Bill Text: TX HB3104 | 2023-2024 | 88th Legislature | Comm Sub
Bill Title: Relating to the temporary exemption of certain tangible personal property related to certain connected data center projects from sales and use taxes.
Spectrum: Partisan Bill (Republican 3-0)
Status: (Engrossed - Dead) 2023-05-28 - House adopts conf. comm. report-reported [HB3104 Detail]
Download: Texas-2023-HB3104-Comm_Sub.html
By: Anderson (Senate Sponsor - Parker) | H.B. No. 3104 | |
(In the Senate - Received from the House May 8, 2023; | ||
May 9, 2023, read first time and referred to Committee on Finance; | ||
May 15, 2023, reported favorably by the following vote: Yeas 17, | ||
Nays 0; May 15, 2023, sent to printer.) | ||
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relating to the temporary exemption of certain tangible personal | ||
property related to certain connected data center projects from | ||
sales and use taxes. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Subchapter H, Chapter 151, Tax Code, is amended | ||
by adding Section 151.3596 to read as follows: | ||
Sec. 151.3596. PROPERTY USED IN CERTAIN CONNECTED DATA | ||
CENTER PROJECTS; TEMPORARY EXEMPTION. (a) In this section: | ||
(1) "Affiliated group" has the meaning assigned by | ||
Section 171.0001. | ||
(2) "Connected data center project" means a project | ||
that: | ||
(A) is located in this state; | ||
(B) is composed of one or more buildings: | ||
(i) comprising at least 250,000 square feet | ||
of space; | ||
(ii) located or to be located on contiguous | ||
or noncontiguous parcels of land that are commonly owned, owned by | ||
affiliation with the qualifying operator, or leased by a common | ||
qualifying operator; and | ||
(iii) connected to each other: | ||
(a) by fiber and associated equipment | ||
required for operating a fiber transmission network between data | ||
center buildings and upstream Internet peering points for the sole | ||
use of the qualifying occupant; and | ||
(b) for the purpose of providing | ||
redundancy and resiliency for the data center services provided in | ||
each building; | ||
(C) is specifically constructed or refurbished | ||
and primarily used to house servers and related equipment and | ||
support staff for the processing, storage, and distribution of | ||
data; | ||
(D) is used by a single qualifying occupant for | ||
the processing, storage, and distribution of data; | ||
(E) is not used primarily by a telecommunications | ||
provider to place tangible personal property used to deliver | ||
telecommunications services; and | ||
(F) has an uninterruptible power source, backup | ||
electricity generation system, fire suppression and prevention | ||
system, and physical security that includes restricted access, | ||
video surveillance, and electronic systems. | ||
(3) "County average weekly wage" means the average | ||
weekly wage in a county for all jobs during the most recent four | ||
quarterly periods for which data is available, as computed by the | ||
Texas Workforce Commission, at the time a connected data center | ||
project creates a job used to qualify under this section. If the | ||
connected data center project is located in more than one county, | ||
the county average weekly wage for each county in which the project | ||
is located may be calculated by averaging the county average weekly | ||
wages of all counties in which the project is located. | ||
(4) "Permanent job" means an employment position that | ||
will exist for at least five years after the date the job is | ||
created. | ||
(5) "Qualifying connected data center project" means a | ||
connected data center project that meets the qualifications | ||
prescribed by Subsection (d). | ||
(6) "Qualifying job" means a full-time, permanent job | ||
that pays at least 120 percent of the county average weekly wage in | ||
the county in which the job is based. The term includes a new | ||
employment position staffed by a third-party employer if a written | ||
contract exists between the third-party employer and a qualifying | ||
owner, qualifying operator, or qualifying occupant that provides | ||
that the employment position is permanently assigned to an | ||
associated qualifying connected data center project. The term does | ||
not include a job that is moved from one county in this state to | ||
another county in this state. | ||
(7) "Qualifying occupant" means a person who contracts | ||
with a qualifying owner or qualifying operator to place, or cause to | ||
be placed, and to use tangible personal property at the qualifying | ||
connected data center project or, in the case of a qualifying | ||
occupant who is also the qualifying owner and the qualifying | ||
operator, who places or causes to be placed and uses tangible | ||
personal property at the qualifying connected data center project. | ||
The term includes a member of the person's affiliated group. | ||
(8) "Qualifying operator" means a person who controls | ||
access to a qualifying connected data center project, regardless of | ||
whether that person owns each item of tangible personal property | ||
located at the qualifying connected data center project. The term | ||
includes a member of the person's affiliated group. A qualifying | ||
operator may also be the qualifying owner. | ||
(9) "Qualifying owner" means a person who owns one or | ||
more buildings in which a qualifying connected data center project | ||
is located. The term includes a member of the person's affiliated | ||
group. A qualifying owner may also be the qualifying operator. | ||
(b) Except as otherwise provided by this section, tangible | ||
personal property that is necessary and essential to the operation | ||
of a qualifying connected data center project is exempted from the | ||
taxes imposed by this chapter if the tangible personal property is | ||
purchased for installation at, incorporation into, or in the case | ||
of electricity, use in a qualifying connected data center project | ||
by a qualifying owner, qualifying operator, or qualifying occupant, | ||
and the tangible personal property is: | ||
(1) electricity; | ||
(2) an electrical system; | ||
(3) a cooling system; | ||
(4) a backup electricity generation system; | ||
(5) hardware or a distributed mainframe computer or | ||
server; | ||
(6) a data storage device; | ||
(7) network connectivity equipment; | ||
(8) a rack, cabinet, and raised floor system; | ||
(9) a peripheral component or system; | ||
(10) software; | ||
(11) a mechanical, electrical, or plumbing system that | ||
is necessary to operate any tangible personal property described by | ||
Subdivisions (2)-(10); | ||
(12) any other item of equipment or system necessary | ||
to operate any tangible personal property described by Subdivisions | ||
(2)-(11), including a fixture; and | ||
(13) a component part of any tangible personal | ||
property described by Subdivisions (2)-(10). | ||
(c) The exemption provided by this section does not apply | ||
to: | ||
(1) office equipment or supplies; | ||
(2) maintenance or janitorial supplies or equipment; | ||
(3) equipment or supplies used primarily in sales | ||
activities or transportation activities; | ||
(4) tangible personal property on which the purchaser | ||
has received or has a pending application for a refund under Section | ||
151.429; | ||
(5) tangible personal property not otherwise exempted | ||
under Subsection (b) that is incorporated into real estate or into | ||
an improvement of real estate; | ||
(6) tangible personal property that is rented or | ||
leased for a term of one year or less; or | ||
(7) notwithstanding Section 151.3111, a taxable | ||
service that is performed on tangible personal property exempted | ||
under this section. | ||
(d) Subject to Subsection (j), a connected data center | ||
project may be certified by the comptroller as a qualifying | ||
connected data center project for purposes of this section if, on or | ||
after September 1, 2023: | ||
(1) a single qualifying occupant: | ||
(A) contracts with a qualifying owner or | ||
qualifying operator to lease space in which the qualifying occupant | ||
will locate a connected data center project; or | ||
(B) occupies a space that was not previously used | ||
as a data center in which the qualifying occupant will locate a | ||
connected data center project, in the case of a qualifying occupant | ||
who is also the qualifying operator and the qualifying owner; and | ||
(2) the qualifying owner, qualifying operator, or | ||
qualifying occupant, jointly or independently: | ||
(A) creates at least 40 qualifying jobs in the | ||
county or counties in which the connected data center project is | ||
located; | ||
(B) makes or agrees to make a capital investment, | ||
on or after September 1, 2023, of at least $500 million in that | ||
particular connected data center project, the amount of which may | ||
not include a capital investment to replace personal property | ||
previously placed in service in that connected data center project, | ||
over a five-year period beginning on the earlier of: | ||
(i) the date the connected data center | ||
project submits the application described by Subsection (e); or | ||
(ii) the date the connected data center | ||
project is certified by the comptroller as a qualifying connected | ||
data center project; and | ||
(C) agrees to contract for at least 20 megawatts | ||
of transmission capacity for the operation of the connected data | ||
center project. | ||
(e) A connected data center project that is eligible under | ||
Subsection (d) to be certified by the comptroller as a qualifying | ||
connected data center project shall apply to the comptroller for | ||
certification as a qualifying connected data center project and for | ||
the issuance of a registration number or numbers by the | ||
comptroller. The application must be made on a form prescribed by | ||
the comptroller and include the information required by the | ||
comptroller. The application must include the name and contact | ||
information for the qualifying occupant, and, if applicable, the | ||
name and contact information for the qualifying owner and the | ||
qualifying operator who will claim the exemption authorized under | ||
this section. The application form must include a section for the | ||
applicant to certify that the capital investment required by | ||
Subsection (d)(2)(B) will be met independently or jointly by the | ||
qualifying occupant, qualifying owner, or qualifying operator | ||
within the time period prescribed by Subsection (d)(2)(B). | ||
(f) The exemption provided by this section begins on the | ||
date the connected data center project is certified by the | ||
comptroller as a qualifying connected data center project and | ||
expires on the 20th anniversary of that date, if the qualifying | ||
occupant, qualifying owner, or qualifying operator, independently | ||
or jointly makes a capital investment of $500 million or more as | ||
provided by Subsection (d)(2)(B). | ||
(g) Each person who is eligible to claim an exemption | ||
authorized by this section must hold a registration number issued | ||
by the comptroller. The registration number must be stated on the | ||
exemption certificate provided by the purchaser to the seller of | ||
tangible personal property eligible for the exemption. | ||
(h) The comptroller shall revoke all registration numbers | ||
issued in connection with a qualifying connected data center | ||
project that the comptroller determines does not meet the | ||
requirements prescribed by Subsection (d). Each person who has the | ||
person's registration number revoked by the comptroller is liable | ||
for taxes, including penalty and interest from the date of | ||
purchase, imposed under this chapter on purchases for which the | ||
person claimed an exemption under this section, regardless of | ||
whether the purchase occurred before the date the registration | ||
number was revoked. | ||
(i) The comptroller shall adopt rules consistent with and | ||
necessary to implement this section, including rules relating to: | ||
(1) a qualifying connected data center project, | ||
qualifying owner, qualifying operator, and qualifying occupant; | ||
(2) issuance and revocation of a registration number | ||
required under this section; and | ||
(3) reporting and other procedures necessary to ensure | ||
that a qualifying connected data center project, qualifying owner, | ||
qualifying operator, and qualifying occupant comply with this | ||
section and remain entitled to the exemption authorized by this | ||
section. | ||
(j) A connected data center project is not eligible to | ||
receive an exemption under this section if the connected data | ||
center project is subject to an agreement limiting the appraised | ||
value of the connected data center's property under former | ||
Subchapter B or C, Chapter 313. | ||
SECTION 2. Section 151.317(a), Tax Code, is amended to read | ||
as follows: | ||
(a) Subject to Sections 151.1551, 151.359, [ |
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and 151.3596 and Subsection (d) of this section, gas and | ||
electricity are exempted from the taxes imposed by this chapter | ||
when sold for: | ||
(1) residential use; | ||
(2) use in powering equipment exempt under Section | ||
151.318 or 151.3185 by a person processing tangible personal | ||
property for sale as tangible personal property, other than | ||
preparation or storage of prepared food described by Section | ||
151.314(c-2); | ||
(3) use in lighting, cooling, and heating in the | ||
manufacturing area during the actual manufacturing or processing of | ||
tangible personal property for sale as tangible personal property, | ||
other than preparation or storage of prepared food described by | ||
Section 151.314(c-2); | ||
(4) use directly in exploring for, producing, or | ||
transporting, a material extracted from the earth; | ||
(5) use in agriculture, including dairy or poultry | ||
operations and pumping for farm or ranch irrigation; | ||
(6) use directly in electrical processes, such as | ||
electroplating, electrolysis, and cathodic protection; | ||
(7) use directly in the off-wing processing, overhaul, | ||
or repair of a jet turbine engine or its parts for a certificated or | ||
licensed carrier of persons or property; | ||
(8) use directly in providing, under contracts with or | ||
on behalf of the United States government or foreign governments, | ||
defense or national security-related electronics, classified | ||
intelligence data processing and handling systems, or | ||
defense-related platform modifications or upgrades; | ||
(9) use directly by a data center, [ |
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center project, or connected data center project that is certified | ||
by the comptroller as a qualifying data center under Section | ||
151.359, [ |
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151.3595, or a qualifying connected data center project under | ||
Section 151.3596 in the processing, storage, and distribution of | ||
data; | ||
(10) a direct or indirect use, consumption, or loss of | ||
electricity by an electric utility engaged in the purchase of | ||
electricity for resale; or | ||
(11) use in timber operations, including pumping for | ||
irrigation of timberland. | ||
SECTION 3. The change in law made by this Act does not | ||
affect tax liability accruing before the effective date of this | ||
Act. That liability continues in effect as if this Act had not been | ||
enacted, and the former law is continued in effect for the | ||
collection of taxes due and for civil and criminal enforcement of | ||
the liability for those taxes. | ||
SECTION 4. This Act takes effect September 1, 2023. | ||
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