H.B. No. 1223
 
 
 
 
AN ACT
  relating to the temporary exemption of certain tangible personal
  property related to data centers from the sales and use tax.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subchapter H, Chapter 151, Tax Code, is amended
  by adding Section 151.359 to read as follows:
         Sec. 151.359.  PROPERTY USED IN CERTAIN DATA CENTERS;
  TEMPORARY EXEMPTION. (a) In this section:
               (1)  "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 data center creates a job
  used to qualify under this section.
               (2)  "Data center" means at least 100,000 square feet
  of space in a single building or portion of a single building, which
  space:
                     (A)  is located in this state;
                     (B)  is specifically constructed or refurbished
  and actually used primarily to house servers and related equipment
  and support staff for the processing, storage, and distribution of
  data;
                     (C)  is used by a single qualifying occupant for
  the processing, storage, and distribution of data;
                     (D)  is not used primarily by a telecommunications
  provider to place tangible personal property that is used to
  deliver telecommunications services; and
                     (E)  has an uninterruptible power source,
  generator backup power, a sophisticated fire suppression and
  prevention system, and enhanced physical security that includes
  restricted access, video surveillance, and electronic systems.
               (3)  "Permanent job" means an employment position that
  will exist for at least five years after the date the job is
  created.
               (4)  "Qualifying data center" means a data center that
  meets the qualifications prescribed by Subsection (d).
               (5)  "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.
               (6)  "Qualifying operator" means a person who controls
  access to a qualifying data center, regardless of whether that
  person owns each item of tangible personal property located at the
  qualifying data center. A qualifying operator may also be the
  qualifying owner.
               (7)  "Qualifying owner" means a person who owns the
  building in which a qualifying data center is located. A qualifying
  owner may also be the qualifying operator.
               (8)  "Qualifying occupant" means a person who:
                     (A)  contracts with a qualifying owner or
  qualifying operator to place, or cause to be placed, and to use
  tangible personal property at the qualifying data center; or
                     (B)  in the case of a qualifying occupant who is
  also the qualifying owner and the qualifying operator, places or
  causes to be placed, and uses tangible personal property at the
  qualifying data center.
         (b)  Except as otherwise provided by this section, tangible
  personal property that is necessary and essential to the operation
  of a qualified data center 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 Subdivision
  (1), use in a qualifying data center 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)  an emergency generator;
               (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 (k), a data center may be
  certified by the comptroller as a qualifying data center for
  purposes of this section if, on or after September 1, 2013:
               (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 data center; or
                     (B)  occupies a space that was not previously used
  as a data center in which the qualifying occupant will locate a data
  center, 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 20 qualifying jobs in the
  county in which the data center is located, not including jobs moved
  from one county in this state to another county in this state; and
                     (B)  makes or agrees to make a capital investment,
  on or after September 1, 2013, of at least $200 million in that
  particular data center over a five-year period beginning on the
  date the data center is certified by the comptroller as a qualifying
  data center.
         (e)  A data center that is eligible under Subsection (d) to
  be certified by the comptroller as a qualified data center shall
  apply to the comptroller for certification as a qualifying data
  center and for 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 data center is certified by the comptroller as a qualifying
  data center and expires:
               (1)  on the 10th anniversary of that date, if the
  qualifying occupant, qualifying owner, or qualifying operator
  independently or jointly makes a capital investment of at least
  $200 million but less than $250 million as provided by Subsection
  (d)(2)(B); or
               (2)  on the 15th anniversary of that date, if the
  qualifying occupant, qualifying owner, or qualifying operator
  independently or jointly makes a capital investment of $250 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 data center 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 data center, 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 data center, qualifying owner, qualifying
  operator, and qualifying occupant comply with this section and
  remain entitled to the exemption authorized by this section.
         (j)  The exemption in this section does not apply to the
  taxes imposed under Chapter 321, 322, or 323.
         (k)  A data center is not eligible to receive an exemption
  under this section if the data center is subject to an agreement
  limiting the appraised value of the data center's property under
  Subchapter B or C, Chapter 313.
         SECTION 2.  Sections 151.317(a), (b), and (d), Tax Code, are
  amended to read as follows:
         (a)  Subject to Sections 151.359 and [Section] 151.1551 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 that is certified by
  the comptroller as a qualifying data center under Section 151.359
  in the processing, storage, and distribution of data;
               (10) [(9)]  a direct or indirect use, consumption, or
  loss of electricity by an electric utility engaged in the purchase
  of electricity for resale; or
               (11) [(10)]  use in timber operations, including
  pumping for irrigation of timberland.
         (b)  The sale, production, distribution, lease, or rental
  of, and the use, storage, or other consumption in this state of, gas
  and electricity sold for the uses listed in Subsection (a), are
  exempted from the taxes imposed by a municipality under Chapter 321
  except as provided by Sections 151.359(j) and [Section] 321.105.
         (d)  To qualify for the exemptions in Subsections (a)(2)-(9)
  [(a)(2)-(8)], the gas or electricity must be sold to the person
  using the gas or electricity in the exempt manner. For purposes of
  this subsection, the use of gas or electricity in an exempt manner
  by an independent contractor engaged by the purchaser of the gas or
  electricity to perform one or more of the exempt activities
  identified in Subsections (a)(2)-(9) [(a)(2)-(8)] is considered
  use by the purchaser of the gas or electricity.
         SECTION 3.  Section 151.1551(a), Tax Code, is amended to
  read as follows:
         (a)  This section applies to an exemption provided by:
               (1)  Sections 151.316(a)(6), (7), (8), (10), (11), and
  (12);
               (2)  Section 151.316(b) for tangible personal property
  used in the production of agricultural products for sale;
               (3)  Section 151.3162(b) for tangible personal
  property used in the production of timber for sale;
               (4)  Sections 151.317(a)(5) and (11) [(10)] for
  electricity used in agriculture or timber operations; and
               (5)  Section 151.3111 for services performed on
  tangible personal property exempted under Section 151.316(a)(6),
  (7), (8), (10), (11), or (12), 151.316(b), or 151.3162(b).
         SECTION 4.  Subchapter A, Chapter 313, Tax Code, is amended
  by adding Section 313.010 to read as follows:
         Sec. 313.010.  CERTAIN ENTITIES INELIGIBLE. An entity that
  has been issued a registration number under Section 151.359 is not
  eligible to receive a limitation on appraised value under this
  chapter.
         SECTION 5.  Section 321.208, Tax Code, is amended to read as
  follows:
         Sec. 321.208.  STATE EXEMPTIONS APPLICABLE. The exemptions
  provided by Subchapter H, Chapter 151, apply to the taxes
  authorized by this chapter, except as provided by Sections
  151.359(j) and [Section] 151.317(b).
         SECTION 6.  Section 323.207, Tax Code, is amended to read as
  follows:
         Sec. 323.207.  STATE EXEMPTIONS APPLICABLE. The exemptions
  provided by Subchapter H, Chapter 151, apply to the taxes
  authorized by this chapter, except as provided by Sections
  151.359(j) and [Section] 151.317(b).
         SECTION 7.  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 8.  This Act takes effect September 1, 2013.
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
 
         I certify that H.B. No. 1223 was passed by the House on May 9,
  2013, by the following vote:  Yeas 137, Nays 3, 2 present, not
  voting; and that the House concurred in Senate amendments to H.B.
  No. 1223 on May 24, 2013, by the following vote:  Yeas 143, Nays 1,
  1 present, not voting.
 
  ______________________________
  Chief Clerk of the House   
 
         I certify that H.B. No. 1223 was passed by the Senate, with
  amendments, on May 22, 2013, by the following vote:  Yeas 23, Nays
  8.
 
  ______________________________
  Secretary of the Senate   
  APPROVED: __________________
                  Date       
   
           __________________
                Governor