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