Tax Code § 151.3595

Sec. 151.3595. PROPERTY USED IN CERTAIN LARGE DATA CENTER PROJECTS; 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 large data center project creates a job used to qualify under this section. (2) "Large data center project" means a project that: (A) is located in this state; (B) is composed of one or more buildings comprising at least 250,000 square feet of space located or to be located on a single parcel of land or on contiguous parcels of land that are commonly owned or owned by affiliation with the qualifying operator; (C) 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; (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, a backup generator, a fire suppression and prevention system, and 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 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 large data center project. (5) "Qualifying large data center project" means a large data center project that meets the qualifications prescribed by Subsection (d). (6) "Qualifying operator" means a person who controls access to a qualifying large data center project, regardless of whether that person owns each item of tangible personal property located at the qualifying large data center project. A qualifying operator may also be the qualifying owner. (7) "Qualifying owner" means a person who owns a building in which a qualifying large data center project 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 large data center project; 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 large data center project. (b) Except as otherwise provided by this section, tangible personal property that is necessary and essential to the operation of a qualifying large 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 large 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) 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 (j), a large data center project may be certified by the comptroller as a qualifying large data center project for purposes of this section if, on or after June 1, 2015: (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 large 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 large 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, independently or jointly: (A) creates at least 40 qualifying jobs in the county in which the large data center project is located, not including jobs moved from one county in this state to another county in this state; (B) on or after May 1, 2015, makes or agrees to make a capital investment of at least $500 million in that particular large data center project, the amount of which may not include a capital investment to replace personal property previously placed in service in that large data center project, over a five-year period beginning on the earlier of: (i) the date the large data center project submits the application described by Subsection (e); or (ii) the date the large data center project is certified by the comptroller as a qualifying large data center project; and (C) agrees to contract for at least 20 megawatts of transmission capacity for operation of the large data center project. (e) A large data center project that is eligible under Subsection (d) to be certified by the comptroller as a qualifying large data center project shall apply to the comptroller for certification 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 must 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 large data center project is certified by the comptroller as a qualifying large 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 the capital investment of at least $500 million 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 large 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 large 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 large 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 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 former Subchapter B or C, Chapter 313. Added by Acts 2015, 84th Leg., R.S., Ch. 412 (H.B. 2712), Sec. 1, eff. June 10, 2015. Amended by: Acts 2025, 89th Leg., R.S., Ch. 204 (H.B. 1620), Sec. 19.002(b), eff. September 1, 2025. SUBCHAPTER I. REPORTS, PAYMENTS, AND METHODS OF REPORTING