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TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER OSTATE AND LOCAL SALES AND USE TAXES
RULE §3.335Property Used in a Qualifying Data Center or Qualifying Large Data Center Project; Temporary Sales Tax Exemption

  (2) the data center is composed of one or more buildings totaling 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;

  (3) the qualifying owner, qualifying operator, or qualifying occupant, jointly or independently, have agreed to:

    (A) on or after June 1, 2015, create at least 40 qualifying jobs on or before the fifth anniversary of the date that the data center submits the application to the comptroller;

    (B) on or after May 1, 2015, make a capital investment of at least $500 million in that particular data center over a five-year period beginning on the date the data center submits the application to the comptroller. For purposes of this subparagraph:

      (i) an expenditure can only be counted toward the capital investment requirement if invoiced to the qualifying owner, qualifying operator, or qualifying occupant on or after the date the data center submits the application to the comptroller; and

      (ii) purchases by a related corporate entity on behalf of a qualifying owner, qualifying operator, or qualifying occupant cannot be included in the capital investment calculation; and

    (C) on or after June 1, 2015, contract for at least 20 megawatts of transmission capacity for operation of the qualifying large data center project; and

  (4) the applicant facility does not have an agreement under which it receives a limitation on appraised value of property for ad valorem tax purposes under Tax Code, Chapter 313 (Texas Economic Development Act).

(f) Application process.

  (1) A facility that is eligible to be certified under subsection (d) of this section as a qualifying data center or under subsection (e) of this section as a qualifying large data center project by the comptroller shall apply for a registration number on the Texas Application for Certification as a Qualifying Data Center, Form AP-233 or Texas Application for Certification as a Qualifying Large Data Center Project, Form AP-236, as applicable. The application must include:

    (A) the name, contact information, and authorized signature for the qualifying occupant and, if applicable, the name, contact information, and authorized signature for the qualifying owner and the qualifying operator who will claim the exemption authorized under this section;

    (B) a business proposal summarizing the plan of the qualifying owner, qualifying operator, or qualifying occupant, independently or jointly, to meet the requirements in subsection (d) of this section for qualifying data centers or subsection (e) of this section for qualifying large data center projects; and

    (C) a statement confirming that the qualifying owner, qualifying operator, and qualifying occupant, as applicable, agree that the statute of limitation provided in Tax Code, §111.201 (Assessment Limitation) on the assessment of tax, penalty, and interest on purchases made tax-free under this section is tolled from the date of certification until the fifth anniversary of that date, or until such time as the comptroller is able to verify that the requirements set out in subsection (d) of this section for qualifying data centers or subsection (e) of this section for qualifying large data center projects have been met, whichever is later.

  (2) Information provided on and with the application under this subsection is confidential under Tax Code, §151.027 (Confidentiality of Tax Information).

  (3) After certifying the qualifying data center or qualifying large data center project, the comptroller will issue a separate registration number to the qualifying owner, the qualifying operator, and the qualifying occupant, as applicable, based on the registration number of the qualifying data center or qualifying large data center project.

(g) Temporary exemption dates. The exemption under this section is temporary. The exemption applies to qualifying purchases made by a qualifying owner, qualifying operator, or qualifying occupant during the exemption period applicable to the qualifying data center or qualifying large data center project.

  (1) The exemption period for a qualifying data center or qualifying large data center project begins on the date the data center is certified by the comptroller.

  (2) A qualifying data center's exemption period ends 10 or 15 years from the certification date, depending on the amount of capital investment made.

    (A) A qualifying data center's sales tax exemption expires 10 years from the date of certification by the comptroller if the qualifying owner, qualifying operator, or qualifying occupant, independently or jointly, makes a capital investment of at least $200 million, but less than $250 million, within the first five years after certification.

    (B) A qualifying data center's sales tax exemption expires 15 years from the date of certification by the comptroller if the qualifying owner, qualifying operator, or qualifying occupant, independently or jointly, makes a capital investment of at least $250 million within the first five years after certification.

  (3) A qualifying large data center project's exemption period ends 20 years from the date of certification by the comptroller provided the qualifying owner, qualifying operator, or qualifying occupant, independently or jointly, makes a capital investment of at least $500 million within the first five years after certification.

  (4) The comptroller will audit each qualifying data center and qualifying large data center project at its five year anniversary to verify the amount of capital investment made and to verify that the jobs creation requirement has been met. The comptroller will also verify the contract for transmission capacity for operation of a qualifying large data center project.

  (5) Once all jobs are created, as required under subsection (d) of this section for qualifying data centers or subsection (e) of this section for qualifying large data center projects, the qualifying owner, qualifying operator, or qualifying occupant, either singly or jointly, must timely notify the comptroller by providing a properly completed Qualifying Data Center or Qualifying Large Data Center Project Job Creation Report, 01-160.

(h) Exemption certificate. Each person who is eligible to claim an exemption authorized by this section must hold a registration number issued by the comptroller.

  (1) To claim an exemption under this section for the purchase of tangible personal property, a qualifying owner, qualifying operator, or qualifying occupant must provide to the seller of a taxable item an Exemption Certificate for Qualifying Data Centers or Qualifying Large Data Center Projects, Form 01-929. The exemption certificate does not apply to local sales and use tax for qualifying data centers. Refer to subsection (l) of this section for more information regarding local sales and use tax.

  (2) To claim the exemption, a qualifying owner, qualifying operator, or qualifying occupant must properly complete all required information on the exemption certificate, including:

    (A) the data center registration number;

    (B) the registration number of the qualifying owner, qualifying operator, or qualifying occupant, as applicable;

    (C) the address of the qualifying owner, qualifying operator, or qualifying occupant, as applicable;

    (D) a description of the tangible personal property to be purchased;

    (E) the signature of the purchaser; and

    (F) the date of the purchase.

  (3) The properly completed Exemption Certificate for Qualifying Data Centers or Qualifying Large Data Center Projects is the seller's documentation that it made a tax-exempt sale in good faith. The seller is required to keep the exemption certificate and all other financial records relating to the exempt sale, including records to document the seller's collection of the local sales and use tax for qualifying data centers. The seller must be able to match invoices of tax-exempt sales to the purchaser's exemption certificate. This may be accomplished by the seller entering the purchaser's registration number on each invoice.

  (4) A seller is not required to accept an exemption certificate from a qualifying data center or qualifying large data center project. If a seller chooses not to accept an exemption certificate issued by a purchaser, the purchaser may instead request a refund of the tax paid from the comptroller. Sellers shall provide an Assignment of Right to Refund, Form 00-985, when the exemption is not provided to a qualifying owner, qualifying operator, or qualifying occupant when qualifying purchases of tangible personal property are made.

(i) Revocation. By filing an application for certification of a qualifying data center or qualifying large data center project, the qualifying owner, qualifying operator, and qualifying occupant, as applicable, commit to meeting the requirements set out in subsection (d) of this section for qualifying data centers or subsection (e) of this section for qualifying large data center projects and certify the data center will be occupied by a single qualifying occupant over the life of the exemption. For more information, refer to subsection (d) of this section for qualifying data center requirements, subsection (e) of this section for qualifying large data center project requirements, and subsection (g) of this section for the term of the exemption.

  (1) Failure to meet one or more of the certification requirements described in subsection (d) of this section for qualifying data centers or subsection (e) of this section for qualifying large data center projects will result in termination of the certification and the revocation of all related qualifying owner, qualifying operator, and qualifying occupant exemption registration numbers.

  (2) Each entity that has a registration number revoked will be liable for unpaid sales or use taxes, including penalty and interest from the date of purchase, on all items purchased tax-free under this section, back to the original date of certification of the data center as a qualifying data center or qualifying large data center project.

  (3) If a formal waiver of the statute of limitations under Tax Code, §111.203 (Agreements to Extend Period of Limitation) is deemed necessary to insure against a loss of revenue to the state in the event that a data center's certification is revoked, by allowing the comptroller to verify, prior to the expiration of the statute of limitations on assessment, that each of the requirements in subsection (d) of this section for qualifying data centers or subsection (e) of this section for qualifying large data center projects has been met, then the failure to execute a timely statutory waiver will also result in the termination of the data center's certification and the revocation of all related registration numbers.

(j) Documentation and record retention.

  (1) In accordance with Tax Code, §111.0041 (Records; Burden to Produce and Substantiate Claims) and §151.025 (Records Required to be Kept), all qualifying occupants, qualifying owners, and qualifying operators of a qualifying data center or qualifying large data center project must keep complete records to document any and all tax-exempt purchases made under this exemption, and to confirm payment of the local sales and use tax on such purchases by qualifying data centers. See §3.281 of this title (relating to Records Required; Information Required) for additional guidance.

  (2) In addition, each qualifying owner, qualifying operator, and qualifying occupant of a qualifying data center or qualifying large data center project must keep complete records to document the applicable capital investment made in the qualifying data center or qualifying large data center project; the creation of the required number of applicable qualifying jobs including the retention of those jobs for a period of at least five years; and documentation of the contract for the applicable transmission capacity for qualifying large data center projects. These records must be retained until the data center's certification expires. For example, a qualifying owner, qualifying operator, or qualifying occupant should keep comprehensive records of capital investment expenditures, such as contracts, invoices, and sales receipts, and employment records regarding job creation, including associated third-party employer positions.

  (3) In the event the comptroller revokes the certification of a qualifying data center or qualifying large data center project, the records of all qualifying owners, qualifying operators, and qualifying occupants must be retained until all assessments have been resolved.

(k) Successor Liability. A purchaser of a qualifying owner, qualifying operator, or qualifying occupant's business or stock of goods in a qualifying data center or qualifying large data center project is subject to Tax Code, §111.020 (Tax Collection on Termination of Business).

(l) Local tax. The state sales and use tax exemption for qualifying owners, qualifying operators, or qualifying occupant of a qualifying data center does not apply to local sales and use tax. Local sales and use tax must be paid on the purchase of any tangible personal property that qualifies for exemption from state sales and use tax under this section. This subsection is not applicable to qualifying large data center projects.

(m) An entity that qualifies for the exemption under this section as a qualifying data center or qualifying large data center project is not eligible to receive a limitation on appraised value of property for ad valorem tax purposes under Tax Code, Chapter 313 (Texas Economic Development Act).


Source Note: The provisions of this §3.335 adopted to be effective February 26, 2014, 39 TexReg 1157; amended to be effective November 10, 2014, 39 TexReg 8742; amended to be effective March 19, 2017, 42 TexReg 1129; amended to be effective February 11, 2018, 43 TexReg 581

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