Isaac Bill Ends Sales Tax Breaks For Data Centers

The text as introduced · 827 words

90R1509 SRA-D

By: Isaac
H.B. No. 408

A BILL TO BE ENTITLED

AN ACT

relating to the repeal of the exemptions from sales and use taxes

for property used in certain data centers and large data center

projects.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Sections 151.317(a), (b), and (d), Tax Code, are

amended to read as follows:

(a) Subject to Section [ Sections ] 151.1551[ , 151.359, and

151.3595 ] 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 or large data center

project that is certified by the comptroller as a qualifying data

center under Section 151.359 or a qualifying large data center

project under Section 151.3595 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

(10) [ (11) ] 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 Section [ Sections 151.359(j) and ] 321.105.

(d) To qualify for the exemptions in Subsections (a)(2)-(8)

[ (a)(2)-(9) ], 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)-(8) [ (a)(2)-(9) ] is considered

use by the purchaser of the gas or electricity.

SECTION 2. 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 Section [ Sections

151.359(j) and ] 151.317(b).

SECTION 3. 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 Section [ Sections

151.359(j) and ] 151.317(b).

SECTION 4. The following provisions of the Tax Code are

repealed:

(1) Section 151.359;

(2) Section 151.3595; and

(3) Section 313.009.

SECTION 5. (a) The repeal by this Act of Sections 151.359

and 151.3595, Tax Code, does not affect the ability of a data center

or large data center project certified by the comptroller of public

accounts as a qualifying data center or qualifying large data

center project before the effective date of this Act to continue to

receive the exemption from sales and use taxes provided under

Section 151.359 or 151.3595, Tax Code, as applicable, until the

data center's or large data center project's exemption period

provided under the applicable section expires, subject to any

limitation provided by the applicable section, and the former law

is continued in effect for that purpose.

(b) An application submitted to the comptroller of public

accounts for certification as a qualifying data center or

qualifying large data center project that is pending on the

effective date of this Act is considered to be denied and may not be

approved by the comptroller.

SECTION 6. This Act takes effect immediately if it receives

a vote of two-thirds of all the members elected to each house, as

provided by Section 39, Article III, Texas Constitution. If this

Act does not receive the vote necessary for immediate effect, this

Act takes effect September 1, 2027.