Regular Session 2017-2018 House Bill 1558 P.N. 2038

PRINTER'S NO. 2038

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

1558

Session of

2017

INTRODUCED BY NESBIT, MILLARD, JAMES, RAPP, WARD, PHILLIPS-HILL

AND MILNE, JUNE 16, 2017

REFERRED TO COMMITTEE ON FINANCE, JUNE 16, 2017

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," in Computer Data Center Equipment Incentive

Program, further providing for definitions, for sales and use

tax refund, for application for certification, for review of

application, for eligibility requirements, for notification,

for revocation of certification, repealing provisions

relating to application and limitations and providing for

exemption certificate.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. The definitions of "new investment" and "tax

refund" in section 2901-D of the act of March 4, 1971 (P.L.6,

No.2), known as the Tax Reform Code of 1971, added July 13, 2016

(P.L.526, No.84), are amended and the section is amended by

adding definitions to read:

Section 2901-D. Definitions.

The following words and phrases when used in this article

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

* * *

"New investment." Construction, expansion or build out of

data center [space at either a new or an existing computer data

center] on or after [January 1, 2014] July 1, 2015, and the

purchase and installation of computer data center equipment,

except for items described under paragraph (4) of the definition

of "computer data center equipment."

* * *

"Tax exemption." The tax exemption provided for under this

article.

["Tax refund." The tax refund provided for under this

article.]

"Telecommunications provider." A provider of

telecommunications services, as defined in 61 Pa. Code § 60.20

(relating to telecommunications service).

* * *

Section 2. Sections 2902-D, 2903-D, 2904-D(b), 2906-D, 2907-

D(b) and 2908-D(c) of the act, added July 13, 2016 (P.L.526,

No.84), are amended to read:

Section 2902-D. Sales and use tax [refund] exemption.

[(a) Application.--Beginning July 1, 2017, an owner or

operator or qualified tenant of a computer data center certified

under this article may apply for a tax refund of taxes paid

under Article II upon the sale at retail or use of computer data

center equipment for installation in a computer data center,

purchased by:

(1) An owner or operator of a computer data center

certified under this article.

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(2) A qualified tenant certified under this article.

(b) Applicability.--Taxes paid under Article II during the

qualification period shall be eligible for a refund under this

article.

refund:

(1) Computer data center equipment used by the computer

data center to:

(i) generate electricity for resale purposes to a

power utility, except for sales incidental to the primary

sale to computer data centers and which qualify under

subparagraph (ii); or

(ii) generate, provide or sell more than 5% of its

electricity outside of the computer data center.

(2) (Reserved).]

(a) State sales and use tax.--The tax imposed by section 202

shall not be imposed upon the sale at retail or use of computer

data center equipment for installation in a computer data

center, purchased by:

(1) An owner or operator of a computer data center

certified under this article.

(2) A qualified tenant of a computer data center

certified under this article.

(b) Local sales and use tax.--The sale at retail or use of

computer data center equipment for installation in a computer

data center shall be exempt from a city or county tax on

purchase price authorized under Article XXXI-B of the act of

July 28, 1953 (P.L.723, No.230), known as the Second Class

County Code, and the act of June 5, 1991 (P.L.9, No.6), known as

the Pennsylvania Intergovernmental Cooperation Authority Act for

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Cities of the First Class, if purchased by:

(1) An owner or operator of a computer data center

certified under this article.

(2) A qualified tenant of a computer data center

certified under this article.

qualification period.

(d) Exclusions.--The following do not qualify for a tax

exemption:

(1) Telecommunications providers' computer data centers

that do not have retail or wholesale customers being billed

or paying for services, and whose majority of services are

for internal services to itself or its subsidiaries.

(2) Computer data center equipment used by the computer

data center to:

(i) generate electricity for resale purposes to a

power utility; or

(ii) generate, provide or sell more than 5% of its

electricity outside of the computer data center.

Section 2903-D. Application for certification.

To be considered for a certification, an owner or operator of

a computer data center shall submit to the department an

application on a form prescribed by the department that includes

the following:

(1) The owner's or operator's name, address and

telephone number.

(2) The address of the site where the facility is or

will be located, including, if applicable, information

sufficient to identify the specific portion or portions of

the facility comprising the computer data center.

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(3) [If the computer data center is to qualify under

section 2906-D(1), the following information:

(i) The anticipated investment associated with the

computer data center for which the certification is being

sought.

(ii)] An affirmation, signed by an authorized

executive representing the owner or operator, that the

computer data center is expected to satisfy the

certification requirements prescribed in section [2906-

D(1)] 2906-D.

[(4) If the computer data center is to qualify under

section 2906-D(2), an affirmation, signed by an authorized

executive representing the owner or operator, that the

computer data center has satisfied, or will satisfy, the

certification requirements prescribed in section 2906-D(2).]

(5) The department shall begin accepting applications no

later than 90 days after the effective date of this section.

Section 2904-D. Review of application.

* * *

(b) Deemed approval.--Failure of the department to approve

or deny an application within 60 days after the date the owner

or operator of a computer data center submits the application to

the department constitutes certification of the computer data

center, and the department shall issue written certification to

the owner or operator within 14 days. The department may not

certify any new computer data center after December 31, 2029.

Section 2906-D. [Eligibility] Computer data center

certification requirements.

[A computer data center must meet one of] To be certified, a

computer data center owner or operator must meet the following

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requirements[, after taking into account the combined

investments made and annual compensation paid by the owner or

operator of the computer data center or the qualified tenant]:

(1) On or before the fourth anniversary of

certification, the computer data center [creates] owner or

operator must make a minimum investment of:

(i) [At] at least [$25,000,000] $35,000,000 of new

investment if the computer data center is located in a

county with a population of 250,000 or fewer individuals;

(ii) [At] at least [$50,000,000] $60,000,000 of new

investment if the computer data center is located in a

county with a population of more than 250,000

individuals.

(2) [One or more taxpayers operating or occupying a

computer data center, in the aggregate,] On or before the

fourth anniversary of certification, the computer data center

owner or operator must pay annual compensation of at least

$1,000,000 to employees at the certified computer data center

site for each year of the certification [after the fourth

anniversary of certification].

Section 2907-D. Notification.

* * *

(b) Records.--Until a computer data center satisfies the

requirements prescribed in section 2906-D, the owner, operator

and qualified tenants shall maintain detailed records of all

investments created by the computer data center, including costs

of buildings and computer data center equipment, and all tax

[refunds] exemptions directly received by the owner, operator or

qualified tenant.

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Section 2908-D. Revocation of certification.

* * *

section, the qualification period of any owner, operator or

qualified tenant of the computer data center expires, and the

department may recapture from the owner, operator or qualified

tenant all or part of the tax [refund] exemption provided

directly to the owner or operator or qualified tenant. The

department may give special consideration or allow a temporary

exemption from recapture of the tax [refund] exemption if there

is extraordinary hardship due to factors beyond the control of

the owner or operator or qualified tenant. The department may

require the owner or operator or qualified tenant to file

appropriate amended tax returns to reflect any recapture of the

tax exemption.

Section 3. Sections 2913-D and 2914-D of the act are

repealed:

[Section 2913-D. Application.

(a) General rule.--An owner, operator or qualified tenant

may apply for a tax refund under this article on or before July

30, 2017, and each July 30 thereafter.

(b) Notification.--No later than September 30, 2017, and

each September 30 thereafter, the department shall notify each

applicant of the amount of tax refund approved by the

department.

Section 2914-D. Limitations.

(a) Total.--The total amount of State tax refunds approved

by the department under this article shall not exceed $5,000,000

in any fiscal year.

(b) Allocation.--If the total amount of tax refunds approved

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for all applicants exceeds the limitation on the amount of tax

refunds in subsection (a) in a fiscal year, the tax refund to be

received by each applicant shall be determined as follows:

(1) Divide:

(i) the tax refund approved for the applicant; by

(ii) the total of all tax refunds approved for all

applicants.

(2) Multiply:

(i) the amount under subsection (a); by

(ii) the quotient under paragraph (1).

(3) The algebraic form of the calculation under this

subsection is:

Taxpayer's tax refund = amount allocated for those

tax refunds X (tax refund approved for the

applicant/total of all tax refunds approved for all

applicants).]

Section 4. The act is amended by adding a section to read:

Section 2915-D. Exemption certificate.

An owner, operator or tenant must prepare and deliver a

properly executed exemption certificate to a vendor from which

the owner, operator or tenant purchases exempt property.

Section 5. This act shall take effect July 1, 2018.

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