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08/25/2019 01:45 AM
Pennsylvania House of Representatives
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=H&SPick=20190&cosponId=28589
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House of Representatives
Session of 2019 - 2020 Regular Session

MEMORANDUM

Posted: March 1, 2019 02:42 PM
From: Representative Tedd C. Nesbit
To: All House members
Subject: Data Center Sales and Use Tax Exemption
 
In the near future I intend to introduce legislation, similar to what I introduced in the last two sessions, to establish a sales and use tax exemption for certain equipment purchased by data centers and their tenants. Similar to sales tax exemptions for other industries in the state such as dairying, farming, manufacturing and mining, this incentivizes companies to locate their data centers in Pennsylvania, creating capital investment and high paying jobs as a result.

In 2016, a data center sales tax exemption was enacted with an annual cap of $5 million (HB 1198 / Act 84). To be eligible for that program, data center owners and operators must have a minimum payroll of $1 million or make capital investments of $25 million in a county with a population less than 250,000 ($50 million in a county with a population greater than 250,000). In addition, tenants of data centers meeting these requirements are eligible for the program on purchases of data center equipment if they have a two-year agreement with the certified data center to use 100kw of power per month.

The $5 million cap required the sales tax exemption to be implemented through a refund program rather than the standard exemption certificate. The $5 million is allocated pro rata amongst all eligible applicants. This means that companies considering locating their data centers in Pennsylvania do not know the amount of savings they would be able to invest in additional capital or jobs until more than a year after they make their investments. Furthermore, sales tax refund requests in 2018 exceeded the $5 million annual cap and so refunds were prorated amongst refund applicants – a clear indication that demand is exceeding supply. Converting the refund program to the standard exemption certificate will allow Pennsylvania to compete with Ohio and Virginia and nearly 20 other states that have implemented a standard sales tax exemption certificate program, allowing data centers and their tenants to more effectively plan for additional investments.

I am, therefore, introducing legislation to replace the existing capped refund program enacted in 2016. To reduce the cost of the program and ensure even larger investments in Pennsylvania, I am increasing the investment thresholds that data center owners/operators must meet (from $25 and $50 million to $35 and $60 million respectively). To qualify for the program, data center owners/operators must now meet both the payroll and capital investment thresholds and will no longer be allowed to include the payroll of their tenants in order to meet the $1 million payroll requirement.

My bill will help create jobs and new sustainable revenue. It promotes economic growth; fosters Pennsylvania's workforce development through the creation of high-paying, high-tech jobs in computer data centers and related industries. I urge you to support this sales tax exemption for data centers, an industry that represents the future for Pennsylvania. Please join me in cosponsoring this legislation.



Introduced as HB1088