HOUSE RULES AND ORDER OF BUSINESS COMMITTEE SUBSTITUTE FOR
HOUSE BILL 324
53rd legislature - STATE OF NEW MEXICO - second session, 2018
AN ACT
RELATING TO THE PUBLIC PEACE, HEALTH, SAFETY AND WELFARE; PROVIDING FOR DEDUCTIONS IN THE GROSS RECEIPTS AND COMPENSATING TAX ACT ASSOCIATED WITH DATA CENTERS; PROVIDING FOR A PROPERTY TAX ABATEMENT ASSOCIATED WITH DATA CENTERS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. A new section of the Gross Receipts and Compensating Tax Act is enacted to read:
"[NEW MATERIAL] DEDUCTION--GROSS RECEIPTS--COMPENSATING
TAX--DATA CENTERS.--
A. Receipts from the sale or lease of data center equipment to the owner or operator of, or a qualified colocation tenant in, a qualified data center may be deducted from gross receipts if:
(1) the owner, operator or qualified colocation tenant delivers a data center deduction nontaxable transaction certificate to the seller or lessor; and
(2) the eligible costs of the sale or lease are incurred during the period beginning on the date development of the qualified data center begins and ending thirty years after the taxpayer is issued a data center deduction nontaxable transaction certificate.
B. The value of eligible costs to the owner or operator of, or a qualified colocation tenant in, a qualified data center may be deducted in computing compensating tax due if:
(1) the owner, operator or qualified colocation tenant holds a valid a data center deduction nontaxable transaction certificate issued by the taxation and revenue department; and
(2) the eligible costs are incurred during the period beginning on the date development of the qualified data center begins and ending thirty years after the owner, operator or qualified colocation tenant is issued the data center deduction nontaxable transaction certificate.
C. The deduction provided for by this section may be referred to as the "data center deduction". The purpose of the data center deduction is to encourage the construction and development of qualified data centers in New Mexico.
D. A taxpayer allowed a data center deduction shall report the amount of the data center deduction separately and as required by the taxation and revenue department. A taxpayer that applies the data center deduction in computing compensating tax due shall separately report each eligible cost for which the data center deduction is taken.
E. To receive the data center deduction, a taxpayer shall apply to the economic development department for a data center deduction certificate of eligibility that entitles the taxpayer to receive a data center deduction nontaxable transaction certificate issued by the taxation and revenue department. The taxpayer is eligible for the data center deduction certificate of eligibility if the taxpayer is the owner or operator of, or a qualified colocation tenant in:
(1) an existing data center; or
(2) a new data center for which the taxpayer and one or more other taxpayers expend at least twenty-five million dollars ($25,000,000) in eligible costs for the new data center during the period beginning ninety days before the taxpayer applies for the data center deduction certificate of eligibility and ending five years after that date.
F. Upon receiving a complete application for a data center deduction certificate of eligibility from a taxpayer, the economic development department shall verify whether the taxpayer qualifies to receive it and:
(1) if so, issue the taxpayer the data center deduction certificate of eligibility within sixty days after receiving the application; or
(2) if not, respond to the taxpayer in writing with the reason or reasons the taxpayer does not qualify. If the economic development department fails in issuing that response within sixty days after receiving the application, the taxation and revenue department shall deem the taxpayer's application approved and promptly issue to the taxpayer a data center deduction nontaxable transaction certificate.
G. The taxation and revenue department shall issue a data center deduction nontaxable transaction certificate, which clearly displays a notice to the taxpayer that the taxpayer is required to report the data center deduction separately from other deductions from gross receipts, if any, taken by the taxpayer, to a taxpayer that submits to it a valid data center deduction certificate of eligibility issued by the economic development department.
H. The validity of a data center deduction certificate of eligibility and of a data center deduction nontaxable transaction certificate is not altered by their transfer to a subsequent owner, operator or qualified colocation tenant of the qualified data center associated with the data center deduction certificate of eligibility or data center deduction nontaxable transaction certificate.
I. The economic development department and the taxation and revenue department shall protect from public disclosure the proprietary business information contained in an application for a data center deduction certificate of eligibility. The economic development department may publicly disclose the name of a qualified data center associated with a data center deduction certificate of eligibility.
J. The economic development department may revoke the data center deduction certificate of eligibility held by a taxpayer that owns, operates or is a tenant in a new data center if the taxpayer fails to make the expenditures outlined in Paragraph (2) of Subsection E of this section. The economic development department may require such a taxpayer, other than a qualified colocation tenant, to remit to the taxation and revenue department the full amount of the qualified data center deductions taken by the taxpayer unless the taxpayer demonstrates to the economic development department that the taxpayer made expenditures for eligible costs to the extent feasible, in which case the economic development department shall conduct a public hearing to determine the portion of the amount of deductions taken by the taxpayer that the taxpayer must repay. In determining that portion, the economic development department shall consider the taxpayer's performance in making the expenditures outlined in Paragraph (2) of Subsection E of this section and the degree to which circumstances beyond the taxpayer's control caused the taxpayer's failure to make the expenditures. The taxpayer shall remit to the taxation and revenue department within one hundred eighty days after the determination is made the amount that, in accordance with this subsection, the economic development department determines is owed by the taxpayer.
K. Beginning in 2019, the taxation and revenue department shall compile an annual report on the data center deduction that includes the number of taxpayers that claimed the data center deduction, the aggregate amount of the data center deductions claimed and other information necessary to evaluate the effectiveness of the data center deduction. The taxation and revenue department shall present the report to the revenue stabilization and tax policy committee and the legislative finance committee with an analysis of the effectiveness and cost of the data center deduction and whether the data center deduction is performing the purpose for which it was created.
L. As used in this section:
(1) "data center equipment" means purchased or leased, tangible or intangible equipment or software, whether affixed to or incorporated into real property, that is essential to the operation of a qualified data center and used or intended for use in the processing, storage, retrieval or communication of data; "data center equipment" includes the installation, refreshment, replacement and upgrade of that equipment or software. As used in this paragraph, "equipment" includes:
(a) component parts, servers, routers, connections, monitoring systems, security systems, enabling machinery, enabling equipment, enabling hardware, chillers and backup generators;
(b) equipment necessary for the transformation, generation, distribution or management of electricity required to operate computer server equipment, including solar generation equipment, wind generation equipment, geothermal generation equipment, ice bank cooling equipment, geothermal cooling equipment, evaporative cooling equipment, substations, generators, uninterruptible energy equipment, supplies, conduit, fuel piping, fuel storage, cabling, duct banks, switches, switchboards, batteries and testing equipment;
(c) equipment necessary to cool and maintain a controlled environment for the operation of computer servers and other components of a qualified data center, including mechanical equipment, refrigerant piping, fuel piping, fuel storage, adiabatic cooling systems, free cooling systems, cooling towers, water softeners, air handling units, indoor direct exchange units, fans, ducting and filters;
(d) water conservation systems, including facilities or mechanisms designed to collect, conserve or reuse water;
(e) equipment associated with computer server equipment, chassis, networking equipment, switches, racks, fiber-optic and copper cabling, trays and conduit;
(f) the conduit, ducting, fiber-optic and copper cabling located outside the qualified data center and directly related to connecting qualified data center locations; and
(g) modular data centers and preassembled components, including those used in the manufacture of a modular data center;
(2) "eligible cost":
(a) means an expenditure for the development, acquisition, construction or operation of a qualified data center; and
(b) includes the cost of: 1) site improvements to the qualified data center; 2) data center equipment for the qualified data center; and 3) permitting, site characterization, assessment, engineering and design fees directly and exclusively associated with the qualified data center;
(3) "entity" means an individual, estate, trust, receiver, cooperative association, corporation, company, firm, partnership, limited liability company, limited liability partnership or joint venture;
(4) "existing data center" means one or more contiguous or noncontiguous tracts of land in New Mexico, and the structures and personal property on that land, that:
(a) as of February 1, 2018, have at least one structure: 1) at least one hundred thousand square feet in size in which installed data center equipment occupies at least three thousand square feet of the structure; 2) that is available for use by tenants; and 3) that has an uninterruptible energy supply, generator backup power, cooling systems, towers or other temperature control infrastructure; and
(b) are or will be operated, developed or expanded for use predominantly to house working servers;
(5) "new data center" means one or more contiguous or noncontiguous tracts of land in New Mexico, and the structures and personal property on that land, with one or more structures:
(a) that, regardless of their prior use, are or will be used predominantly to house working servers;
(b) that have or will have an uninterruptible energy supply, generator backup power, cooling systems, towers or other temperature control infrastructure; and
(c) whose: 1) construction or development begins on or after July 1, 2018; or 2) reconstruction, redevelopment or expansion begins on or after July 1, 2018;
(6) "owner" means an entity or an affiliate of the entity that holds fee simple title or a long-term ground lease to a qualified data center;
(7) "operator" means an entity, other than an owner or a qualified colocation tenant, but including a licensed property management company and a property lessor, or an affiliate of the entity, that:
(a) operates a qualified data center in accordance with a lease or other type of contract with the owner or lessor of the qualified data center; and
(b) is responsible for the control, oversight or maintenance of the qualified data center;
(8) "qualified colocation tenant" means an entity that contracts with the owner or operator of a qualified data center to use or occupy all or part of the qualified data center for at least two years; and
(9) "qualified data center" means an existing data center or a new data center."
SECTION 2. A new section of Chapter 7, Article 37 NMSA 1978 is enacted to read:
"[NEW MATERIAL] ABATEMENT OF PROPERTY TAX--DATA CENTERS.--
A. As provided in this section, a taxpayer shall be afforded a property tax abatement of increases in property taxes, except those caused by new mill levies or adjustments to existing mill levies for yield control, that are attributable to the development of a new data center, improvements to an existing data center or the installation of equipment in a new or existing data center. The property tax abatement associated with a data center is as follows:
(1) for the first fifteen years of abatement, one hundred percent of increases attributable to that development, improvement or installation;
(2) for the sixteenth year of abatement, sixty-seven percent of increases attributable to that development, improvement or installation;
(3) for the seventeenth year of abatement, thirty-three percent of increases attributable to that development, improvement or installation; and
(4) for all subsequent years, no abatement.
B. If the ownership of a data center changes, the property tax abatement provided for by this section transfers to the new owner.
C. Nothing in this section shall be construed to alter the distribution, as provided by law, of property tax revenues to state and local entities. During the period of property tax abatement provided for by this section, the county assessor of the county in which a data center is located shall continue to assess the data center property in accordance with the county's usual assessment practices.
D. As used in this section, "data center" means one or more contiguous tracts of land, and the structures and personal property on that land, with one or more structures that:
(1) regardless or their prior use, are or will be used predominantly to house working servers; and
(2) have or will have an uninterruptible energy supply, generator backup power, cooling systems, towers or other temperature control infrastructure."
SECTION 3. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2018.
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