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Summary: HB 1223 would allow certain qualifying data centers to receive a sales and use tax exemption. It would exempt tangible personal property that is necessary and essential to a qualified data center from taxes imposed by HB 1223.
HB 1223 sets out various qualifications for data centers to claim an exemption, including a promise to invest $150 million over five years and create at least 20 qualifying jobs in their county. A qualified job is one that is full time and permanent, and pays 120% of the county average weekly wage.
The comptroller decides what data centers qualify and gives registration numbers to qualifying centers. If a qualifying center becomes ineligible, the center’s registration number will be revoked and the center will be liable for all taxes, including interest and penalties, that they claimed an exemption for under HB 1223’s tax exemption, even if the exemptions date back before they had their registrations revoked and they were eligible for the bill’s tax exemptions.
Analysis: HB 1223 limits the size and scope of government by exempting qualifying data centers from taxation. This exemption also provides incentives for data centers to locate in Texas and create jobs with the personal property that they retain.
HB 1223, however, contains a concerning provision that would require formerly qualified data centers that become unqualified to pay back taxes for exemptions claimed while they were qualified data centers. Section 151.359 (h) should be amended to say they are only liable for tax exemptions claimed while they were unqualified for exemptions, not for exemptions they received when they were qualified.
While we support the overall legislation, it could be substantially improved by amending to make relevant data centers liable only for exemptions claimed while they were unqualified for the exemptions.