701—230.12 (423) Large data center business exemption. Effective on or after July 1, 2009, a data center business that has a physical location in Iowa and that meets specific criteria may obtain an exemption from sales and use tax on specific purchases that are used in the operation and maintenance of the data center business.
	   230.12(1) Definitions. For the purpose of this rule, the following definitions apply:
“Data center”  means a building rehabilitated or constructed to house a group of networked server computers in one physical location in order to centralize the storage, management, and dissemination of data and information pertaining to a particular business, taxonomy, or body of knowledge.
“Data center business”  means an entity whose business, among other businesses, is to operate a data center.
	   230.12(2) Criteria to claim exemption. The following govern whether a business qualifies for an exemption from sales and use tax on purchases made or leases executed by a data center business:
	      a.    	  Requirements. All of the following requirements must be met by a data center business for the purpose of this exemption:
	       (1)  	 The business, among other businesses, of the purchaser or lessee shall be as a provider of a data center.
	       (2)  	 The data center business shall have a physical location in Iowa that is, in the aggregate, at least 5,000 square feet in size used for the operation and maintenance of the data center.
	      1. 	  A data center facility includes, but is not limited to, the centralization, storage, management and dissemination of data and information.
	      2. 	  The physical location shall include the mechanical and electrical systems, redundant or backup power supplies, redundant data communications connections, environmental controls, and fire suppression systems for the data center business. The data center business’s physical location may also include a restricted access area employing advanced physical security measures such as video surveillance systems and card-based security or biometric security access systems.
	       (3)  	 The data center business shall make a minimum investment in an Iowa physical location of $200 million within the first six years of operation in Iowa beginning with the date the data center business initiates site preparation activities. The minimum investment includes the initial investment, including land and subsequent acquisition of additional adjacent land and subsequent investment at the Iowa location.
	       (4)  	 The data center business shall comply with the applicable sustainable design and construction standards in Iowa Administrative Code 661—Chapter 310 as established by the state building code commissioner pursuant to Iowa Code section 103A.8B.
	      b.    	  Failure to meet investment qualifications. If a data center business claiming exemption from sales and use tax under this exemption fails to meet at least 80 percent of the minimum investment amount required within the first six years of operation beginning with the initiation of the site preparation activities by the data center business, the data center business will lose the right to claim this exemption from sales and use tax. Immediately following the loss of the right to claim this exemption from sales and use tax, the data center business is required to pay all sales and use taxes that would have been due on the purchase or rental of all purchases previously claimed exempt from sales and use tax, plus any and all applicable statutory penalty and interest due on the tax.
	   230.12(3) Exempt purchases. Sales and leases of the following are exempt from sales and use tax when sold or leased to a qualifying data center business:
	      a.    	 Computers and equipment that are necessary for the maintenance and operation of the data center business;
	      b.    	 All equipment used for the operation and maintenance of the cooling system for the computers and equipment used in the operation of the data center business;
	      c.    	 All equipment used for the operation and maintenance of the cooling towers for the cooling system referenced in paragraph “b”;
	      d.    	 All equipment used for the operation and maintenance of the temperature control infrastructure for the computers and equipment used in the operation of the data center business;
	      e.    	 All equipment used for the operation and maintenance of the power infrastructure that is used for the transformation, distribution, or management of electricity used for the operation and maintenance of the data center business. This equipment includes, but is not limited to, exterior dedicated business-owned power substations and backup power generation systems, battery systems, and related infrastructure;
	      f.    	 All equipment used in the racking system, including cabling and trays;
	      g.    	 Fuel purchased by the data center business that is used in the backup power generation system and in all items listed in paragraphs “a” to “f.” This includes the fuel used in the backup generators that may be located outside the building and that are used if power is interrupted to ensure the data center business continues operation; and
	      h.    	 Electricity purchased for use in operating the data center business.
	   230.12(4) Limitation of exemption. The purchase or lease of the items listed in subrule 230.12(3) is only exempt if the items being purchased or leased are being used in the operation or maintenance of the data center business. Such purchases or leases will not be exempt from sales or use tax if the item is to be used in the business for another purpose. For example:
	      a.    	 The purchase of electricity for use in the office portion of the data center business facility would not be exempt.
	      b.    	 The purchase of building materials that become real property would not be exempt. For example, the purchase of a dishwasher that will be built into a kitchen area in the break room for employees would not be exempt from tax. Although the purchase of a dishwasher is the purchase of tangible personal property, upon installation, the dishwasher becomes part of the building and realty and, therefore, is not exempt from Iowa sales and use tax.
	   230.12(5) Initial date of exemption. The exemption from sales and use tax begins on and after the date of the initial investment in or the initiation of site preparation activities for the facility that will contain the qualifying data center business.
This rule is intended to implement Iowa Code section 423.3 as amended by 2009 Iowa Acts, Senate File 478, sections 197 through 202.
[ARC 8602B, IAB 3/10/10, effective 4/14/10]