House File 140 - Introduced HOUSE FILE BY WENDT and WHITEAD Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to providing sales, use, and property tax 2 exemptions for certain data processing businesses. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1207HH 83 5 tw/mg:sc/5 PAG LIN 1 1 Section 1. Section 423.3, Code 2009, is amended by adding 1 2 the following new subsection: 1 3 NEW SUBSECTION. 93A. a. (1) The sales price from the 1 4 sale or rental of computers and equipment that are necessary 1 5 for the maintenance and operation of a data processing 1 6 business and property whether directly or indirectly connected 1 7 to the computers, including but not limited to cooling 1 8 systems, cooling towers, and other temperature control 1 9 infrastructure; power infrastructure for transformation, 1 10 distribution, or management of electricity used for the 1 11 maintenance and operation of the data processing business, 1 12 including but not limited to exterior dedicated business=owned 1 13 substations, back=up power generation systems, battery 1 14 systems, and related infrastructure; and racking systems, 1 15 cabling, and trays, which are necessary for the maintenance 1 16 and operation of the data processing business. 1 17 (2) The sales price of back=up power generation fuel that 1 18 is purchased by a data processing business for use in the 1 19 items listed in subparagraph (1). 1 20 (3) The sales price of electricity purchased for use by a 1 21 data processing business. 1 22 b. For the purpose of claiming this exemption, all of the 1 23 following requirements shall be met: 1 24 (1) The purchaser or renter shall be a data processing 1 25 business. 1 26 (2) The data processing business shall have a physical 1 27 location in the state that is used for the operations and 1 28 maintenance of the data processing business. 1 29 (3) The data processing business shall make a minimum 1 30 investment in an Iowa physical location of two hundred million 1 31 dollars within the first six years of operation in Iowa 1 32 beginning with the date the data processing business initiates 1 33 site preparation activities. The minimum investment includes 1 34 the initial investment, including land and subsequent 1 35 acquisition of additional adjacent land and subsequent 2 1 investment at the Iowa location. 2 2 (4) The data processing business shall purchase, option, 2 3 or lease Iowa land not later than December 31, 2009, for any 2 4 initial investment. However, the December 31, 2009, date 2 5 shall not affect the future purchases of adjacent land and 2 6 additional investment in the initial or adjacent land to 2 7 qualify as part of the minimum investment for purposes of this 2 8 exemption. 2 9 c. This exemption applies from the date of the initial 2 10 investment in or the initiation of site preparation activities 2 11 for the data processing facility as described in paragraph 2 12 "b". For purposes of claiming this exemption, the 2 13 requirements may be met by aggregating the various Iowa 2 14 investments and other requirements of the data processing 2 15 business's affiliates. This exemption applies to affiliates 2 16 of the data processing business. 2 17 d. Failure to meet eighty percent of the minimum 2 18 investment amount requirement specified in paragraph "b" 2 19 within the first six years of operation from the date the data 2 20 processing business initiates site preparation activities will 2 21 result in the data processing business losing the right to 2 22 claim this data processing business exemption, and the data 2 23 processing business shall pay all sales or use tax that would 2 24 have been due on the purchase or rental or use of the items 2 25 listed in this exemption, plus any applicable penalty and 2 26 interest imposed by statute. 2 27 e. For purposes of this subsection: 2 28 (1) "Affiliate" means an entity that directly or 2 29 indirectly controls, is controlled with or by, or is under 2 30 common control with another entity. 2 31 (2) "Control" means any of the following: 2 32 (a) In the case of a United States corporation, the 2 33 ownership, directly or indirectly, of fifty percent or more of 2 34 the voting power to elect directors. 2 35 (b) In the case of a foreign corporation, if the voting 3 1 power to elect the directors is less than fifty percent, the 3 2 maximum amount allowed by applicable law. 3 3 (c) In the case of an entity other than a corporation, 3 4 fifty percent or more ownership interest in the entity, or the 3 5 power to direct the management of the entity. 3 6 (3) "Data processing business" means a business entity 3 7 having North American industry classification system number 3 8 518210. 3 9 Sec. 2. Section 427.1, Code 2009, is amended by adding the 3 10 following new subsection: 3 11 NEW SUBSECTION. 37. DATA PROCESSING PROPERTY. 3 12 a. Property, other than land and buildings and other 3 13 improvements, that is utilized by a data processing business 3 14 as defined in and meeting the requirements of section 423.3, 3 15 subsection 93A, including computers and equipment that are 3 16 necessary for the maintenance and operation of a data 3 17 processing business and other property whether directly or 3 18 indirectly connected to the computers, including but not 3 19 limited to cooling systems, cooling towers, and other 3 20 temperature control infrastructure; power infrastructure for 3 21 transformation, distribution, or management of electricity, 3 22 including but not limited to exterior dedicated business=owned 3 23 substations, and power distribution systems which are not 3 24 subject to assessment under chapter 437A; racking systems, 3 25 cabling, and trays; and back=up power generation systems, 3 26 battery systems, and related infrastructure all of which are 3 27 necessary for the maintenance and operation of the data 3 28 processing business. 3 29 b. This data processing business exemption applies 3 30 beginning with the assessment year the investment in or 3 31 construction of the facility utilizing the materials, 3 32 equipment, and systems set forth in paragraph "a" are first 3 33 assessed. For purposes of claiming this data processing 3 34 business exemption, the requirements may be met by aggregating 3 35 the various Iowa investments and other requirements of the 4 1 data processing business's affiliates as allowed under section 4 2 423.3, subsection 93A. This exemption applies to affiliates 4 3 of the data processing business. 4 4 Sec. 3. IMPLEMENTATION. Section 25B.7 does not apply to 4 5 the property tax exemption enacted in this Act. 4 6 EXPLANATION 4 7 This bill provides a sales and use tax exemption for the 4 8 sale or rental of computers and equipment that are necessary 4 9 for the maintenance and operation of a data processing 4 10 business and property that is directly or indirectly connected 4 11 to the computers; the sale of back=up power generation fuel; 4 12 and electricity used in the operation and maintenance of the 4 13 data processing business. 4 14 To qualify for the sales and use tax exemption, the 4 15 purchaser or renter must be a data processing business. A 4 16 data processing business means a business having North 4 17 American industry classification system number 518210; the 4 18 data processing business must have a physical location in the 4 19 state that is used for the operations and maintenance of the 4 20 data processing business; the business must have a minimum 4 21 investment within the first six years of operation in Iowa of 4 22 $200 million; and the business must purchase, option, or lease 4 23 land in the state not later than December 31, 2009. 4 24 The bill also provides a property tax exemption for 4 25 property utilized by a data processing business as defined in 4 26 and meeting the qualifications of the provisions for the sales 4 27 and use tax exemption. 4 28 Code section 25B.7 does not apply to the property tax 4 29 exemption in the bill. That Code section requires state 4 30 funding to implement a property tax exemption. 4 31 LSB 1207HH 83 4 32 tw/mg:sc/5