Senate Study Bill 1278 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON BOLKCOM) A BILL FOR An Act relating to state and local taxation by amending the 1 sales and use tax exemption and refunds and the property tax 2 exemption available to data center businesses, and including 3 effective date provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1765XC (2) 86 mm/sc

S.F. _____ Section 1. Section 423.3, subsection 95, paragraph b, Code 1 2015, is amended by adding the following new subparagraph: 2 NEW SUBPARAGRAPH . (5) The data center business shall begin 3 rehabilitation or construction before the effective date of 4 this Act on the data center that it will operate. 5 Sec. 2. Section 423.3, subsection 95, paragraph e, 6 subparagraph (1), Code 2015, is amended to read as follows: 7 (1) “Data center” means a building rehabilitated or 8 constructed to house a group of networked server computers 9 in one physical location in order to centralize the storage, 10 management, and dissemination of data and information 11 pertaining to a particular business, taxonomy, or body of 12 knowledge , which building rehabilitation or construction 13 began before the effective date of this Act . A data center 14 business’s facility typically includes the mechanical and 15 electrical systems, redundant or backup power supplies, 16 redundant data communications connections, environmental 17 controls, and fire suppression systems. A data center 18 business’s facility also includes a restricted access area 19 employing advanced physical security measures such as video 20 surveillance systems and card-based security or biometric 21 security access systems. 22 Sec. 3. Section 423.4, subsection 7, paragraph b, Code 2015, 23 is amended by adding the following new subparagraph: 24 NEW SUBPARAGRAPH . (5) The data center business shall begin 25 rehabilitation or construction before the effective date of 26 this Act on the data center that it will operate. 27 Sec. 4. Section 423.4, subsection 8, paragraph b, Code 2015, 28 is amended by adding the following new subparagraph: 29 NEW SUBPARAGRAPH . (5) The data center business shall begin 30 rehabilitation or construction before the effective date of 31 this Act on the data center that it will operate. 32 Sec. 5. EFFECTIVE UPON ENACTMENT. This Act, being deemed of 33 immediate importance, takes effect upon enactment. 34 EXPLANATION 35 -1- LSB 1765XC (2) 86 mm/sc 1/ 3

S.F. _____ The inclusion of this explanation does not constitute agreement with 1 the explanation’s substance by the members of the general assembly. 2 BACKGROUND. Current law provides several tax incentives 3 targeted exclusively at data center businesses that operate a 4 data center in Iowa. 5 Code section 423.3(95) provides a sales and use tax 6 exemption to a data center business for the purchase of 7 certain computers, equipment, backup power generation fuel, 8 and electricity. In order to qualify for the exemption the 9 data center business must meet certain requirements related to 10 physical size, timing and amount of investment, and design and 11 construction standards. 12 Code section 423.4(7) provides a limited-time (up to five 13 years) refund for 50 percent of the state sales and use tax 14 paid by a data center business on purchases of certain fuel 15 and electricity. In order to qualify for the refund the data 16 center business must meet certain requirements related to the 17 timing and amount of investment, and design and construction 18 standards. 19 Code section 423.4(8) provides a limited-time (seven 20 or 10 years) refund for 50 percent of the state sales and 21 use tax paid by a data center business on purchases of 22 certain computers, equipment, backup power general fuel, and 23 electricity. In order to qualify for the refund the data 24 center business must fail to qualify for the sales and use tax 25 exemption under Code section 423.3(95) and must meet certain 26 requirements related to physical size, timing and amount of 27 investment, and design and construction standards. 28 Code section 427.1(37) provides a property tax exemption 29 for certain computers and machinery utilized by a data center 30 business. 31 BILL CHANGES. This bill amends the requirements for a data 32 center business to qualify for the sales and use tax exemption 33 in Code section 423.3(95), and by operation of law the property 34 tax exemption in Code section 427.1(37), and the requirements 35 -2- LSB 1765XC (2) 86 mm/sc 2/ 3

S.F. _____ for a data center business to qualify for the sales and use tax 1 refunds in Code sections 423.4(7) and 423.4(8), to require that 2 a data center business begin rehabilitation or construction 3 before the effective date of the bill on the data center that 4 it will operate in order to qualify. The bill also amends 5 the definition of “data center” in Code section 423.3(95) to 6 specify that in order to meet the definition, the building 7 rehabilitation or construction must begin before the effective 8 date of the bill. 9 The bill takes effect upon enactment. 10 -3- LSB 1765XC (2) 86 mm/sc 3/ 3