HF 2688 (LSB 6029HV (1) 91)

HOUSE FILE 2688

BY  COMMITTEE ON ECONOMIC GROWTH AND TECHNOLOGY

(SUCCESSOR TO HSB 727)

A BILL FOR

An Act relating to investment requirements for data center businesses that claim certain sales tax exemptions and sales and use tax refunds.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  15E.30  Data center business sales tax exemptions and refunds —— required investments.
   1.  a.  A data center business that claims a sales tax exemption under section 423.3, subsection 95, or a sales and use tax refund under section 423.4, subsections 7 and 8, shall, by the end of the calendar year, invest a minimum of five percent of the aggregate value of the sales tax exemption and sales or use tax refund claimed for the immediately preceding calendar year as either of the following:
   (1)  As an equity investment in a qualifying business under section 15E.28.
   (2)  As an equity investment in an innovation fund under section 15E.52.
   b.  The department of revenue shall annually provide the aggregate value of the sales tax exemptions and sales and use tax refunds claimed by the data center business as disclosed in the annual report of the data center business required pursuant to section 423.3, subsection 95, paragraph “b”, subparagraph (5).
   2.  The authority shall verify that the data center made equity investments that meet the requirements of subsection 1. If a data center business fails to make the required investment described in subsection 1, all of the following shall apply:
   a.  The authority shall notify the department of revenue, and the department of revenue shall cancel the registration of the data center business under section 423.3, subsection 95, and the data center business shall not be eligible for the sales tax exemption under section 423.3, subsection 95.
   b.  The data center business shall repay the aggregate amount of the sales tax exemptions and sales and use tax refunds claimed in the calendar year for which the data center business did not make the required investment. Any repayment shall be considered a tax payment due and payable to the department of revenue by the data center business, and the failure to make the repayment may be treated by the department of revenue in the same manner as a failure to pay the tax shown due, or required to be shown due, with the filing of a return or deposit form.
   3.  The authority may adopt rules pursuant to chapter 17A to administer this section.
    Sec. 2.  Section 423.3, subsection 95, paragraph b, subparagraph (5), Code 2026, is amended to read as follows:
   (5)  (a)  The data center business shall register with the department as a data center business. To maintain its registration, the data center business shall file an annual report with the department, by January 31, 2026, and by each January 31 thereafter. The annual report shall describe the aggregate sales price amount of backup power generation fuel and electricity purchased in the previous calendar year for the purposes described in paragraph “a”, subparagraphs (2) and (3), and any other information the department requires.
   (b)  Beginning with the annual report due on or after January 31, 2027, the annual report shall also contain all of the following information from the previous calendar year:
   (i)  The aggregate sales price amount of exempt property purchased under paragraph “a”, subparagraphs (1), (2), and (3).
   (ii)  The amount of sales and use tax refunds under section 423.4, subsections 7 and 8.
   (c)  If the economic development authority notifies the department of revenue that the data center business is not in compliance with section 15E.30, the department of revenue shall cancel the registration of the data center business.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to the investment requirements for data center businesses that claim certain sales tax exemptions and sales and use tax refunds.
   The bill requires a data center business (data center) that claims a sales tax exemption or sales and use tax refunds (exemptions and refunds) to, by the end of the calendar year, invest a minimum of 5 percent of the aggregate value of the exemption or refund claimed for the previous year as an equity investment in either a qualifying business or an innovation fund. The department of revenue (department) shall annually provide the aggregate value of the exemptions and refunds claimed by a data center as disclosed in the data center’s annual report, and the economic development authority (authority) shall verify the data center made the required equity investments.
   If a data center does not make the required equity investments, the authority shall notify the department, which shall cancel the registration of the data center for, and the data center shall not receive, a sales tax exemption. Additionally, the data center shall repay the aggregate amount of the exemptions and refunds claimed for which the year the data center did not make the required investment. Repayment shall be considered a tax payment due and payable to the department, and the failure to make the repayment may be treated as a failure to pay the tax shown due, or required to be shown due, with the filing of a return or deposit form.
   The authority may adopt rules to administer the bill.
   Under current law, a data center shall register with the department as a data center and shall file an annual report with the department describing the backup power generation fuel and electricity purchased in the previous year and any other information the department requires. The bill requires the annual report to describe the aggregate sales price amount of the backup power generation fuel and electricity. Additionally, beginning with the annual report due January 31, 2027, a data center’s annual report shall contain, from the previous calendar year, the aggregate sales price amount of exempt property purchased, and the amount of sales and use tax refunds received.