Washington HB 2673: Providing a tax preference for nonrural data centers.

Bill Text

H-3579.3

HOUSE BILL 2673

State of Washington

65th Legislature

2018 Regular Session

By Representatives Springer, Stambaugh, Stokesbary, McDonald, and McBride

Read first time 01/12/18. Referred to Committee on Technology & Economic Development.

AN ACT Relating to providing a tax preference for nonrural data centers; adding a new section to chapter 82.08 RCW; adding a new section to chapter 82.12 RCW; creating new sections; and providing an expiration date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that data centers are a cornerstone for strong internet infrastructure that is critical to the continuing prosperity of Washington's vibrant digital economy. Under current law, data center incentives are restricted to rural counties and have improved the economies of rural counties. The legislature recognizes that rural county data center investments are necessary but insufficient for the state's total economy and competitiveness. Washington is the only state that restricts incentives geographically. As a result, data centers serving urban counties requiring higher performance and that offer colocation services for multiple tenants that foster technology ecosystems are lost to other states, particularly neighboring Oregon. The legislature further finds that despite the need, the lack of data center usage growth in Washington urban counties is primarily due to the sales tax, which can add as much as ten percent to the total cost of ownership and often runs into the millions of dollars for even mid-level users. Therefore, the legislature authorizes sales tax abatement for tenants in as many as eight data centers in Washington's urban counties.

NEW SECTION. Sec. 2. (1) This section is the tax preference performance statement for the sales and use tax exemptions contained in sections 3 and 4, chapter . . . , Laws of 2018 (sections 3 and 4 of this act). This performance statement is only intended to be used for subsequent evaluation of the tax preferences in sections 3 and 4, chapter . . ., Laws of 2018 (sections 3 and 4 of this act). It is not intended to create a private right of action by any party or be used to determine eligibility for preferential tax treatment.

(2) The legislature categorizes these sales and use tax exemptions as ones intended to improve industry competitiveness, as indicated in RCW 82.32.808(2)(b) and as one intended to create or retain jobs as indicated in RCW 82.32.808(2)(c).

(3) It is the legislature's specific public policy objective to improve industry competitiveness and to increase, create, or retain jobs in computer data centers in Washington state, thereby increasing family wage jobs. It is the legislature's intent to provide a sales and use tax exemption on eligible server equipment and power infrastructure installed in eligible computer data centers, charges made for labor and services rendered in respect to installing eligible server equipment, and for construction, installation, repair, alteration, or improvement of eligible power infrastructures in order to increase investment in data center construction, leasing, and other investment throughout the state of Washington, thereby growing employment in the technology industry in the state while adding real and personal property to state and local property tax rolls, thereby increasing the county tax base.

(4) The legislature intends to extend the expiration date of the tax preferences in sections 3 and 4, chapter . . ., Laws of 2018 (sections 3 and 4 of this act) and expand the applicability of the tax preferences to the entire state of Washington if a review finds that:

(a) As a proxy for overall technology industry growth, the amount of electrical capacity deployed attributable to these projects increased by at least ten percent over the capacity deployed in the nonrural data centers in the state since 2016; or

(b) The county tax base increased as a result of the construction, leasing, and other investment of computer data centers eligible for the sales and use tax exemptions in sections 3 and 4 of this act.

(5) In order to obtain the data necessary to perform the review in subsection (4) of this section, the joint legislative audit and review committee may refer to data available from the department of revenue regarding county property tax assessments and data provided to the department of revenue pursuant to the annual tax performance report required under RCW 82.32.534.

NEW SECTION. Sec. 3. A new section is added to chapter 82.08 RCW to read as follows:

(1) An exemption from the tax imposed by RCW 82.08.020 is provided for sales to qualifying businesses and to qualifying tenants of eligible server equipment to be installed, without intervening use, in an eligible computer data center, and to charges made for labor and services rendered in respect to installing eligible server equipment. The exemption also applies to sales to qualifying businesses and t