HB 2649 — computer data centers; tax incentives

1.

A minimum annual investment of $100,000,000 in new capital assets, including costs of land, buildings and international operations center equipment in each of ten consecutive taxable years of the owner or operator.  Investments greater than $100,000,000 in any taxable year may be carried forward as a credit toward the investment requirement in future years.

2.

On or before the tenth anniversary of certification, a minimum investment of at least $1,250,000,000 in new capital assets, including costs of land, buildings and international operations center equipment.

3.

An investment by the owner or operator or an affiliated entity, or a third-party entity on behalf of or for the direct benefit of the owner, operator or affiliated entity, of at least $100,000,000 in one or more new renewable energy facilities in this state that produce energy for self-consumption using renewable energy resources.

The minimum investment must be completed within a three-year period beginning on the date the initial application is received or by December 31, 2030, whichever is earlier.

Construction of the renewable energy facilities shall begin not later than six months after the receipt of the application.

4.

The use of a portion of the energy produced at each renewable energy facility for self-consumption in this state.

By the fifth year a renewable energy facility is in operation, at least fifty-one percent of the energy produced must be used for self-consumption in this state.

Self-consumption includes the power used by related entities if the related entities are directly or indirectly under the same ownership interests that collectively own more than eighty percent.

Power that a renewable energy facility transfers to a utility qualifies as self-consumption if the utility is the same utility that provides power to the owner's or operator's international operations center in this state, regardless of whether the owner or operator or an affiliated entity owns or leases the renewable energy facility or the land on which it is located at the time of transfer.

5.

The use of power for self-consumption under paragraph 4 of this subsection is for an international operations center in this state.

A lessor of an international operations center facility that uses power for self-consumption under paragraph 4 of this subsection satisfies the requirements of this paragraph if the lessee is an international operations center and the power is transferred as part of the lease to the lessee.

E.

Within thirty days after the end of each taxable year following certification, and within thirty days after the tenth anniversary of certification, the owner or operator shall furnish the authority written information demonstrating whether the certified international operations center has or has not satisfied the investment requirements prescribed in subsection D of this section.

Until the investment requirements prescribed in subsection D of this section are met, the owner or operator shall keep detailed records of all capital investment in the international operations center, including costs of land, buildings and international operations center equipment, and all utility relief directly received by the owner or operator.

F.

If the authority determines that the requirements of this section have not been satisfied, the authority may revoke the certification of the international operations center and notify the department of revenue in writing.

The owner or operator may appeal the revocation.

The authority may give special consideration or allow a temporary exception if there is extraordinary hardship due to factors beyond the owner's or operator's control.

If certification is revoked, the department of revenue shall order the owner or operator to forfeit further entitlement to utility relief.

If the owner or operator fails to make a minimum capital investment of $100,000,000 in a taxable year, taking into account any excess investment amounts carried forward from previous years, the owner or operator may avoid revocation of its certification by paying to the department of revenue within sixty days after the end of the taxable year the amount of the utility relief provided pursuant to this section in that year.

G.

Each year after initial certification, on or before the anniversary date of the application specified in subsection b of this section, the Owner, operator or affiliated entity must submit to the authority:

1.

Documentation of the Owner's, operator's or affiliated entity's progress toward the investment required by subsection d, paragraph 3 of this section.

This documentation is not required after the authority receives a report stating that the required investment threshold has been reached.

2.

Documentation for each renewable energy facility that demonstrates that the required portion of the power generated by each facility is for self-consumption as required by subsection d, paragraph 4 of this section.

G.

H.

The authority and the department of revenue shall prescribe forms and procedures as necessary for the purposes of this section.

H.

I.

Proprietary business information contained in the application form described in subsection B of this section and the written notice described in subsection F of this section are confidential and may not be disclosed to the public, except that the information shall be transmitted to the department of revenue.

The authority or the department of revenue may disclose the name of an international operations center that has been certified pursuant to this section.

I.

J.

Except as provided in subsection F of this section, on certification, the international operations center remains certified unless ownership of the international operations center is sold, conveyed, transferred or otherwise directly or indirectly disposed of to another entity in which the original owner holds less than a controlling interest.  For the purposes of this subsection, "controlling interest" means at least eighty percent of the voting shares of a corporation or of the interests in a noncorporate entity.

J.

K.

An owner or operator may be composed of a single entity or affiliated entities.

L.

If the information required by subsection B, paragraphs 3, 4 and 5 of this section and the documentation required by subsection G of this section were already provided to the department of revenue for the purposes of the credit provided by section 43-1164.05, the owner or operator is not required to provide the information or documentation a second time under this section.

K.

M.

For the purposes of this section:

1.

"Affiliated entity" means any of the following:

(a) an entity that is included in the same Arizona income tax return as the owner or operator of the international operations center.

(b) any entity in which the owner or operator of the international operations center is entitled to a distributive share of the entity's income or loss.

(c) Any entity, including a single-member limited liability company, that is disregarded for federal income tax purposes and is directly or indirectly owned wholly or in part by the owner or operator of the international operations center.

2.

"biomass" means organic material that is available on a renewable or recurring basis, including:

(a) Forest-related materials, including mill residues, logging residues, forest thinnings, slash, brush, low-commercial value materials or undesirable species, salt cedar and other phreatophyte or woody vegetation removed from river basins or watersheds and woody material harvested for the purpose of forest fire fuel reduction or forest health and watershed improvement.

(b) Agricultural-related materials, including orchard trees, vineyard, grain or crop residues, including straws and stover, aquatic plants and agricultural processed coproducts and waste products, including fats, oils, greases, whey and lactose.

(c) Animal waste, including manure and slaughterhouse and other processing waste.

(d) Solid woody waste materials, including landscape or right-of-way tree trimmings, rangeland maintenance residues, waste pallets, crates and manufacturing, construction and demolition wood wastes, but excluding pressure-treated, chemically treated or painted wood wastes and wood contaminated with plastic.

(e) Crops and trees planted for the purpose of being used to produce energy.

(f) Landfill gas, wastewater treatment gas and biosolids, including organic waste by-products generated during the wastewater treatment process.

1.

3.

"International operations center" means a facility or connected facilities under the same ownership that are subject to the investment thresholds under subsection D of this section and that self-consume renewable energy from a qualified facility pursuant to subsection D of this section.

43-1164.05, subsection B.

4.

"Renewable energy facility" means a facility in which the owner, operator or affiliated entity, or a third-party entity on behalf of and for the benefit of the taxpayer, invested at least $30,000,000, that has at least twenty megawatts of generating capacity or a minimum typical annual generation of forty thousand megawatt hours, that is located on land in this state and that produces electricity using a renewable energy resource.

5.

"Renewable energy resource" means a resource that generates electricity by using only the following energy sources:

(a) solar light.

(b) solar heat.

(c) wind.

(d) biomass, including fuel cells supplied directly or indirectly with biomass generated fuels.

(e) Battery storage that is independent from or coupled with other sources.

2.

6.

"Utility relief" means the mitigation of the tax burden on the retail purchaser of electricity or natural gas through the application of section 42-5063, subsection C, paragraph 7, section 42-5159, subsection G, paragraph 2 and section 42-6012, paragraph 2.END_STATUTE Sec. 3.

Sales of liquid, solid or gaseous chemicals used in manufacturing, processing, fabricating, mining, refining, metallurgical operations, research and development and, beginning on January 1, 1999, printing, if using or consuming the chemicals, alone or as part of an integrated system of chemicals, involves direct contact with the materials from which the product is produced for the purpose of causing or permitting allowing a chemical or physical change to occur in the materials as part of the production process. process. This paragraph does not include chemicals that are used or consumed in activities such as packaging, storage or transportation but does not affect any deduction for such chemicals that is otherwise provided by this section.

This paragraph does not include chemicals that are used or consumed in activities such as packaging, storage or transportation but does not affect any deduction for such chemicals that is otherwise provided by this section.

Machinery, or equipment, used directly in manufacturing, processing, fabricating, job printing, refining or metallurgical operations. operations. The terms "manufacturing", "processing", "fabricating", "job printing", "refining" and "metallurgical" as used in this paragraph refer to and include those operations commonly understood within their ordinary meaning.

The terms "manufacturing", "processing", "fabricating", "job printing", "refining" and "metallurgical" as used in this paragraph refer to and include those operations commonly understood within their ordinary meaning.

END_STATUTE Sec. 3.Sec. 4.

110 Stat.

END_STATUTE Sec. 4.Sec. 5.

(b) Administration or supervision of any modification performed pursuant to a punch list.list.  For the purposes of this subdivision, "punch list" means minor items of modification work performed after substantial completion and before final completion of the project.

 For the purposes of this subdivision, "punch list" means minor items of modification work performed after substantial completion and before final completion of the project.

END_STATUTE Sec. 5.Sec. 6.

START_STATUTE42-5159.END_STATUTE42-5159.

78 Stat.

7 United States Code sections 2011 through 2036b) by the United States department of agriculture food and nutrition service or food instruments issued under section 17 of the child nutrition act (P.L. 95-627;

For the purposes of subsection D of this section, "ancillary services", "electric distribution service", "electric generation service", "electric transmission service" and "other services" have the same meanings prescribed in section 42-5063.END_STATUTE Sec. 6.Sec. 7.

Sec. 7.END_STATUTE Sec. 8.

The minimum investment must be completed within a three-year period beginning on the date the initial application is received or by December 31, 2030,2030 2018, whichever is earlier.

The taxpayer, including all affiliates of the taxpayer, may not cumulate tax credits under this section over different taxable years exceeding, in the aggregate, $25,000,000. $25,000,000. The initial credit for each facility is claimed in the year that the facility becomes operational.

AThe credit,initial othercredit thanfor carryoverseach allowedfacility underis subsection M of this section, may not be claimed forin anythe taxable year beginning after December 31, 2025.  An international operations center that is initially certified pursuant to section 41-1520, subsection C after December 31, may not claim the taxfacility creditbecomes authorizedoperational. by this section.

A credit, other than carryovers allowed under subsection M of this section, may not be claimed for any taxable year beginning after December 31, 2025.

An international operations center that is initially certified pursuant to section 41-1520, subsection C after December 31, 2018 may not claim the tax credit authorized by this section.

END_STATUTE Sec. 8.Sec. 9.

Sec. 9.

Legislative intent The Legislature intends with this act to move the transaction privilege tax deduction for computer data center equipment in section 42-5061, Arizona Revised Statutes, from section 42-5061, subsection A, Arizona Revised Statutes, to section 42-5061, subsection B, Arizona Revised Statutes, and from section 42-5159, subsection A, Arizona Revised Statutes, to section 42-5159, subsection B, Arizona Revised Statutes, in order to clarify and allow taxpayers to take advantage of the independent functional utility deduction in section 42-5075, Arizona Revised Statutes, in addition to the deductions allowed in sections 42-5061 and 42-5159, Arizona Revised Statutes.

RetroactivityLegislative Thisintent The Legislature intends with this act appliesto retroactivelymove the transaction privilege tax deduction for computer data center equipment in section 42-5061, Arizona Revised Statutes, from section 42-5061, subsection A, Arizona Revised Statutes, to taxablesection periods42-5061, beginningsubsection B, Arizona Revised Statutes, and from section 42-5159, subsection A, Arizona Revised Statutes, to section 42-5159, subsection B, Arizona Revised Statutes, in order to clarify and afterallow Septembertaxpayers 12,to 2013.take advantage of the independent functional utility deduction in section 42-5075, Arizona Revised Statutes, in addition to the deductions allowed in sections 42-5061 and 42-5159, Arizona Revised Statutes.

Retroactivity A.

Sections 41-1519, 42-5075, 42-5159 and 42-6017, Arizona Revised Statutes, as amended by this act, and section 42-5061, as amended by Laws 2019, chapter 273, section 7 and chapter 288, section 1 and this act, apply retroactively to taxable periods beginning from and after September 12, 2013.

B.

Sections 41-1520 and 43-1164.05, Arizona Revised Statutes, as amended by this act, apply retroactively to from and after August 24, 2020.

Sec. 12.

Sec. 12.Sec. 13.

Conditional enactmentenactment; Section 42-5061, Arizona Revised Statutes, as amended by Laws 2019, chapter 273, section 8 and chapter 288, section 2 and this act, becomes effective on the date prescribed by Laws 2018, chapter 263, section 5, but only on the occurrence of the condition prescribed by Laws 2018, chapter 263, section 5.

retroactivity Section 42-5061, Arizona Revised Statutes, as amended by Laws 2019, chapter 273, section 8 and chapter 288, section 2 and this act, becomes effective on the date prescribed by Laws 2018, chapter 263, section 5 and applies retroactively to taxable periods beginning from and after September 12, 2013, but only on the occurrence of the condition prescribed by Laws 2018, chapter 263, section 5.

      APPROVED BY THE GOVERNOR APRIL 20, 2021.

  FILED IN THE OFFICE OF THE SECRETARY OF STATE APRIL 20, 2021.