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SB1799 - 572R - I Ver
REFERENCE TITLE:
commerce authority; tax incentives; certification
State of Arizona
Senate
Fifty-seventh Legislature
Second Regular Session
2026
SB 1799
Introduced by
Senator
Epstein
AN
ACT
amending sections 41-1519 and 41-1520,
Arizona Revised Statutes; relating to the arizona commerce authority.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 41-1519, Arizona Revised
Statutes, is amended to read:
START_STATUTE
41-1519.
Computer data center tax relief; definitions
A.
From and after August 31, 2013,
Tax relief is allowed for the owner or operator of a computer data center
certified pursuant to this section.� The same tax relief is allowed for
qualified colocation tenants of the computer data center. All tax
relief applies during the qualification period.
B. To qualify for the tax relief, the owner or
operator shall submit to the authority an application on a form prescribed by
the authority that includes all of the following:
1. The owner's or operator's name, address and
telephone number.
2. The address of the site where the facility is or
will be located, including, if applicable, information sufficient to identify
the specific portion or portions of the facility composing the computer data
center.
3. If the computer data center is to qualify under
subsection E, paragraph 1 of this section, both of the following:
(a) The anticipated investment associated with the
computer data center for which the tax relief is being sought and whether the
computer data center is anticipated to qualify as a sustainable redevelopment
project.
(b) An affirmation, signed by an authorized
executive representing the owner or operator, that the computer data center is
expected to satisfy one of the certification requirements prescribed in
subsection E, paragraph 1 of this section and that the computer data center
will not violate subsection M of this section.
4. If the computer data center is to qualify under
subsection E, paragraph 2 of this section, an affirmation, signed by an
authorized executive representing the owner or operator, that the computer data
center has satisfied the certification requirements prescribed in subsection E,
paragraph 2 of this section, whether the computer data center qualifies as a
sustainable redevelopment project and that the computer data center will not
violate subsection M of this section.
C. Within sixty days after receiving a complete and
correct application, the authority shall review the application and either
issue a written certification that the computer data center qualifies for the
tax relief or provide written reasons for its denial.� Failure to approve or
deny the application within sixty days after the date the owner or operator
submits the application to the authority constitutes approval of the computer
data center, and the authority shall issue written certification to the owner
or operator within fourteen days. The effective date of the
certification is either the date on which the application was submitted to the
authority or a prospective date stated in the application that does not exceed
five years after the date on which the application was
submitted. The authority shall send a copy of the certification,
including its effective date, to the department of revenue. The authority shall
not certify any new computer data center that submits an application to the
authority after December 31,
2033
2026
.
D. An owner or operator may separate a facility into
one or more computer data centers, which may each receive a separate
certification if each computer data center individually meets the requirements
prescribed in subsection E of this section.� A portion of a facility or an
article of computer data center equipment shall not be deemed to be a part of
more than one computer data center.� The owner or operator may aggregate one or
more of the parcels, buildings, condominiums or modular data centers in a
facility into a single computer data center if, in the aggregate, the parcels,
buildings, condominiums and modular data centers meet the requirements of subsection
E of this section.
E. A computer data center must meet one of the
following requirements after taking into account the combined investments made
by the owner, operator or qualified colocation tenants of a computer data
center:
1. On or before the fifth anniversary of
certification, the computer data center creates a minimum investment of at
least:
(a) $25,000,000 of new investment, including costs
of land, buildings, improvements, modular data centers and computer data center
equipment, whether owned or leased or paid for pursuant to a right to use
agreement, if the computer data center is located in a county with a population
of eight hundred thousand or less persons.
(b) $50,000,000 of new investment, including costs
of land, buildings, improvements, modular data centers and computer data center
equipment, whether owned or leased or paid for pursuant to a right to use
agreement, if the computer data center is located in a county with a population
of more than eight hundred thousand persons.
2. During the seventy-two months immediately
before September 1, 2013, the computer data center created an investment of at
least $250,000,000, including costs of land, buildings, improvements,
modular data centers and computer data center equipment, whether owned or leased
or paid for pursuant to a right to use agreement.
F. On or before the fifth anniversary of the
certification of a new computer data center, the owner or operator shall notify
the authority in writing that the computer data center for which the
certification is requested has or has not satisfied the requirements prescribed
in subsection E, paragraph 1 of this section. Until a new computer
data center satisfies the requirements prescribed in subsection E, paragraph 1
of this section, the owner or operator shall keep detailed records of all
investment created by the new computer data center, including costs of land,
buildings, improvements, modular data centers and computer data center
equipment, and all tax relief directly received by the owner or
operator. This subsection does not apply to an existing computer
data center.
G. If the authority determines that:
1. A new computer data center that is certified
under subsection E, paragraph 1 of this section has not complied with the
requirements and time periods prescribed by subsection E, paragraph 1 of this
section, the authority shall revoke the computer data center's
certification. If the certification is revoked, the qualification
period of any owner, operator or qualified colocation tenant of the computer
data center automatically terminates, and the department of revenue may
recapture all or part of the tax relief provided directly to the owners and
operators.� A qualified colocation tenant is not subject to recapture of any
part of tax relief received pursuant to this section, except that a
contributing qualified colocation tenant may be subject to recapture if it is
located in a computer data center that is certified from and after August 31,
2016.� An owner or operator may appeal any revocation under this paragraph
pursuant to chapter 6, article 10 of this title.
2. There has been a violation of subsection M of
this section with respect to a computer data center:
(a) The authority shall revoke the computer data
center's certification and, if revoked, the qualification period of any owner,
operator or qualified colocation tenant of the computer data center
automatically terminates.
(b) The department of revenue may not recapture any
tax relief provided directly to the owner, operator or qualified colocation
tenant before the date of revocation.
(c) An owner or operator may appeal any revocation
under this paragraph pursuant to chapter 6, article 10 of this title.
H. The authority and the department of revenue shall
adopt rules and prescribe forms and procedures as necessary for the purposes of
this section. The authority and the department shall collaborate in adopting
rules as necessary to avoid duplication and inconsistencies while accomplishing
the purposes of this section.� The authority has exclusive authority over
issues related to certification, including determinations as to whether a
computer data center has satisfied the requirements of subsection E of this
section, constitutes a qualified sustainable redevelopment project or has
committed a violation of this section.� The department of revenue has exclusive
authority over the administration of tax relief.
I. Proprietary business information contained in the
application described in subsection B of this section, the written notice
described in subsection F of this section and the list described in subsection
J of this section are confidential and shall not be disclosed to the public
except that the information shall be transmitted to the department of revenue.�
The authority or the department may disclose the name of a computer data center
that has been certified pursuant to this section.
J. The owner or operator shall provide the authority
and the department of revenue with a list of qualified colocation tenants,
including the commencement and expiration dates of each qualified colocation
tenant's agreement to use or occupy all or part of the computer data center,
and shall notify the authority and the department of any changes within thirty
days. The failure of an owner or operator to provide the list or
notify the authority and department of revenue of changes within the required
time is not grounds for termination of the computer data center's
certification, but may preclude unlisted colocation tenants from receiving tax
relief until the list is provided or updated.
K. Except as provided in subsection G of this
section, if a computer data center has been certified, the certification
remains in effect, even in the event of a future transfer, sale or disposition,
directly or indirectly, of the computer data center.
L. For the purposes of qualifying and continuing as
a sustainable redevelopment project:
1. After receiving certification, an owner may
substantially demolish all or part of an existing building to the extent
reasonably necessary to accommodate future computer data center use, and the
demolition is not cause for loss of certification as a sustainable
redevelopment project. An existing building that has been
substantially demolished before certification is not eligible to qualify as a
sustainable redevelopment project.�
2. An owner or operator may expand the boundaries of
a certified computer data center by increasing the size of an existing building
within a sustainable redevelopment project or by building additional
improvements in an unlimited manner to the extent the expansion is constructed
on the same parcel of land on which the original sustainable redevelopment
project is located or on a contiguous parcel, regardless of whether the
contiguous parcel was within the original description of the boundaries of the
certified computer data center.� Expansion activities do not prevent a facility
from maintaining its classification as a sustainable redevelopment project.
3. All construction activities and investments
related to demolition and expansion activities described in this subsection are
considered to be a part of the sustainable redevelopment project.
M. This section does not allow a computer data
center to do either of the following:
1. Generate electricity for resale purposes.
2. Generate, provide or sell electricity outside of
the computer data center.
N. The owner or operator may be a single individual
or entity or multiple affiliated entities.
O. For the purposes of this section:
1. "Computer data center" means all or
part of a facility that may be composed of multiple businesses or owners, that
is or will be predominantly used to house working servers and that may have
uninterruptible energy supply or generator backup power, or both, cooling
systems, towers and other temperature control infrastructure.
2. "Computer data center equipment" means
equipment that is used to outfit, operate or benefit a computer data center and
component parts, installations, refreshments, replacements and upgrades to this
equipment, regardless of whether affixed to or incorporated into real property,
and whether owned, leased or used by the owner or operator pursuant to a
contract for the right to use the equipment, including:
(a) All equipment necessary for the transformation,
generation, distribution or management of electricity that is required to
operate computer server equipment, including generators, uninterruptible
energy, supplies, conduit, gaseous fuel piping, cabling, duct banks, switches,
switchboards, batteries and testing equipment.
(b) All equipment necessary to cool and maintain a
controlled environment for the operation of the computer server and other
components of the computer data center, including mechanical equipment,
refrigerant piping, gaseous fuel piping, adiabatic and free cooling systems,
cooling towers, water softeners, air handling units, indoor direct exchange units,
fans, ducting and filters.
(c) All water conservation systems, including
facilities or mechanisms that are designed to collect, conserve and reuse
water.
(d) All enabling software, computer server
equipment, chassis, networking equipment, switches, racks, cabling, trays and
conduit.
(e) All monitoring equipment and security systems.
(f) Modular data centers and preassembled components
of any item described in this paragraph, including components used in the
manufacturing of modular data centers.
(g) Other tangible personal property that is
essential to the operations of a computer data center.
3. "Contributing qualified colocation
tenant" means a qualified colocation tenant that is an operator or that
had its anticipated investment included in an application for certification for
the purposes of satisfying subsection E, paragraph 1 of this section.
4. "Existing building" means any existing
vertical building improvement located at a facility used for commercial
purposes at the time of its acquisition by an owner, but not including single
family residential structures, barns or other agricultural structures.
5. "Existing computer data center" means a
computer data center that is certified under subsection E, paragraph 2 of this
section.
6. "Facility" means one or more parcels of
land in this state and any structures and personal property contained on the
land.
7. "Investment" means all monies spent to
acquire a facility regardless of prior use and all monies spent to construct or
expand a computer data center, including costs of land, buildings,
improvements, modular data centers and computer data center equipment.� For new
data centers, investment includes all costs incurred on or after a date that is
thirty days before the date the application is submitted to the authority.
8. "Modular data center" means a portable
system of information technology, climate control, energy supply and energy
distribution machinery, equipment and related tangible personal property
contained in an intermodal freight container or similar structure.
9. "New computer data center" means a
computer data center that is certified under subsection E, paragraph 1 of this
section.
10. "Operator" means any individual or
entity that operates a computer data center as an operator or lessor or
pursuant to a contract with an owner or lessor.� Operator includes a licensed
property management company, a property lessor or any other individual or
entity responsible for the control, oversight or maintenance of a facility.
11. "Qualification period" means:
(a) With respect to the owner or operator of a
computer data center, a period of time beginning on the effective date of the
computer data center's certification and expiring at the end of the tenth full
calendar year following the calendar year containing the effective date,
except, if a computer data center is a sustainable redevelopment project,
qualification period means a period of time beginning on the effective date of
the computer data center's certification and expiring at the end of the
twentieth full calendar year following the calendar year containing the
effective date.
(b) With respect to the qualified colocation tenant
of the owner or operator of a computer data center certified under this
section, a period of time beginning on the date that the qualified colocation
tenant enters into an agreement concerning the use or occupancy of the computer
data center and expiring at the earlier of the expiration of the term of the
agreement or the tenth full calendar year following the calendar year in which
the qualified colocation tenant entered into the agreement, except, if a computer
data center is a sustainable redevelopment project, qualification period means
a period of time beginning on the date that the qualified colocation tenant
enters into an agreement concerning the use or occupancy of the computer data
center and expiring at the earlier of the expiration of the term of the
agreement or the twentieth full calendar year following the calendar year in
which the tenant entered into the agreement.� The qualification period for a
qualified colocation tenant may not extend beyond the qualification period for
the owner or operator of the computer data center.
12. "Qualified colocation tenant" means an
entity that contracts with the owner, the operator or another qualified
colocation tenant of a computer data center that is certified pursuant to this
section to use or occupy all or part of the computer data center for at least
five hundred kilowatts per month for a period of two or more years.
13. "Sustainable redevelopment project"
means a computer data center that satisfies the requirements in subsection E of
this section and is either:
(a) A newly constructed data center, with at least a
$200,000,000 investment, that attains certification under the energy star or
green globes standard, the leadership in energy and environmental design green
building rating standard developed by the United States green building council
or an equivalent green building standard and was not previously certified under
these standards.
(b) A data center that occupies an existing facility
that either:
(i) Was at least fifty percent vacant for six of the
twelve consecutive months before the acquisition by purchase or lease of or
with respect to the facility.
(ii) Attains certification under the energy star or
green globes standard, the leadership in energy and environmental design green
building rating standard developed by the United States green building council
or an equivalent green building standard and was not previously certified under
these standards.
14. "Tax relief" means the deductions of
the gross proceeds of sale or gross income from the sale, use, installation,
assembly, repair or maintenance of computer data center equipment as prescribed
by sections 42-5061, 42-5075, 42-5159 and 42-6004 for
use at a computer data center.
END_STATUTE
Sec. 2. Section 41-1520, Arizona Revised
Statutes, is amended to read:
START_STATUTE
41-1520.
International operations centers; utility relief; certification;
revocation; definitions
A. Utility relief is allowed for the owner or
operator of an international operations center that is certified pursuant to
this section.
B. To qualify for the utility relief, the owner or
operator must submit to the authority an application in a form prescribed by
the authority that includes all of the following:
1. The owner's or operator's name, address and
telephone number.
2. The address of the site where the facility is or
will be located, including, if applicable, information sufficient to identify
the specific portion or portions of the facility comprising the international
operations center.
3. An estimate of the total investment the owner or
operator or an affiliated entity, including investments made by a third-party
entity on behalf of and for the benefit of the owner, operator or affiliated
entity, will make, over a three-year period beginning on the date the
application is received, in new renewable energy facilities in this state that
produce energy for self-consumption by the international operations
center using renewable energy resources.
4. The expected location of each of the renewable
energy facilities that comprise the total investment estimated in paragraph 3
of this subsection and the earliest date that each facility is expected to be
operational.
5. A statement that a portion of the power generated
by each renewable energy facility, as required by subsection D, paragraph 4 of
this section, is for self-consumption and will be used for international
operations center use.
C. Within sixty days after receiving a complete and
correct application, the authority shall review the application and either
issue a written certification that the international operations center
qualifies for the utility relief or provide written reasons for its
denial. A failure to approve or deny the application within sixty
days after the date of submittal constitutes certification of the international
operations center, and the authority shall issue written certification to the
owner or operator within fourteen days. The authority shall send a
copy of the certification to the department of revenue.
The
authority shall not certify any new international operations center that
submits an application to the authority after December 31, 2026.
D. The owner or operator of the international
operations center must achieve all of the following requirements after taking
into account the combined investments made by the owner or operator:
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 requirements prescribed in
subsection D of this section. Until the 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.
H. The authority and the department of revenue shall
prescribe forms and procedures as necessary for the purposes of this section.
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.
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.
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.
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.
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.
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, owner, operator or
affiliated entity, 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.
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.
Requirements for enactment; two-thirds vote
Pursuant to article IX, section 22,
Constitution of Arizona, this act is effective only on the affirmative vote of
at least two-thirds of the members of each house of the legislature and is
effective immediately on the signature of the governor or, if the governor
vetoes this act, on the subsequent affirmative vote of at least three-fourths
of the members of each house of the legislature.