Prohibit new data center sales tax exemptions from being granted

hb957_00_IN

As Introduced

136th
General Assembly

Regular
Session
H. B. No. 957

2025-2026

Representative Rader

Cosponsors: Representatives Troy,
Somani, Abdullahi, Synenberg, Sims, Brewer, Brent, Miller, J.,
Pizzulli, Baker

To
amend section 122.175 of the Revised Code
to
prohibit new data center sales tax exemptions from being granted.

BE
IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section
1.
That
section 122.175 of the Revised Code be amended to read as follows:

Sec.
122.175.
(A)
As used in this section:

(1)
"Capital investment project" means a plan of investment at
a project site for the acquisition, construction, renovation,
expansion, replacement, or repair of a computer data center or of
computer data center equipment, but does not include any of the
following:

(a)
Project costs paid before a date determined by the tax credit
authority for each capital investment project;

(b)
Payments made to a related member as defined in section 5733.042 of
the Revised Code or to a consolidated elected taxpayer or a combined
taxpayer as defined in section 5751.01 of the Revised Code.

(2)
"Computer data center" means a facility used or to be used
primarily to house computer data center equipment used or to be used
in conducting one or more computer data center businesses, as
determined by the tax credit authority.

(3)
"Computer data center business" means, as may be further
determined by the tax credit authority, a business that provides
electronic information services as defined in division (Y)(1)(c) of
section 5739.01 of the Revised Code, or that leases a facility to one
or more such businesses. "Computer data center business"
does not include providing electronic publishing as defined in that
section.

(4)
"Computer data center equipment" means tangible personal
property used or to be used for any of the following:

(a)
To conduct a computer data center business, including equipment
cooling systems to manage the performance of computer data center
equipment;

(b)
To generate, transform, transmit, distribute, or manage electricity
necessary to operate the tangible personal property used or to be
used in conducting a computer data center business;

(c)
As building and construction materials sold to construction
contractors for incorporation into a computer data center.

(5)
"Eligible computer data center" means a computer data
center that satisfies all of the following requirements:

(a)
One or more taxpayers operating a computer data center business at
the project site will, in the aggregate, make payments for a capital
investment project of at least one hundred million dollars at the
project site during one of the following cumulative periods:

(i)
For projects beginning in 2013, six consecutive calendar years;

(ii)
For projects beginning in 2014, four consecutive calendar years;

(iii)
For projects beginning in or after 2015, three consecutive calendar
years.

(b)
One or more taxpayers operating a computer data center business at
the project site will, in the aggregate, pay annual compensation that
is subject to the withholding obligation imposed under section
5747.06 of the Revised Code of at least one million five hundred
thousand dollars to employees employed at the project site for each
year of the agreement beginning on or after the first day of the
twenty-fifth month after the agreement was entered into under this
section.

(6)
"Person" has the same meaning as in section 5701.01 of the
Revised Code.

(7)
"Project site," "related member," and "tax
credit authority" have the same meanings as in sections 122.17
and 122.171 of the Revised Code.

(8)
"Taxpayer" means any person subject to the taxes imposed
under Chapters 5739. and 5741. of the Revised Code.

(B)
The tax credit authority may completely or partially exempt from the
taxes levied under Chapters 5739. and 5741. of the Revised Code the
sale, storage, use, or other consumption of computer data center
equipment used or to be used at an eligible computer data center. Any
such exemption shall extend to charges for the delivery,
installation, or repair of the computer data center equipment subject
to the exemption under this section.

(C)
A taxpayer that proposes a capital improvement project for an
eligible computer data center in this state may apply to the tax
credit authority to enter into an agreement under this section
authorizing a complete or partial exemption from the taxes imposed
under Chapters 5739. and 5741. of the Revised Code on computer data
center equipment purchased by the applicant or any other taxpayer
that operates a computer data center business at the project site and
used or to be used at the eligible computer data center. The director
of development shall prescribe the form of the application. After
receipt of an application, the authority shall forward copies of the
application to the tax commissioner, who shall review the application
to determine the economic impact that the proposed eligible computer
data center would have on the state and any affected political
subdivisions and submit to the authority a summary of their
determinations. The authority shall also forward a copy of the
application to the director of development who shall review the
application to determine the economic impact that the proposed
eligible computer data center would have on the state and the
affected political subdivisions and shall submit a summary of their
determinations and recommendations to the authority.

(D)
Upon review and consideration of such determinations and
recommendations, the tax credit authority
,
before October 1, 2026,

may enter into an agreement with the applicant and any other taxpayer
that operates a computer data center business at the project site for
a complete or partial exemption from the taxes imposed under Chapters
5739. and 5741. of the Revised Code on computer data center equipment
used or to be used at an eligible computer data center if the
authority determines all of the following:

(1)
The capital investment project for the eligible computer data center
will increase payroll and the amount of income taxes to be withheld
from employee compensation pursuant to section 5747.06 of the Revised
Code.

(2)
The applicant is economically sound and has the ability to complete
or effect the completion of the proposed capital investment project.

(3)
The applicant intends to and has the ability to maintain operations
at the project site for the term of the agreement.

(4)
Receiving the exemption is a major factor in the applicant's decision
to begin, continue with, or complete the capital investment project.

(E)
An agreement entered into under this section shall include all of the
following:

(1)
A detailed description of the capital investment project that is the
subject of the agreement, including the amount of the investment, the
period over which the investment has been or is being made, the
annual compensation to be paid by each taxpayer subject to the
agreement to its employees at the project site, and the anticipated
amount of income taxes to be withheld from employee compensation
pursuant to section 5747.06 of the Revised Code.

(2)
The percentage of the exemption from the taxes imposed under Chapters
5739. and 5741. of the Revised Code for the computer data center
equipment used or to be used at the eligible computer data center,
the length of time the computer data center equipment will be
exempted, and the first date on which the exemption applies.

(3)
A requirement that the computer data center remain an eligible
computer data center during the term of the agreement and that the
applicant maintain operations at the eligible computer data center
during that term. An applicant does not violate the requirement
described in division (E)(3) of this section if the applicant ceases
operations at the eligible computer data center during the term of
the agreement but resumes those operations within eighteen months
after the date of cessation. The agreement shall provide that, in
such a case, the applicant and any other taxpayer that operates a
computer data center business at the project site shall not claim the
tax exemption authorized in the agreement for any purchase of
computer data center equipment made during the period in which the
applicant did not maintain operations at the eligible computer data
center.

(4)
A requirement that, for each year of the term of the agreement
beginning on or after the first day of the twenty-fifth month after
the date the agreement was entered into, one or more taxpayers
operating a computer data center business at the project site will,
in the aggregate, pay annual compensation that is subject to the
withholding obligation imposed under section 5747.06 of the Revised
Code of at least one million five hundred thousand dollars to
employees at the eligible computer data center.

(5)
A requirement that each taxpayer subject to the agreement annually
report to the director of development employment, tax withholding,
capital investment, and other information required by the director to
perform the director's duties under this section.

(6)
A requirement that the director of development annually review the
annual reports of each taxpayer subject to the agreement to verify
the information reported under division (E)(5) of this section and
compliance with the agreement. Upon verification, the director shall
issue a certificate to each such taxpayer stating that the
information has been verified and that the taxpayer remains eligible
for the exemption specified in the agreement.

(7)
A provision providing that the taxpayers subject to the agreement may
not relocate a substantial number of employment positions from
elsewhere in this state to the project site unless the director of
development determines that the appropriate taxpayer notified the
legislative authority of the county, township, or municipal
corporation from which the employment positions would be relocated.
For purposes of this paragraph, the movement of an employment
position from one political subdivision to another political
subdivision shall be considered a relocation of an employment
position unless the movement is confined to the project site. The
transfer of an employment position from one political subdivision to
another political subdivision shall not be considered a relocation of
an employment position if the employment position in the first
political subdivision is replaced by another employment position.

(8)
A waiver by each taxpayer subject to the agreement of any limitations
periods relating to assessments or adjustments resulting from the
taxpayer's failure to comply with the agreement.

(F)
The term of an agreement under this section shall be determined by
the tax credit authority, and the amount of the exemption shall not
exceed one hundred per cent of such taxes that would otherwise be
owed in respect to the exempted computer data center equipment.

(G)
If any taxpayer subject to an agreement under this section fails to
meet or comply with any condition or requirement set forth in the
agreement, the tax credit authority may amend the agreement to reduce
the percentage of the exemption or term during which the exemption
applies to the computer data center equipment used or to be used by
the noncompliant taxpayer at an eligible computer data center. The
reduction of the percentage or term may take effect in the current
calendar year.

(H)
Financial statements and other information submitted to the
department of development or the tax credit authority by an applicant
for or recipient of an exemption under this section, and any
information taken for any purpose from such statements or
information, are not public records subject to section 149.43 of the
Revised Code. However, the chairperson of the authority may make use
of the statements and other information for purposes of issuing
public reports or in connection with court proceedings concerning tax
exemption agreements under this section. Upon the request of the tax
commissioner, the chairperson of the authority shall provide to the
tax commissioner any statement or other information submitted by an
applicant for or recipient of an exemption under this section. The
tax commissioner shall preserve the confidentiality of the statement
or other information.

(I)
The tax commissioner shall issue a direct payment permit under
section 5739.031 of the Revised Code to each taxpayer subject to an
agreement under this section. Such direct payment permit shall
authorize the taxpayer to pay any sales and use taxes due on
purchases of computer data center equipment used or to be used in an
eligible computer data center and to pay any sales and use taxes due
on purchases of tangible personal property or taxable services other
than computer data center equipment used or to be used in an eligible
computer data center directly to the tax commissioner. Each such
taxpayer shall pay pursuant to such direct payment permit all sales
tax levied on such purchases under sections 5739.02, 5739.021,
5739.023, and 5739.026 of the Revised Code and all use tax levied on
such purchases under sections 5741.02, 5741.021, 5741.022, and
5741.023 of the Revised Code, consistent with the terms of the
agreement entered into under this section.

During
the term of an agreement under this section each taxpayer subject to
the agreement shall submit to the tax commissioner a return that
shows the amount of computer data center equipment purchased for use
at the eligible computer data center, the amount of tangible personal
property and taxable services other than computer data center
equipment purchased for use at the eligible computer data center, the
amount of tax under Chapter 5739. or 5741. of the Revised Code that
would be due in the absence of the agreement under this section, the
exemption percentage for computer data center equipment specified in
the agreement, and the amount of tax due under Chapter 5739. or 5741.
of the Revised Code as a result of the agreement under this section.
Each such taxpayer shall pay the tax shown on the return to be due in
the manner and at the times as may be further prescribed by the tax
commissioner. Each such taxpayer shall include a copy of the director
of development's certificate of verification issued under division
(E)(6) of this section. Failure to submit a copy of the certificate
with the return does not invalidate the claim for exemption if the
taxpayer submits a copy of the certificate to the tax commissioner
within the time prescribed by section 5703.0510 of the Revised Code.

(J)
If the director of development determines that one or more taxpayers
received an exemption from taxes due on the purchase of computer data
center equipment purchased for use at a computer data center that no
longer complies with the requirement under division (E)(3) of this
section, the director shall notify the tax credit authority and, if
applicable, the taxpayer that applied to enter the agreement for the
exemption under division (C) of this section of the noncompliance.
After receiving such a notice, and after giving each taxpayer subject
to the agreement an opportunity to explain the noncompliance, the
authority may terminate the agreement and require each such taxpayer
to pay to the state all or a portion of the taxes that would have
been owed in regards to the exempt equipment in previous years, all
as determined under rules adopted pursuant to division (K) of this
section. In determining the portion of the taxes that would have been
owed on the previously exempted equipment to be paid to this state by
a taxpayer, the authority shall consider the effect of market
conditions on the eligible computer data center, whether the taxpayer
continues to maintain other operations in this state, and, with
respect to agreements involving multiple taxpayers, the taxpayer's
level of responsibility for the noncompliance. After making the
determination, the authority shall certify to the tax commissioner
the amount to be paid by each taxpayer subject to the agreement. The
tax commissioner shall make an assessment for that amount against
each such taxpayer under Chapter 5739. or 5741. of the Revised Code.
The time limitations on assessments under those chapters do not apply
to an assessment under this division, but the tax commissioner shall
make the assessment within one year after the date the authority
certifies to the tax commissioner the amount to be paid by the
taxpayer.

(K)
The director of development, after consultation with the tax
commissioner and in accordance with Chapter 119. of the Revised Code,
shall adopt rules necessary to implement this section. The rules may
provide for recipients of tax exemptions under this section to be
charged fees to cover administrative costs incurred in the
administration of this section. The fees collected shall be credited
to the tax incentives operating fund created in section 122.174 of
the Revised Code. At the time the director gives public notice under
division (A) of section 119.03 of the Revised Code of the adoption of
the rules, the director shall submit copies of the proposed rules to
the chairpersons of the standing committees on economic development
in the senate and the house of representatives.

(L)
On or before the first day of August of each year, the director of
development shall submit a report to the governor, the president of
the senate, and the speaker of the house of representatives on the
tax exemption authorized under this section. The report shall include
information on the number of agreements that were entered into under
this section during the preceding calendar year, a description of the
eligible computer data center that is the subject of each such
agreement, and an update on the status of eligible computer data
centers under agreements entered into before the preceding calendar
year.

(M)
A taxpayer may be made a party to an existing agreement entered into
under this section by the tax credit authority and another taxpayer
or group of taxpayers. In such a case, the taxpayer shall be entitled
to all benefits and bound by all obligations contained in the
agreement and all requirements described in this section. When an
agreement includes multiple taxpayers, each taxpayer shall be
entitled to a direct payment permit as authorized in division (I) of
this section.

Section
2.
That
existing section 122.175 of the Revised Code is hereby repealed.