Data center equipment/taxes

AN ACT Relating to removing a tax exemption for the replacement 1
of equipment for data centers; amending RCW 82.08.986 and 82.08.9861; 2
creating a new section; and providing an effective date.3
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:4
NEW SECTION. Sec. 1. The legislature finds that, according to 5
the most recent tax exemption study published by the department of 6
revenue, there are currently 786 tax exemptions for the major state 7
and local tax sources in Washington. A number of these tax exemptions 8
have been unchanged in law for a long time and exist as the result of 9
private interests securing preferential tax treatment. Furthermore, 10
the legislature finds that the state's tax code must be periodically 11
reviewed and updated to ensure that tax policy reflects our modern 12
economy and provides adequate revenue to fund necessary and essential 13
services to support the well-being of Washingtonians. Thus, it is the 14
intent of the legislature to remove a tax preference in order to 15
increase revenue to the state's general fund to maintain essential 16
state services.17
Sec. 2. RCW 82.08.986 and 2025 c 411 s 4 are each amended to 18
read as follows: 19
Z-0629.1
SENATE BILL 6231
State of Washington 69th Legislature 2026 Regular Session
By Senators Frame and Hasegawa; by request of Office of Financial
Management
Read first time 01/20/26. Referred to Committee on Ways & Means.
p. 1 SB 6231
(1)(a) An exemption from the tax imposed by RCW 82.08.020 is 1
provided for sales to qualifying businesses and to qualifying tenants 2
of eligible server equipment to be installed, without intervening 3
use, in an eligible computer data center to which a valid exemption 4
certificate applies, and to charges made for labor and services 5
rendered in respect to installing eligible server equipment.6
(b) This exemption also applies to sales to qualifying businesses 7
and to qualifying tenants of eligible power infrastructure, including 8
labor and services rendered in respect to constructing, installing, 9
repairing, altering, or improving eligible power infrastructure at an 10
eligible computer data center for which an exemption certificate has 11
been issued. 12
(c) No new exemption certificates may be issued on or after July 13
1, 2036. 14
(d) The exemptions provided in this section expire July 1, 2048.15
(e)(i) Each calendar year, the department may issue no more than 16
six certificates for data centers which qualify through 17
refurbishment. Certificates are available for refurbished data 18
centers on a first-in-time basis based on the date the application 19
required under this section is received by the department. Each 20
qualifying business may apply for only one certificate for a 21
refurbished data center each calendar year. 22
(ii) New exemption certificates may not be issued on or after 23
July 1, 2026, for data centers that qualify through refurbishment.24
(iii) The exemption granted to data centers that qualify through 25
refurbishment under this subsection (1)(e) expires July 1, 2026.26
(2)(a) In order to obtain an exemption certificate under this 27
section, a qualifying business or a qualifying tenant must submit an 28
application to the department for an exemption certificate. The 29
application must include the information necessary, as required by 30
the department, to determine that a business or tenant qualifies for 31
the exemption under this section. The department must issue exemption 32
certificates to qualifying businesses and qualifying tenants. The 33
department may assign a unique identification number to each 34
exemption certificate issued under this section. 35
(b) A qualifying business or a qualifying tenant claiming the 36
exemption under this section must present the seller with an 37
exemption certificate in a form and manner prescribed by the 38
department. The seller must retain a copy of the certificate for the 39
seller's files. 40
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(c) With respect to computer data centers for which the 1
commencement of construction occurs after July 1, 2015, but before 2
July 1, 2019, the exemption provided in this section is limited to no 3
more than eight computer data centers, with total eligible data 4
centers provided under this section limited to 12 from July 1, 2015, 5
through June 9, 2022. Tenants of qualified data centers do not 6
constitute additional data centers under the limit. The exemption is 7
available on a first-in-time basis based on the date the application 8
required under this section is received by the department.9
(d) The exemption certificate is effective on the date the 10
application is received by the department, which is deemed to be the 11
date of issuance. Only purchases on or after the date of issuance 12
qualify for the exemption under this section. No tax refunds are 13
authorized for purchases made before the effective date of the 14
exemption certificate. 15
(e) Exemption certificates expire two years after the date of 16
issuance, unless construction has been commenced. 17
(3)(a)(i) Within six years of the date that the department issued 18
an exemption certificate under this section to a qualifying business 19
or a qualifying tenant with respect to an eligible computer data 20
center, the qualifying business or qualifying tenant must establish 21
that net employment assigned to an eligible computer data center has 22
increased by a minimum of: 23
(A) Thirty-five family wage employment positions; or, if lower24
(B) Three family wage employment positions for each 20,000 square 25
feet of space or less that is newly dedicated to housing working 26
servers at the eligible computer data center. For qualifying tenants, 27
the number of family wage employment positions that must be increased 28
under this subsection (3)(a)(i)(B) is based only on the space 29
occupied by the qualifying tenant in the eligible computer data 30
center. 31
(ii) After the minimum number of family wage employment positions 32
as required under (a)(i) of this subsection (3) is established, a 33
qualifying business or a qualifying tenant must maintain the minimum 34
family wage employment positions required under (a)(i) of this 35
subsection (3) while the exemption certificate is valid.36
(b) In calculating the net increase in family wage employment 37
positions: 38
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(i) The owner of an eligible computer data center, in addition to 1
its own net increase in family wage employment positions, may 2
include: 3
(A) The net increase, since the date of issuance of the 4
qualifying business's exemption certificate, in family wage 5
employment positions employed by qualifying tenants; and6
(B) The net increase in family wage employment positions 7
described in (c)(ii)(B) of this subsection (3). 8
(ii)(A) Qualifying tenants, in addition to their own net increase 9
in family wage employment positions, may include: 10
(I) A portion of the net increase in family wage employment 11
positions employed by the owner; and 12
(II) A portion of the net increase in family wage employment 13
positions described in (c)(ii)(B) of this subsection (3).14
(B) The portion of the net increase in family wage employment 15
positions to be counted under this subsection (3)(b)(ii) by each 16
qualifying tenant is equal to the net increase in family wage 17
employment positions assigned to an eligible computer data center as 18
described in (b)(ii)(A)(I) and (II) of this subsection (3), 19
multiplied by the percentage of total space within the eligible 20
computer data center occupied by the qualifying tenant. Any 21
combination of qualifying business and qualifying tenant family wage 22
employment positions may meet this requirement. 23
(C)(I) In the instance of an existing data center facility that 24
was ineligible, regardless of the date of commencement of 25
construction, that later obtains an exemption certificate under this 26
section, the data center may count the existing employment positions 27
that are dedicated to the data center toward the new family wage 28
employment position requirements if the employment positions meet the 29
requirements of a family wage employment position, as described in 30
(c)(i)(B) and (C) of this subsection (3), other than the requirement 31
that the position did not exist or had not previously been filled as 32
of the date that the department issued an exemption certificate.33
(II) In the instance of the refurbishment of an existing data 34
center that previously qualified under the data center program, the 35
data center may count the existing employment positions dedicated to 36
the data center toward the new family wage employment position 37
requirements if the employment positions meet the requirements of a 38
family wage employment position, as described in (c)(i)(B) and (C) of 39
this subsection (3), other than the requirement that the position did 40
p. 4 SB 6231
not exist or had not previously been filled as of the date that the 1
department issued an exemption certificate. 2
(c)(i) For purposes of this subsection: 3
(A) For exemption certificates issued before June 9, 2022, family 4
wage employment positions are new permanent employment positions 5
requiring 40 hours of weekly work, or their equivalent, on a full-6
time basis assigned to an eligible computer data center and receiving 7
a wage equivalent to or greater than 150 percent of the per capita 8
personal income of the county in which the qualified project is 9
located as published by the employment security department. The per 10
capita personal income to be used to determine qualification for any 11
year is the amount that was established for the immediate prior year.12
(B) For exemption certificates issued on or after June 9, 2022, 13
family wage employment positions are new permanent employment 14
positions requiring 40 hours of weekly work, or their equivalent, on 15
a full-time basis assigned to an eligible computer data center and 16
receiving a wage equivalent to or greater than 125 percent of the per 17
capita personal income of the county in which the qualified project 18
is located as published by the employment security department. The 19
per capita personal income to be used to determine qualification for 20
any year is the amount that was established for the immediate prior 21
year. 22
(C) An employment position may not be counted as a family wage 23
employment position unless the employment position is entitled to 24
health insurance coverage provided by the employer of the employment 25
position. 26
(D) "New permanent employment position" means an employment 27
position that did not exist or that had not previously been filled as 28
of the date that the department issued an exemption certificate to 29
the qualifying business or qualifying tenant of an eligible computer 30
data center, as the case may be, except as provided in (b)(ii)(C) of 31
this subsection (3). 32
(ii)(A) Family wage employment positions include positions filled 33
by employees of the qualifying business and by employees of 34
qualifying tenants. 35
(B) Family wage employment positions also include individuals 36
performing work at an eligible computer data center as an independent 37
contractor hired by the owner of the eligible computer data center or 38
as an employee of an independent contractor hired by the owner of the 39
eligible computer data center, if the work is necessary for the 40
p. 5 SB 6231
operation of the computer data center, such as security and building 1
maintenance, and provided that all of the applicable requirements in 2
(c)(i) of this subsection (3) are met. 3
(d)(i) For a qualifying business or qualifying tenant that does 4
not meet the requirements of this subsection (3), previously exempted 5
sales and use taxes are immediately due and payable and any exemption 6
certificate issued to that qualifying business or qualifying tenant 7
under this section is canceled, except as described in (d)(iii) of 8
this subsection (3). 9
(ii) The department of labor and industries must, at the request 10
of the department, assist in determining whether the requirements of 11
this subsection (3) have been met. 12
(iii) If the department, with the assistance of the department of 13
labor and industries, finds that a failure to meet the requirements 14
of this subsection (3) is due to circumstances beyond the control of 15
the qualifying business or qualifying tenant including, but not 16
limited to, a declaration of an economic recession, pandemic, or 17
natural disaster affecting data center operations, the department may 18
provide exceptions or extensions to the requirements of this 19
subsection (3). 20
(iv) Any repayment of taxes triggered by the failure of a 21
qualifying business or qualifying tenant to meet the requirements of 22
this subsection (3) must be calculated in proportion to the duration 23
of time for which any applicable requirement was not met.24
(v) If the department is notified that a qualifying business or 25
qualifying tenant fails to meet the requirements of this subsection 26
(3), the department may require a qualifying business or qualifying 27
tenant to submit records necessary to determine whether the 28
requirements have been met. 29
(4) For exemption certificates issued on or after June 9, 2022:30
(a) Within three years after being placed in service, the 31
qualifying business operating a newly constructed data center must 32
certify to the department that it has attained certification under 33
one or more of the following sustainable design or green building 34
standards: 35
(i) BREEAM for new construction or BREEAM in-use;36
(ii) Energy star; 37
(iii) Envision; 38
(iv) ISO 50001-energy management; 39
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(v) LEED for building design and construction or LEED for 1
operations and maintenance; 2
(vi) Green globes for new construction or green globes for 3
existing buildings; 4
(vii) UL 3223; or 5
(viii) Other reasonable standards approved by the department.6
(b) The department may require qualifying businesses and 7
qualifying tenants to submit records necessary to verify the 8
requirements under (a) of this subsection have been met.9
(c)(i) For a qualifying business or qualifying tenant that does 10
not meet the requirements of (a) of this subsection (4), all 11
previously exempted sales and use taxes may be immediately due and 12
payable, any exemption certificate issued to that qualifying business 13
or qualifying tenant under this section is canceled, and an 14
additional 10 percent penalty is assessed, except as described in 15
(c)(ii) of this subsection (4). 16
(ii) If the department finds that a failure to meet the 17
requirements of this subsection (4) is due to circumstances beyond 18
the control of the qualifying business or qualifying tenant 19
including, but not limited to, a declaration of an economic 20
recession, pandemic, or natural disaster affecting data center 21
operations, the department may, at its discretion, provide exceptions 22
or extensions to the requirements of this subsection (4). The 23
department may, at its discretion, coordinate with agencies with 24
relevant expertise to assist in determining whether the requirements 25
have been met. 26
(5) A qualifying business or a qualifying tenant claiming the 27
exemption under this section is encouraged to take direct steps to 28
adopt practices to mitigate negative environmental impacts resulting 29
from expanded use of data centers, including through:30
(a) Coordinating with the industrial waste coordination program 31
established under RCW 43.31.625 to identify and provide technical 32
assistance in implementing industrial symbiosis projects;33
(b) To the extent possible, procuring or contracting for power 34
from renewable sources; 35
(c) Adopting practices to improve the energy efficiency of 36
existing data centers, including through upgrading and consolidating 37
technology, managing data center airflow, and adjusting and improving 38
heating, ventilation, and air conditioning systems; and39
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(d) Taking actions to conserve, reuse, and replace water. This 1
includes using water efficient fixtures and practices; treating, 2
infiltrating, and harvesting rainwater; recycling water before 3
discharging; partnering with local water utilities to use discharged 4
water for irrigation and other water conservation purposes; using 5
reclaimed water where possible for data center operations; and 6
supporting water restoration in local watersheds. 7
(6) A qualifying business or a qualifying tenant claiming an 8
exemption under this section or RCW 82.12.986 must complete an annual 9
tax performance report with the department as required under RCW 10
82.32.534. The report must identify construction firm names and 11
employment levels used for constructing, renovating, refurbishing, or 12
remodeling the data centers. 13
(7)(a) The certificate holder may not at any time assign or 14
transfer a certificate without the prior written consent of the 15
department. The department must allow certificate transfers if the 16
certificate holder meets the following requirements:17
(i) The certificate assignee or transferee is qualified to do 18
business in the state; 19
(ii) The assignee or transferee acknowledges the transfer of the 20
certificate in writing; 21
(iii) The assignee or transferee agrees to keep and perform all 22
the terms of the certificates; and 23
(iv) An assignment or transfer of the certificate is to an entity 24
that: 25
(A) Controls, is controlled by, or under common control with, the 26
certificate holder; 27
(B) Acquires all or substantially all of the stock or assets of 28
the certificate holder; or 29
(C) Is the resulting entity of a merger or consolidation with the 30
certificate holder. 31
(b) In the event the assignee or transferee acquires eligible 32
server equipment in a qualifying asset sale under (a)(iv)(B) of this 33
subsection, the purchaser shall be deemed to purchase the eligible 34
server equipment pursuant to the transferred certificate.35
(8) The definitions in this subsection apply throughout this 36
section unless the context clearly requires otherwise.37
(a) "Affiliated" means that one person has a direct or indirect 38
ownership interest of at least 20 percent in another person.39
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(b) "Building" means a fully enclosed structure with a weather 1
resistant exterior wall envelope or concrete or masonry walls 2
designed in accordance with the requirements for structures under 3
chapter 19.27 RCW. This definition of "building" only applies to 4
computer data centers for which commencement of construction occurs 5
on or after July 1, 2015. 6
(c) "Certificate of occupancy" means: 7
(i) For a newly constructed eligible computer data center, the 8
certificate of occupancy issued by a local governing authority for 9
the structure or structures which comprise the eligible computer data 10
center; or 11
(ii) For renovations of an eligible computer data center, the 12
certificate of occupancy issued by a local governing authority for 13
the renovated structure or structures that comprise the eligible 14
computer data center. 15
(d)(i) "Computer data center" means a facility comprised of one 16
or more buildings, which may be comprised of multiple businesses, 17
constructed or refurbished specifically, and used primarily, to house 18
working servers, where the facility has the following 19
characteristics: (A) Uninterruptible power supplies, generator backup 20
power, or both; (B) sophisticated fire suppression and prevention 21
systems; and (C) enhanced physical security, such as: Restricted 22
access to the facility to selected personnel; permanent security 23
guards; video camera surveillance; an electronic system requiring 24
passcodes, keycards, or biometric scans, such as hand scans and 25
retinal or fingerprint recognition; or similar security features.26
(ii) For a computer data center comprised of multiple buildings, 27
each separate building constructed or refurbished specifically, and 28
used primarily, to house working servers is considered a computer 29
data center if it has all of the characteristics listed in (d)(i)(A) 30
through (C) of this subsection (8). 31
(iii) A facility comprised of one building or more than one 32
building must have a combined square footage of at least 100,000 33
square feet. 34
(e) "Electronic data storage and data management services" 35
include, but are not limited to: Providing data storage and backup 36
services, providing computer processing power, hosting enterprise 37
software applications, and hosting websites. The term also includes 38
providing services such as email, web browsing and searching, media 39
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applications, and other online services, regardless of whether a 1
charge is made for such services. 2
(f)(i) "Eligible computer data center" means a computer data 3
center: 4
(A) Located in a rural county as defined in RCW 82.14.370 at the 5
time an application for an exemption under this section is received;6
(B) Having at least 20,000 square feet dedicated to housing 7
working servers; and 8
(C) For which the commencement of construction occurs:9
(I) After March 31, 2010, and before July 1, 2011;10
(II) After March 31, 2012, and before July 1, 2015; or11
(III) After June 30, 2015, and before July 1, 2035.12
(ii) For purposes of this section, "commencement of construction" 13
means the date that a building permit is issued under the building 14
code adopted under RCW 19.27.031 for construction of the computer 15
data center. The construction of a computer data center includes the 16
expansion, renovation, or refurbishment of existing facilities 17
regardless of whether the existing facility was previously ineligible 18
and regardless of whether commencement of construction of the 19
existing facility occurred outside of the dates listed in 20
(f)(i)(C)(I) through (III) of this subsection, including leased or 21
rented space. "Commencement of construction" does not include soil 22
testing, site clearing and grading, site preparation, or any other 23
related activities that are initiated before the issuance of a 24
building permit for the construction of the foundation of a computer 25
data center. If no building permit is required for renovation or 26
refurbishment, then the date that renovation or refurbishment begins 27
is the "commencement of construction." 28
(g) "Eligible power infrastructure" means all fixtures and 29
equipment owned by a qualifying business or qualifying tenant and 30
necessary for the transformation, distribution, or management of 31
electricity that is required to operate eligible server equipment 32
within an eligible computer data center. The term includes 33
generators; wiring; cogeneration equipment; and associated fixtures 34
and equipment, such as electrical switches, batteries, and 35
distribution, testing, and monitoring equipment. The term does not 36
include substations. 37
(h) "Eligible server equipment" means: 38
(i) For a qualifying business whose computer data center 39
qualifies as an eligible computer data center under (f)(i)(C)(I) of 40
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this subsection (8), the original server equipment installed in an 1
eligible computer data center on or after April 1, 2010, and before 2
January 1, 2026, and replacement server equipment. For purposes of 3
this subsection (8)(h)(i), "replacement server equipment" means 4
server equipment that: 5
(A) Replaces existing server equipment, if the sale or use of the 6
server equipment to be replaced qualified for an exemption under this 7
section or RCW 82.12.986; and 8
(B) Is installed and put into regular use before April 1, 2018.9
(ii) For a qualifying business whose computer data center 10
qualifies as an eligible computer data center under (f)(i)(C)(II) of 11
this subsection (8), "eligible server equipment" means the original 12
server equipment installed in an eligible computer data center on or 13
after April 1, 2012, and before January 1, 2026, and replacement 14
server equipment. For purposes of this subsection (8)(h)(ii), 15
"replacement server equipment" means server equipment that:16
(A) Replaces existing server equipment, if the sale or use of the 17
server equipment to be replaced qualified for an exemption under this 18
section or RCW 82.12.986; and 19
(B) Is installed and put into regular use before April 1, 2024.20
(iii) For a qualifying business whose computer data center 21
qualifies as an eligible computer data center under (f)(i)(C)(III) of 22
this subsection (8), "eligible server equipment" means the original 23
server equipment installed in a building within an eligible computer 24
data center on or after July 1, 2015 ((, and replacement server 25
equipment)). Server equipment installed in movable or fixed stand-26
alone, prefabricated, or modular units, including intermodal shipping 27
containers, is not "directly installed in a building." ((For purposes 28
of this subsection (8)(h)(iii), "replacement server equipment" means 29
server equipment that:30
(A)(I) Replaces existing server equipment, if the sale or use of 31
the server equipment to be replaced qualified for an exemption under 32
this section or RCW 82.12.986; or33
(II) Replaces existing server equipment in a computer data center 34
that meets the following requirements: Was ineligible before June 9, 35
2022, for the exemptions provided under this section and RCW 36
82.12.986; has been refurbished; and to which a valid exemption 37
certificate applies; and38
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(B) Is installed and put into regular use no later than 12 years 1
after the date of the certificate of occupancy or completion of 2
refurbishment of the computer data center.))3
(iv) For a qualifying tenant who leases space within an eligible 4
computer data center, "eligible server equipment" means the original 5
server equipment installed within the space it leases from an 6
eligible computer data center with an exemption certificate on or 7
after April 1, 2010 ((, and replacement server equipment. For purposes 8
of this subsection (8)(h)(iv), "replacement server equipment" means 9
server equipment that:10
(A)(I) Replaces existing server equipment, if the sale or use of 11
the server equipment to be replaced qualified for an exemption under 12
this section or RCW 82.12.986; or13
(II) Replaces existing server equipment in a computer data center 14
that meets the following requirements: Was ineligible before June 9, 15
2022, for the exemptions provided under this section and RCW 16
82.12.986; has been refurbished; and to which a valid exemption 17
certificate applies; and18
(B) Is installed and put into regular use no later than 12 years 19
after the date of the certificate of occupancy or completion of 20
refurbishment of the computer data center)). 21
(i) "Qualifying business" means a business entity that exists for 22
the primary purpose of engaging in commercial activity for profit and 23
that is the owner of an eligible computer data center. The term does 24
not include the state or federal government or any of their 25
departments, agencies, and institutions; tribal governments; 26
political subdivisions of this state; or any municipal, quasi-27
municipal, public, or other corporation created by the state or 28
federal government, tribal government, municipality, or political 29
subdivision of the state. 30
(j) "Qualifying tenant" means a business entity that exists for 31
the primary purpose of engaging in commercial activity for profit and 32
that leases space from a qualifying business within an eligible 33
computer data center. The term does not include the state or federal 34
government or any of their departments, agencies, and institutions; 35
tribal governments; political subdivisions of this state; or any 36
municipal, quasi-municipal, public, or other corporation created by 37
the state or federal government, tribal government, municipality, or 38
political subdivision of the state. The term also does not include a 39
lessee of space in an eligible computer data center under 40
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(f)(i)(C)(I) of this subsection (8), if the lessee and lessor are 1
affiliated and: 2
(i) That space will be used by the lessee to house server 3
equipment that replaces server equipment previously installed and 4
operated in that eligible computer data center by the lessor or 5
another person affiliated with the lessee; or 6
(ii) Prior to May 2, 2012, the primary use of the server 7
equipment installed in that eligible computer data center was to 8
provide electronic data storage and data management services for the 9
business purposes of either the lessor, persons affiliated with the 10
lessor, or both. 11
(k)(i) "Refurbished" or "refurbishment" means a substantial 12
improvement to an eligible computer data center to update or 13
modernize servers, server space, ventilation, or power infrastructure 14
in an eligible computer data center. 15
(ii) For a qualifying computer data center to be considered 16
refurbished, the qualifying business must certify, in a form and 17
manner prescribed by the department, that the refurbishment of an 18
eligible computer data center is complete. The refurbishment is 19
considered complete on the date that the improved portion of the 20
computer data center is operationally complete and able to be used 21
for its intended purpose. 22
(l) "Server equipment" means the computer hardware located in an 23
eligible computer data center and used exclusively to provide 24
electronic data storage and data management services, including cloud 25
services, for internal use by the owner or lessee of the computer 26
data center, for clients of the owner or lessee of the computer data 27
center, or both. "Server equipment" also includes computer software 28
necessary to operate the computer hardware. "Server equipment" does 29
not include personal computers, the racks upon which the server 30
equipment is installed, and computer peripherals such as keyboards, 31
monitors, printers, and mice. 32
(9) This section expires July 1, 2048. 33
Sec. 3. RCW 82.08.9861 and 2022 c 267 s 5 are each amended to 34
read as follows: 35
(1)(a) An exemption from the tax imposed by RCW 82.08.020 is 36
provided for sales to qualifying businesses and to qualifying tenants 37
of eligible server equipment to be installed, without intervening 38
use, in an eligible computer data center to which a valid exemption 39
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certificate applies, and to charges made for labor and services 1
rendered in respect to installing eligible server equipment.2
(b) The exemption also applies to sales to qualifying businesses 3
and to qualifying tenants of eligible power infrastructure, including 4
labor, material, equipment, and services rendered in respect to 5
constructing, installing, repairing, altering, or improving eligible 6
power infrastructure at an eligible computer data center for which an 7
exemption certificate has been issued. 8
(c) No new exemption certificates may be issued on or after July 9
1, 2028. 10
(d) The exemptions provided in this section expire July 1, 2038.11
(2)(a)(i) In order to obtain an exemption, a qualifying business 12
must be located in a county with a population over 800,000, as 13
determined by the April 1, 2021, office of financial management 14
population estimates and must submit an application to the department 15
for an exemption certificate. The application must include the 16
information necessary, as required by the department, to determine 17
that a business or tenant qualifies for the exemption under this 18
section. The department must issue exemption certificates to 19
qualifying businesses and qualifying tenants. The department may 20
assign a unique identification number to each exemption certificate 21
issued under this section. 22
(ii) For the purposes of demonstrating that the requirements of 23
this subsection (2)(a) are met, a qualifying business must submit 24
records of available power for customers at the time of the 25
application for the exemption under this section. The qualifying 26
business must demonstrate that it has a minimum of 1.5 megawatts of 27
available power. The qualifying business must provide requests for 28
proposals, pricing offered, and marketing materials associated with 29
the requirements of this subsection, as required by the department, 30
as supporting documentation that the requirements of this subsection 31
(2)(a) have been met. 32
(b) A qualifying business or a qualifying tenant claiming the 33
exemption under this section must present the seller with an 34
exemption certificate in a form and manner prescribed by the 35
department. The seller must retain a copy of the certificate for the 36
seller's files. 37
(c)(i) The exemptions provided in this section are limited to 38
qualifying businesses or tenants, and the department is authorized to 39
approve: 40
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(A) Six applications to obtain the exemptions for qualifying 1
businesses in the first calendar year of the exemption; and2
(B) Six applications to obtain the exemptions for qualifying 3
businesses in each year, calendar year three through calendar year 4
six, of the exemption. 5
(ii) The exemption is available on a first-in-time basis based on 6
the date the application required under this section is received by 7
the department. 8
(d) The exemption certificate is effective on the date the 9
application is received by the department, which is deemed to be the 10
date of issuance. Only purchases on or after the date of issuance 11
qualify for the exemption under this section. No tax refunds are 12
authorized for purchases made before the effective date of the 13
exemption certificate. 14
(e) Exemption certificates expire two years after the date of 15
issuance, unless construction has been commenced. 16
(f) A qualifying tenant must contract for a minimum electrical 17
capacity of 150 kilowatts for server and computer equipment in a 18
qualifying business. Tenants that previously qualified under RCW 19
82.08.986 or 82.12.986 must reapply if they intend to expand into a 20
qualifying business. 21
(3)(a)(i) Within six years of the date that the department issued 22
an exemption certificate under this section to a qualifying business 23
or a qualifying tenant with respect to an eligible computer data 24
center, the qualifying business or qualifying tenant must establish 25
that net employment assigned to an eligible computer data center has 26
increased by a minimum of three family wage employment positions for 27
each incremental increase of 20,000 square feet of space that is 28
newly dedicated to housing working servers at the eligible computer 29
data center. For qualifying tenants, the number of family wage 30
employment positions that must be increased under this subsection 31
(3)(a)(i) is based only on the space occupied by the qualifying 32
tenant in the eligible computer data center. 33
(ii) After the minimum number of family wage employment positions 34
as required under (a)(i) of this subsection (3) is established, a 35
qualifying business or a qualifying tenant must maintain the minimum 36
family wage employment positions required under (a)(i) of this 37
subsection (3) while the exemption certificate is valid.38
(b) In calculating the number of family wage employment 39
positions: 40
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(i) The owner of an eligible computer data center, in addition to 1
its own net increase in family wage employment positions, may 2
include: 3
(A) The net increase, since the date of issuance of the 4
qualifying business's exemption certificate, in family wage 5
employment positions employed by qualifying tenants; and6
(B) The net increase in family wage employment positions 7
described in (c)(ii)(B) of this subsection (3). 8
(ii)(A) Qualifying tenants, in addition to their own net increase 9
in family wage employment positions, may include: 10
(I) A portion of the net increase in family wage employment 11
positions employed by the owner; and 12
(II) A portion of the net increase in family wage employment 13
positions described in (c)(ii)(B) of this subsection (3).14
(B) The portion of the net increase in family wage employment 15
positions to be counted under this subsection (3)(b)(ii) by each 16
qualifying tenant is equal to the net increase in family wage 17
employment positions assigned to an eligible computer data center as 18
described in (b)(ii)(A)(I) and (II) of this subsection (3), 19
multiplied by the percentage of total space within the eligible 20
computer data center occupied by the qualifying tenant. Any 21
combination of qualifying business and qualifying tenant family wage 22
employment positions may meet this requirement. 23
(c)(i) For purposes of this subsection: 24
(A) For exemption certificates issued on or after June 9, 2022, 25
family wage employment positions are new permanent employment 26
positions requiring 40 hours of weekly work, or their equivalent, on 27
a full-time basis assigned to an eligible computer data center and 28
receiving a wage equivalent to or greater than 125 percent of the per 29
capita personal income of the county in which the qualified project 30
is located as published by the employment security department. The 31
per capita personal income to be used to determine qualification for 32
any year is the amount that was established for the immediate prior 33
year. 34
(B) An employment position may not be counted as a family wage 35
employment position unless the employment position is entitled to 36
health insurance coverage provided by the employer of the employment 37
position. 38
(C) "New permanent employment position" means an employment 39
position that did not exist or that had not previously been filled as 40
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of the date that the department issued an exemption certificate to 1
the qualifying business or qualifying tenant of an eligible computer 2
data center, as the case may be. 3
(ii)(A) Family wage employment positions include positions filled 4
by employees of the qualifying business and by employees of 5
qualifying tenants. 6
(B) Family wage employment positions also include individuals 7
performing work at an eligible computer data center as an independent 8
contractor hired by the owner of the eligible computer data center or 9
as an employee of an independent contractor hired by the owner of the 10
eligible computer data center, if the work is necessary for the 11
operation of the computer data center, such as security and building 12
maintenance, and provided that all of the requirements in (c)(i) of 13
this subsection (3) are met. 14
(d)(i) For a qualifying business or qualifying tenant that does 15
not meet the requirements of this subsection (3), all previously 16
exempted sales and use taxes immediately due and payable, and any 17
exemption certificate issued to that qualifying business or 18
qualifying tenant under this section is canceled, except as described 19
in (d)(iii) of this subsection (3). 20
(ii) The department of labor and industries must, at the request 21
of the department, assist in determining whether the requirements of 22
this subsection (3) have been met. 23
(iii) If the department, with the assistance of the department of 24
labor and industries, finds that a failure to meet the requirements 25
of this subsection (3) is due to circumstances beyond the control of 26
the qualifying business or qualifying tenant including, but not 27
limited to, a declaration of an economic recession, pandemic, or 28
natural disaster affecting data center operations, the department may 29
provide exceptions or extensions to the requirements of this 30
subsection (3). 31
(iv) Any repayment of taxes triggered by the failure of a 32
qualifying business or qualifying tenant to meet the requirements of 33
this subsection (3) must be calculated in proportion to the duration 34
of time for which any applicable requirement was not met.35
(v) If the department is notified that a qualifying business or 36
qualifying tenant fails to meet the requirements of this subsection 37
(3), the department may require a qualifying business or qualifying 38
tenant to submit records necessary to determine whether the 39
requirements have been met. 40
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(4) For exemption certificates issued on or after June 9, 2022:1
(a) Within three years after being placed in service, the 2
qualifying business operating a newly constructed data center must 3
certify to the department that it has attained certification under 4
one or more of the following sustainable design or green building 5
standards: 6
(i) BREEAM for new construction or BREEAM in-use;7
(ii) Energy star; 8
(iii) Envision; 9
(iv) ISO 50001-energy management; 10
(v) LEED for building design and construction or LEED for 11
operations and maintenance; 12
(vi) Green globes for new construction or green globes for 13
existing buildings; 14
(vii) UL 3223; or 15
(viii) Other reasonable standards approved by the department.16
(b) The department may require qualifying businesses and 17
qualifying tenants to submit records necessary to verify the 18
requirements under this subsection (4) have been met.19
(c)(i) For a qualifying business or qualifying tenant that does 20
not meet the requirements of this subsection (4), all previously 21
exempted sales and use taxes are immediately due and payable, any 22
exemption certificate issued to that qualifying business or 23
qualifying tenant under this section is canceled, and an additional 24
10 percent penalty is assessed, except as described in (c)(ii) of 25
this subsection (4). 26
(ii) If the department finds that a failure to meet the 27
requirements of this subsection (4) is due to circumstances beyond 28
the control of the qualifying business or qualifying tenant 29
including, but not limited to, a declaration of an economic 30
recession, pandemic, or natural disaster affecting data center 31
operations, the department may, at its discretion, provide exceptions 32
or extensions to the requirements of this subsection (4). The 33
department may, at its discretion, coordinate with agencies with 34
relevant expertise to assist in determining whether the requirements 35
of this subsection (4) have been met. 36
(5) A qualifying business or a qualifying tenant claiming the 37
exemption under this section is encouraged to take direct steps to 38
adopt practices to mitigate negative environmental impacts resulting 39
from expanded use of data centers, including through:40
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(a) Coordinating with the industrial waste coordination program 1
established under RCW 43.31.625 to identify and provide technical 2
assistance in implementing industrial symbiosis projects;3
(b) To the extent possible, procuring or contracting for power 4
from renewable sources; 5
(c) Adopting practices to improve the energy efficiency of 6
existing data centers, including through upgrading and consolidating 7
technology, managing data center airflow, and adjusting and improving 8
heating, ventilation, and air conditioning systems; and9
(d) Taking actions to conserve, reuse, and replace water. This 10
includes using water efficient fixtures and practices; treating, 11
infiltrating, and harvesting rainwater; recycling water before 12
discharging; partnering with local water utilities to use discharged 13
water for irrigation and other water conservation purposes; using 14
reclaimed water where possible for data center operations; and 15
supporting water restoration in local watersheds. 16
(6) Qualifying businesses and tenants must claim an exemption 17
under this section in the current tax year when the taxes would have 18
been due unless an extension is filed with the department.19
(7) A qualifying business or a qualifying tenant claiming an 20
exemption under this section must complete an annual tax performance 21
report as required in RCW 82.32.534. The report must identify 22
construction firm names and employment levels used for constructing, 23
renovating, refurbishing, or remodeling the data centers.24
(8)(a) The certificate holder may not at any time assign or 25
transfer a certificate without the prior written consent of the 26
department. The department must allow certificate transfers if the 27
certificate holder meets the following requirements:28
(i) The certificate assignee or transferee is qualified to do 29
business in the state; 30
(ii) The assignee or transferee acknowledges the transfer of the 31
certificate in writing; 32
(iii) The assignee or transferee agrees to keep and perform all 33
the terms of the certificates; and 34
(iv) An assignment or transfer of the certificate is to an entity 35
that: 36
(A) Controls, is controlled by, or under common control with, the 37
certificate holder; 38
(B) Acquires all or substantially all of the stock or assets of 39
the certificate holder; or 40
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(C) Is the resulting entity of a merger or consolidation with the 1
certificate holder. 2
(b) Information submitted on the tax performance report is not 3
subject to the confidentiality provisions of RCW 82.32.330 and may be 4
disclosed to the public upon request, except as provided otherwise in 5
RCW 82.32.330. 6
(9) The definitions in this subsection apply throughout this 7
section unless the context clearly requires otherwise.8
(a) "Affiliated" means that one person has a direct or indirect 9
ownership interest of at least 20 percent in another person.10
(b) "Building" means a fully enclosed structure with a weather 11
resistant exterior wall envelope or concrete or masonry walls 12
designed in accordance with the requirements for structures under 13
chapter 19.27 RCW. 14
(c) "Certificate of occupancy" means: 15
(i) For a newly constructed eligible computer data center, the 16
certificate of occupancy issued by a local governing authority for 17
the structure or structures which comprise the eligible computer data 18
center; or 19
(ii) For renovations of an eligible computer data center, the 20
certificate of occupancy issued by a local governing authority for 21
the renovated structure or structures that comprise the eligible 22
computer data center. 23
(d)(i) "Computer data center" means a facility comprised of one 24
or more buildings, which may be comprised of multiple businesses, 25
constructed or refurbished specifically, and used primarily, to house 26
working servers, where the facility has the following 27
characteristics: (A) Uninterruptible power supplies, generator backup 28
power, or both; (B) sophisticated fire suppression and prevention 29
systems; and (C) enhanced physical security, such as: Restricted 30
access to the facility to selected personnel; continuous on-site 31
security guards; video camera surveillance; an electronic system 32
requiring passcodes, keycards, or biometric scans, such as hand scans 33
and retinal or fingerprint recognition; or similar security features.34
(ii) For a computer data center comprised of multiple buildings, 35
each separate building constructed or refurbished specifically, and 36
used primarily, to house working servers is considered a computer 37
data center if it has all of the characteristics listed in (d)(i)(A) 38
through (C) of this subsection (9). 39
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(iii) A facility comprised of one building or more than one 1
building must have a combined square footage of at least 100,000 2
square feet. 3
(e) "Electronic data storage and data management services" 4
includes, but is not limited to: Providing data storage and backup 5
services, providing computer processing power, hosting enterprise 6
software applications, and hosting websites. The term also includes 7
providing services such as email, web browsing and searching, media 8
applications, and other online services, regardless of whether a 9
charge is made for such services. 10
(f)(i) "Eligible computer data center" means a computer data 11
center having at least 20,000 square feet dedicated for housing 12
working servers. 13
(ii) Movable or fixed stand-alone, prefabricated, or modular 14
units, including intermodal shipping containers, do not qualify as 15
"eligible computer data centers." 16
(iii) Computer data centers refurbished on or after July 1, 2026, 17
do not qualify as "eligible computer data centers."18
(g) "Eligible power infrastructure" means all fixtures and 19
equipment owned by a qualifying business or qualifying tenant and 20
necessary for the transformation, distribution, or management of 21
electricity that is required to operate eligible server equipment 22
within an eligible computer data center. The term includes 23
generators; wiring; cogeneration equipment; and associated fixtures 24
and equipment, such as electrical switches, batteries, and 25
distribution, testing, and monitoring equipment. The term does not 26
include substations. 27
(h)(i) "Eligible server equipment" means for a qualifying 28
business whose computer data center qualifies as an eligible computer 29
data center, the original server equipment installed in an eligible 30
computer data center on or after June 9, 2022 ((, and replacement 31
server equipment)). 32
(ii) ((For purposes of this subsection (9)(h), "replacement 33
server equipment" means server equipment that:34
(A) Replaces existing server equipment, if the sale or use of the 35
server equipment to be replaced qualified for an exemption under this 36
section or RCW 82.12.9861; and37
(B) Is installed and put into regular use within 10 years of June 38
9, 2022.39
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(iii))) For a qualifying tenant who leases space within an 1
eligible computer data center, "eligible server equipment" means the 2
original server equipment installed within the space it leases from 3
an eligible computer data center with an exemption certificate on or 4
within 10 years of June 9, 2022 ((, and replacement server equipment. 5
For purposes of this subsection (9)(h)(iii), "replacement server 6
equipment" means server equipment that:7
(A)(I) Replaces existing server equipment, if the sale or use of 8
the server equipment to be replaced qualified for an exemption under 9
this section or RCW 82.12.9861 and is installed and put into regular 10
use before July 1, 2027; or11
(II) Replaces existing server equipment in a computer data center 12
that meets the following requirements: Was ineligible before June 9, 13
2022, for the exemptions provided under this section and RCW 14
82.12.9861; has been refurbished; and to which a valid exemption 15
certificate applies; and16
(B) Is installed and put into regular use no later than 12 years 17
after the date of the certificate of occupancy or completion of 18
refurbishment of the computer data center)). 19
(i) "Qualifying business" means a business entity that exists for 20
the primary purpose of engaging in commercial activity for profit and 21
that is the owner of an eligible computer data center. The term does 22
not include the state or federal government or any of their 23
departments, agencies, and institutions; tribal governments; 24
political subdivisions of this state; or any municipal, quasi-25
municipal, public, or other corporation created by the state or 26
federal government, tribal government, municipality, or political 27
subdivision of the state. 28
(j) "Qualifying tenant" means a business entity that exists for 29
the primary purpose of engaging in commercial activity for profit and 30
that leases space from a qualifying business within an eligible 31
computer data center. The term does not include the state or federal 32
government or any of their departments, agencies, and institutions; 33
tribal governments; political subdivisions of this state; or any 34
municipal, quasi-municipal, public, or other corporation created by 35
the state or federal government, tribal government, municipality, or 36
political subdivision of the state. 37
(k)(i) "Refurbished" or "refurbishment" means a substantial 38
improvement to an eligible computer data center for which a 39
certificate of occupancy is not issued. Such an improvement must 40
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update or modernize servers, server space, ventilation, or power 1
infrastructure in an eligible computer data center.2
(ii) For a qualifying computer data center to be considered 3
refurbished, the qualifying business must certify, in a form and 4
manner prescribed by the department, that the refurbishment of an 5
eligible computer data center is complete. The refurbishment is 6
considered complete on the date that the improved portion of the 7
computer data center is operationally complete and able to be used 8
for its intended purpose. 9
(l) "Server equipment" means the computer hardware located in an 10
eligible computer data center and used exclusively to provide 11
electronic data storage and data management services for internal use 12
by the owner or lessee of the computer data center, for clients of 13
the owner. For the purposes of this subsection, "electronic data 14
storage and data management services" include, but are not limited 15
to: Providing data storage and backup services, providing computer 16
processing power, hosting enterprise software applications, and 17
hosting websites. The term also includes providing services such as 18
email, web browsing and searching, media applications, and other 19
online services, regardless of whether a charge is made for such 20
services. "Server equipment" also includes computer software 21
necessary to operate the computer hardware. "Server equipment" does 22
not include personal computers, the racks upon which the server 23
equipment is installed, and computer peripherals such as keyboards, 24
monitors, printers, and mice, unless used within the eligible 25
computer data center. 26
(10) This section expires July 1, 2038. 27
NEW SECTION. Sec. 4. Sections 2 and 3 of this act take effect 28
July 1, 2026.29
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