Senate Bill 26 (SB26) provides gross receipts tax and compensating tax deductions for data centers. SB ?? also creates a method of valuation for property tax purposes for certain data center property.
Senate Bill 26 (SB26) provides gross receipts tax and compensating tax deductions for data centers. SB26 also creates a method of valuation for property tax purposes for certain data center property.
In this analysis, owner, operator, or co-location tenant are referred to as owner;
Data Center Transaction Certificate is referred to as Certificate; Data Center Deduction Certificate of Eligibility is referred to as eligibility certificate.
SB26 creates the Gross Receipts and Compensating Tax Act (Act)
SECTION 1. DEDUCTION--GROSS RECEIPTS--COMPENSATING TAX--DATA CENTERS.—
A. Receipts from the sale or lease of data center equipment to the owner, operator, or co-location tenant (hereafter called owner) of a qualified data center may be deducted from gross receipts if:
(1) the owner delivers a Data Center Deduction Nontaxable Transaction Certificate (Certificate) to the seller or lessor; and
(2) the eligible costs of the sale or lease are incurred during the period beginning on the date development of the qualified data center begins and ending 30 years after the taxpayer is issued a Certificate.
B. The value of eligible costs to the owner of a qualified data center may be deducted in computing compensating tax due if: (1) the owner holds a valid Certificate issued by the department; and (2) the eligible costs are incurred during the period beginning on the date development of the qualified data center begins and ending 30 years after the owner is issued the data Certificate.
C. The deduction provided for by this section may be referred to as the "data center deduction". The purpose of the data center deduction is to encourage the construction and development of qualified data centers in New Mexico.
D. A taxpayer allowed a data center deduction shall report the amount of the data center deduction separately and as required by the department. A taxpayer that applies the data center deduction in computing compensating tax due shall separately report each eligible cost for which the data center deduction is taken.
E. To receive the data center deduction, a taxpayer shall apply to the Economic Development Department (EDD) for a Data Center Deduction Certificate of Eligibility (eligibility certificate) that entitles the taxpayer to receive a Certificate issued by the Taxation and Revenue Department. (TRD). The taxpayer is eligible for the eligibility certificate if the taxpayer is the owner in a data center for which the taxpayer or the taxpayer and one or more other taxpayers agree to expend at least $25,000,000 in eligible costs for the data center during the period beginning 90 days before the taxpayer applies for the Certificate of eligibility and ending five years after that date.
F. Upon receiving a complete application for a certificate of eligibility from a taxpayer, the EDD shall verify whether the taxpayer qualifies to receive the certificate of eligibility.
G. A taxpayer allowed a deduction pursuant to this section shall report the amount of the deduction separately in a manner required by the TRD.
H. The validity of a certificate of eligibility and of a Certificate is not altered by transfer to a subsequent owner, operator or qualified co-location tenant of the qualified data center associated with the certificate of eligibility or data center Certificate.
I. The EDD and the TRD shall protect from public disclosure the proprietary business information contained in an application for a certificate of eligibility. The EDD may publicly disclose the name of a qualified data center associated with a certificate of eligibility.
J. The EDD may revoke the certificate of eligibility held by a taxpayer that owns, operates or is a co-location tenant in a qualified data center if the taxpayer fails to make the expenditures outlined in Subsection E of this section. The EDD may require repayment of deductions if taxpayer does not reach the specified expenditures as specified in this subsection.
K. The TRD shall compile an annual report on the data center deduction as specified in this Subsection, which shall be presented to the Revenue Stabilization and Tax Policy Committee and the Legislative Finance Committee.
L. Provides definitions to be used in this section.
SECTION 2. Provides a special method of valuation for Chapter 7, Article 36 NMSA 1978.
SPECIAL METHOD OF VALUATION--PROPERTY THAT IS A DATA SYSTEM PLANT OR PART OF A DATA CENTER SYSTEM.--
A. The value of property that is a data system plant or is part of a data center system and is subject to valuation for property taxation purposes shall be valued at five percent of the original cost of the data system plant or the part of the data center system, regardless of age of the data system plant or part of the data center system.
B. As used in this section: (1) "data system plant" means all tangible property located in this state used or useful for the provision of data center services as reflected by the uniform system of accounting in use by the taxpayer; and
(2) "data center system" means a tangible or virtual system for the storage, processing and distribution of data and information by the use of electronic, magnetic or optical means or any combination thereof.
SECTION 3. APPLICABILITY.--The provisions of Section 2 of this act apply to the 2022 and subsequent property tax years.
SECTION 4. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2021.