2021 -- H 6476

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LC003069

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2021

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A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT -- QUALIFIED DATA CENTERS

LOCATION INCENTIVE

     Introduced By: Representative Scott Slater

     Date Introduced: June 25, 2021

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Title 42 of the General Laws entitled "STATE AFFAIRS AND

GOVERNMENT" is hereby amended by adding thereto the following chapter:

CHAPTER 64.34

QUALIFIED DATA CENTERS LOCATION INCENTIVE

     42-64.34-1. Definitions.

     (a) As used in this section:

     (1) "Colocation Tenant" means a person that contracts with the owner or operator of a

qualified data center to use or occupy all or part of a qualified data center for a period of at least

two (2) years;

     (2) "Eligible qualified data center costs" means expenditures made on or after July 1, 2021,

for the development, acquisition, construction, rehabilitation, renovation, repair or operation of a

facility to be used as a qualified data center, including the cost of land, buildings, site

characterization and assessment, engineering services, design services and data center equipment

acquisition and permitting related to such data center equipment acquisitions. "Eligible qualified

data center costs" does not include expenditures made in connection with real or personal property

that is located outside the boundaries of the facility to be used as a qualified data center;

     (3) "Enterprise information technology equipment" means:

     (i) Hardware that support computing, networking or data storage functions, including

servers and routers;

     (ii) Networking systems equipment that support computing, networking or data storage

functions and have an industry designation as equipment within the enterprise class or data center

class of networking systems; and

     (iii) Generators and other equipment used to ensure an uninterrupted power supply for the

hardware and networking systems equipment under subsection (a)(3)(i) or (a)(3)(ii) of this section;

     (4) "Facility" means one or more contiguous tracts of land in the state and any structure

and personal property contained on such land;

     (5) "Operator" means a person that contracts with the owner of a qualified data center to

operate such a qualified data center;

     (6) "Owner" means a person that holds a leasehold estate in excess of fifty (50) years or a

fee title to a facility;

     (7) "Person" means an individual, an estate, a trust, a receiver, a cooperative association, a

corporation, a company, a firm, a partnership, a limited partnership, a limited liability company, a

limited liability partnership or a joint venture;

     (8) "Qualified data center" means a facility that is developed, acquired, constructed,

rehabilitated, renovated, repaired or operated, to house a group of networked computer services in

one physical location or multiple contiguous locations to centralize the storage, management and

dissemination of data and information pertaining to a particular business or classification or body

of knowledge;

     (9) "Qualified data center equipment" means computer equipment, software and hardware

purchased or leased for the processing, storage, retrieval or communication of data including:

     (i) Computer servers, routers, connections, chassis, networking equipment, switches, racks,

fiber optics and copper cables, trays, conduits and other enabling machinery, equipment and

hardware, regardless of whether such personal property is affixed to or incorporated into real

property;

     (ii) Equipment used in the operation of computer equipment or software for the benefit of

a qualified data center, including component parts, replacement parts and upgrades, regardless of

whether the personal property is affixed to or incorporated into real property;

     (iii) Equipment necessary for the transformation, generation, distribution or management

of electricity that is required to operate computer servers and related equipment, including

substations, generators, uninterrupted energy equipment, supplies, conduits, fuel piping and

storage, cabling, duct banks, switches, switchboards, batteries and testing equipment;

     (iv) Equipment necessary to cool and maintain a controlled environment for the operation

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of computer servers and other equipment of a qualified data center, including chillers, mechanical

equipment, refrigerant piping, fuel piping and storage, adiabatic and free cooling systems, cooling

towers, water softeners, air handling units, indoor direct exchange units, fans, ducting and filters;

     (v) Water conservation systems, including equipment designated to collect, conserve and

reuse water;

     (vi) Conduit, ducting and fiber optic and copper cables located outside the qualified data

center, that are directly related to connecting one or more qualified data center locations;

     (vii) Monitoring equipment and security systems;

     (viii) Modular data centers and preassembled components of any item described in this

subsection, including components used in the manufacturing of modular data centers; and

     (ix) Any other personal property, exclusive of motor vehicles, that is essential to the

operations of a qualified data center or that is acquired for incorporation into or used or consumed

in the operation of the qualified data center; and

     (10) "Qualified investment" means the aggregate, nonduplicative eligible data center costs

expended by an owner, operator and colocation tenant of a qualified data center.

     42-64.34-2. Qualified data center location incentive.

     (a) Any person that anticipates it will own, operate or be a colocation tenant in a qualified

data center in this state may apply to the Rhode Island commerce corporation to enter into an

agreement in accordance with the provisions of subsection (b) of this section, for an exemption

from taxes imposed under chapter 3 of title 44 and chapter 18 of title 44 as set forth in subsections

(c) and (d) of this section.

     (b)(1) Any person described in subsection (a) of this section that seeks an exemption under

subsection (a) of this section shall submit an application to the Rhode Island commerce corporation,

in a manner and form prescribed by the secretary of commerce. If the Rhode Island commerce

corporation approves such an application, the secretary of commerce shall enter into an agreement

with such persons, provided such person demonstrates to the satisfaction of the secretary of

commerce that:

     (i) The facility to be developed, acquired, constructed, rehabilitated, renovated, repaired or

operated will be used as a qualified data center; and

     (ii) The qualified data center will make, on or before the fifth anniversary of the date an

agreement entered into pursuant to this section becomes effective, a qualified investment of at least:

     (A) Fifty million dollars ($50,000,000) in such qualified data center is located in an

enterprise zone designated pursuant to chapter 64.3 of title 42 or a federal qualified opportunity

zone designated pursuant to the Tax Cuts and Jobs Act of 2017, Pub .L.115-97, as amended from

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time to time, or

     (B) Two hundred million dollars ($200,000,000) if such qualified data center is not located

in an enterprise zone or federal qualified opportunity zone.

     (2) Any agreement entered into pursuant to this subsection shall:

     (i) Be for a period of no less than thirty (30) years and no greater than fifty (50) years from

the date an agreement entered into pursuant to this section becomes effective, which may be in the

year in which the construction, rehabilitation, renovation or repair of a qualified data center

commences;

     (ii) Include a five-year (5) qualifying period, from the date an agreement entered into

pursuant to this section becomes effective, for the applicable qualified investment amount set forth

in subsection (b)(1)(ii) of this section to be reached;

     (iii) Include the payment of an annual fee by the qualified data center, to be determined

annually by the Rhode Island commerce corporation and not to exceed twenty-five thousand dollars

($25,000.00), for the administrative and operational costs of the Rhode Island commerce

corporation for the administration of this chapter. Such fee shall be paid by the qualified data center

to the secretary of commerce during each year of such qualifying period or until the applicable

qualified investment amount set forth in subsection (b)(1)(ii) of this section is reached, whichever

is sooner;

     (iv) Include a detailed description of the capital project that is the subject of the agreement;

     (v) Provide that the provisions of the agreement are applicable, within the time period such

agreement is effective and for the remaining duration of such time period, to any:

     (A) Subsequent owner of the qualified data center;

     (B) Operator or affiliate of the operator of the qualified data center, or

     (C) Colocation tenant, provided the facility continues to be used as a qualified data center;

and

     (vi) Include provisions for the assessment and payment of the taxes exempted pursuant to

such agreement and the rates or amounts of penalties and interest to be imposed thereon, if the

Rhode Island commerce corporation determines that the requirements of the agreement or of a

qualified data center are not being met or have not been met.

     (3) If a qualified data center makes a qualified investment of at least:

     (i) Two hundred million dollars ($200,000,000) if such qualified data center is located in

an enterprise zone designated pursuant to section chapter 64.3 of title 42 or a federal qualified

opportunity zone designated pursuant to the Tax Cuts and Jobs Act of 2017, Pub. L. 115-97, as

amended from time to time; or

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     (ii) Four hundred million dollars ($400,000,000) if such qualified data center is not located

in an enterprise zone or federal qualified opportunity zone, the agreement entered into with the

Rhode Island commerce corporation pursuant to this section shall be effective for no less than thirty

(30) years and not more than to fifty (50) years.

     (4) Any qualified data center that enters into an agreement pursuant to this section and

makes the applicable qualified investment amount set forth in subsection (b)(3) of this section, and

any operator or affiliate of and colocation tenant of such qualified data center, shall be exempt from

any financial transactions tax or fee that may be imposed by the state on trades of stocks, bonds,

derivatives and other financial products. The exemption under this subdivision shall be effective

for a period of up to fifty (50) years from the date of the construction, rehabilitation, renovation or

repair of a facility is completed, as determined by the Rhode Island commerce corporation. The

Rhode Island commerce corporation may incorporate the provisions of this subdivision into the

agreement entered into pursuant to this section or amend an existing agreement with a qualified

data center to incorporate the provisions of this subdivision.

     (5) The Rhode Island secretary of commerce, or his or her designee, shall:

     (i) Serve as the liaison between applicants and qualified data centers and other state

agencies;

     (ii) Provide assistance to applicants and qualified data centers from the preapplication

phase to the post-operational stage; and

     (iii) Seek to ensure coordinated, efficient and timely responses to applicants and qualified

data centers.

     (c)(1) With respect to the exemption of taxes imposed under chapter 18 of title 44, the

secretary of commerce shall notify the tax administrator of any person that has entered into an

agreement pursuant to this section. The tax administrator shall provide to such person a certificate

that exempts such person, and any contractor or subcontractor of such person, from taxes for:

     (i) The sale of and the storage, use or other consumption in this state of qualified data center

equipment acquired for incorporation into or used and consumed in the development, acquisition,

construction, rehabilitation, renovation, repair or operation of a facility that is used or to be used as

a qualified data center;

     (ii) The sale of and the acceptance, use or other consumption in this state of any service

described under subsection § 44-18-20, that is used and consumed in the development, acquisition,

construction, rehabilitation, renovation, repair or operation of a facility that is used or to be used as

a qualified data center; and

     (iii) All electricity used by a qualified data center. Such person, and any contractor or

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subcontractor of such person, may use such certificate for the purchase, storage, use or other

consumption in this state of qualified data center equipment, services and electricity as set forth in

this subsection and each seller of such equipment, services or electricity may rely on such

certificate.

     (2) The certificate provided pursuant to subsection (c)(1) of this section shall apply, during

the time period the agreement is effective, to:

     (i) Any additional building or structure at a qualified data center to be developed, acquired,

constructed, rehabilitated, renovated, repaired or operated, to house a group of networked computer

servers, regardless of whether such development, acquisition, construction, rehabilitation,

renovation, repair or operation was contemplated at the time of entering into the agreement; and

     (ii) Any additional qualified data center equipment, services and electricity acquired or

used by such qualified data center after the date the agreement was entered into.

     (d)(1) With respect to the exemption from the tax imposed under chapter 3 of title 44 of

the general laws, such exemption shall apply to:

     (i) Real property, buildings or structures, located within or at a qualified data center; and

     (ii) Enterprise information technology equipment used by a qualified data center.

     (2) The exemption under this subsection shall apply, during the time period the agreement

entered into pursuant to subsection (b) of this section is effective to:

     (i) Any additional building or structure at a qualified data center that is developed,

acquired, constructed, rehabilitated, renovated, repaired or operated, to house a group of networked

computer servers, regardless of whether any such development, acquisition, construction,

rehabilitation, renovation, repair or operation was contemplated at the time of entering into the

agreement;

     (ii) Any additional enterprise information technology equipment used by a qualified data

center that is acquired after the date the agreement was entered into; and

     (iii) Any additional facility acquired by the owner of a qualified data center for the

development, construction, rehabilitation, renovation, repair or operation of a qualified data center,

after the date of the agreement was entered into, provided such owner enters into a negotiated host

municipality fee agreement as required under subsection (d)(4) of this section for each such

additional facility.

     (3) The secretary of commerce shall notify each municipality in which such facility is

located of any agreement entered into pursuant to this section and shall provide the identity of the

person with which the secretary has entered into such agreement, the date such agreement is

effective and the terms of the agreement with respect to the exemption from the tax imposed under

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chapter 3 of title 44.

     (4)(i) No developer or owner shall commence construction, rehabilitation, renovation or

repair of a facility that will be a qualified data center unless such owner has entered into a negotiated

host municipality fee agreement with the municipality in which such facility is located. Such owner

shall enter into a negotiated host municipality fee agreement for each additional facility that will

be a qualified data center that such owner acquires. If a facility is located in contiguous

municipalities, such owner shall enter into a negotiated host municipality fee agreement with each

such municipality.

     (ii) Each negotiated host municipality fee agreement shall include provisions for the

assessment and payment of the tax under chapter 3 of title 44 exempted pursuant to the agreement

entered into pursuant to subsection (b) of this section, and the rates or amounts of penalties and

interest to be imposed thereon, if the legislative body of the municipality in which the qualified

data center is located determines that the requirements of the negotiated host municipality fee

agreement are not being met or have not been met.

     (5) The chief elected official of the municipality in which a qualified data center is located

shall notify the qualified data center if the legislative body of such municipality determines the

requirements of a negotiated host municipality fee agreement entered into pursuant to subsection

(d)(4) of this section are not being met or have not been met. The qualified data center shall cure

such noncompliance not later than one hundred eighty (180) days after the date of such notification.

If the legislative body of such municipality determines the noncompliance has not been cured, the

negotiated host municipality fee agreement shall be terminated.

     (6) Upon termination of a negotiated host municipality fee agreement pursuant to

subsection (d) or subsection (e)(2) of this section, the qualified data center, the owner of the

property on which such qualified data center is located or such owner's successors or assigns shall

be subject to the tax imposed under chapter 3 of title 44 and shall be liable for the payment of such

taxes on the property that was exempted from such tax, from the date of noncompliance under

subsection (d)(5) of this section or the date of termination under subsection (e)(2) of this section,

as applicable. Such liability shall attach to the property as a charge thereon. Such tax and any related

penalty and interest shall be due, payable and collectible as other municipal taxes and subject to

the same liens and processes of collection.

     (e)(1) If the Rhode Island commerce corporation terminates an agreement entered into

pursuant to subsection (b) of this section due to making the determination that the requirements of

such agreement or of a qualified data center are not being met or have not been met the secretary

of commerce shall notify the tax administrator and the chief elected official of the municipality in

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which the applicable qualified data center is located of such termination.

     (2) Any negotiated host municipality fee agreement entered into pursuant to subsection

(d)(4) of this section by such qualified data center shall be terminated as of the date of the agreement

entered into pursuant to subsection (b) of this section is terminated. The municipality in which such

qualified data center is located may use any remedy authorized by the general laws to secure the

interest of the municipality and recover the amount of any fee, tax, penalty and interest that become

due and owing to such municipality due to such termination.

     (3) The amount of taxes under chapter 18 of title 44, penalty or interest that become due

and owing pursuant to the termination by the Rhode Island commerce corporation of an agreement

entered into pursuant to subsection (b) of this section may be collected by the tax administrator

under the provisions of chapter 1 of title 44. The amount of any such tax, penalty or interest shall

be a lien on the real estate of the qualified data center from the last day of the month next proceeding

the due date of such tax until such tax is paid. The tax administrator may record such lien in the

records of any municipality in which the real estate of such qualified data center is located but no

such lien shall be enforceable against a bona fide purchaser or qualified encumbrancer of such real

estate. When any tax with respect to which a lien has been recorded under the provisions of this

subsection has been satisfied, the tax administrator shall, upon request of any interested party, issue

a certificate discharging such lien, which certificate shall be recorded in the same office in which

the lien was recorded. Any action for the foreclosure of such lien shall be brought by the attorney

general in the name of the state in the superior court for the county in which the real estate subject

to the lien is located, or, of such property is located in two or more counties, in the superior court

for one such county, and the court may limit the time for redemption or order the sale of such real

estate or make such other or further decree as it judges equitable.

     SECTION 2. This act shall take effect on July 1, 2021.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT -- QUALIFIED DATA CENTERS

LOCATION INCENTIVE

***

     This act would establish property, tangible, sales and use tax exemptions as incentives for

the location of qualified data centers in Rhode Island upon a minimum qualified investment of two

hundred million dollars ($200,000,000) in a designated enterprise zone and four hundred million

dollars ($400,000,000) in a non-enterprise zone. The application requirements and approval process

shall be in a form and manner prescribed by the Rhode Island commerce corporation.

     This act would take effect on July 1, 2021.

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