October 27, 2023
**************
**************
**************
RE: Private Letter Ruling No. PLR20230227091823
Dear **************:
We issue this private letter ruling in accordance with Rule 3.1, Private Letter Rulings and General Information Letters. [ENDNOTE 1] We are responding to your request dated Feb. 10, 2023. Detrimental reliance relief is provided in accordance with Rule 3.10, Taxpayer Bill of Rights.
You requested guidance on whether qualifying jobs for a new certified large data center project can be physically located at an affiliated data center in the same county during construction of the new data center.
Facts Presented
************** (Taxpayer) is the qualifying owner of a certified large data center project in Texas that is under construction (New Data Center). An affiliate of Taxpayer with the same parent company is the qualifying owner of an existing large data center project in the same county (Existing Data Center). The Existing Data Center and the New Data Center have the same qualifying occupant and qualifying operator.
While the New Data Center is under construction, the qualifying operator will hire new employees and will code their accounting records to identify them with the New Data Center. The New Data Center employees will be physically located at the Existing Data Center until the New Data Center is completed. Taxpayer will not move any employees from another county in Texas to the New Data Center. Both the Existing and New Data Centers will each create 40 jobs as required to be certified as a large data center project.
Question, Ruling, and Analysis
Our restatement of your question is shown below, followed by our response and analysis.
Question: Will jobs internally coded in the employer’s records as assigned to the New Data Center be qualifying jobs if they are physically located at the Existing Data Center during the development and construction of the New Data Center?
Ruling: Jobs assigned to the New Data Center but physically located at the Existing Data Center will be qualifying jobs if they are hired on or after the date of certification for the New Data Center.
Analysis: Under Sections 151.3595(d) and (e), a large data center project must apply to and be certified by the Comptroller’s office. The qualifying owner, qualifying operator, and qualifying occupant must certify that independently or jointly they will:
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create at least 40 qualifying jobs in the county in which the project is located;
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make at least $500 million of capital investment in the project in the five-year period following the date of certification; and
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agree to contract for at least 20 megawatts of transmission capacity for operation of the large data center project.
Section 151.3595(a)(4) defines a “qualifying job” as a full-time, permanent job that pays at least 120 percent of the county average weekly wage in the county in which the job is based. A permanent job is an employment position that will exist for at least five years after the date the job is created. Section 151.3595(a)(3).
Rule 3.335(a)(7) (Property Used in a Qualifying Data Center or Qualifying Large Data Center Project; Temporary Sales Tax Exemption) further provides a qualifying job is a job that is located in the same county in Texas in which the associated qualifying large data center project is located, will provide at least 1,820 hours of employment a year to a single employee, is not transferred from one county in Texas to another county in Texas, and is not created to replace a qualifying job that was previously held by another employee.
Taxpayer along with the qualifying operator and qualifying occupant has certified that they will create at least 40 qualifying jobs as part of the project. Section 151.3595 and Rule 3.335 require the jobs to be created after the date of certification and to be located in the county where the project is located. These sections do not prohibit the jobs from being physically located at another location in the county while the data center project is under construction.
Once the qualifying jobs have been created, a properly completed Qualifying Data Center or Qualifying Large Data Center Project Job Creation Report, 01-160 must be submitted. Rule 3.335(g)(5). The large data center project will also be audited at its five-year anniversary to verify the capital investment, job creation, and contract for electricity transmission capacity requirements have been met. Rule 3.335(g)(4).
Sincerely,
Tax Policy Division – Indirect Taxes
Texas Comptroller of Public Account
ENDNOTE
1 Unless otherwise indicated, all references to “Section” are to the Texas Tax Code, and all references to “Rule” are to Title 34 of the Texas Administrative Code.