SB-0617, As Passed House, December 15, 2015

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 617

(as amended December 15, 2015)

A bill to amend 1937 PA 94, entitled

"Use tax act,"

by amending section 14b (MCL 205.104b), as amended by 2008 PA 439,

and by adding section 4cc.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 4cc. (1) [subject to subsections (2) and (3), beginning]

January 1, 2016 through December 31,

2035, the tax under this act does not apply to the storage, use, or

consumption of data center equipment sold to the owner or operator

of a qualified data center or a colocated business for assembly,

use, or consumption in the operations of the qualified data center

or data center equipment sold or provided to a person engaged in

the business of constructing, altering, repairing, or improving

real estate for others to the extent the data center equipment is

to be affixed to or made a structural part of a qualified data

center.

[(2) the exemption under this section only continues to apply after January 1, 2022, if the numbers gathered by the local economic development corporations are certified and reported to the department of talent and economic development and subsequently forwarded to the department and demonstrate that the qualified data centers, the colocated businesses, and the contractors of the qualified data centers, collectively, have, in aggregate, established in this state at least 400 data center industry jobs or data center industry related jobs, or a combination of both, since January 1, 2016. The department of talent and economic development shall submit a report NO LATER THAN APRIL 1, 2022 related to the number of DATA CENTER INDUSTRY JOBS OR DATA CENTER INDUSTRY RELATED JOBS that have been established since january 1, 2016 TO THE SPEAKER AND MINORITY LEADER OF THE HOUSE OF REPRESENTATIVES, THE MAJORITY AND MINORITY LEADERS OF THE SENATE, AND THE GOVERNOR.

(3) THE EXEMPTION UNDER THIS SECTION ONLY continues to APPLy AFTER JANUARY 1, 2026, IF THE numbers gathered by the local economic development corporations are certified and reported to the DEPARTMENT OF TALENT AND ECONOMIC DEVELOPMENT and subsequently forwarded to the department and demonstrate THAT THE QUALIFIED DATA CENTERS, THE COLOCATED BUSINESSES, AND THE CONTRACTORS OF THE QUALIFIED DATA CENTERS, COLLECTIVELY, HAVE, IN AGGREGATE, ESTABLISHED in this state AT LEAST 1,000 DATA CENTER INDUSTRY JOBS OR DATA CENTER INDUSTRY RELATED JOBS, OR A COMBINATION OF BOTH, SINCE JANUARY 1, 2016. THE DEPARTMENT OF TALENT AND ECONOMIC DEVELOPMENT SHALL SUBMIT A REPORT NO LATER THAN APRIL 1, 2026 RELATED TO THE NUMBER OF DATA CENTER INDUSTRY JOBS OR DATA CENTER INDUSTRY RELATED JOBS THAT HAVE BEEN established SINCE JANUARY 1, 2016 TO THE SPEAKER AND MINORITY LEADER OF THE HOUSE OF REPRESENTATIVES, THE MAJORITY AND MINORITY LEADERS OF THE SENATE, AND THE GOVERNOR.

(4)] As used in this section:

(a) "Affiliate" means a person that directly, or indirectly

through 1 or more intermediaries, controls, is controlled by, or is

under common control with a specified person.

(b) "Colocated business" means a person that has entered into

a contract with the owner or operator of a qualified data center to

use or deploy data center equipment physically located within the

qualified data center for a period of 1 or more years.

routers, switches, peripheral computer devices, racks, shelving,

cabling, wiring, storage batteries, back-up generators,

uninterrupted power supply units, environmental control equipment,

other redundant power supply equipment, and prewritten computer

software used in operating, managing, or maintaining the qualified

data center or the business of the qualified data center or a

colocated business. Data center equipment also includes any

construction materials used or assembled under the qualified data

center's proprietary method for the construction or modification of

a qualified data center, including, but not limited to, building

materials, infrastructure, machinery, wiring, cabling, devices,

tools, and equipment that would otherwise be considered a fixture

or related equipment. Data center equipment does not include any

equipment owned by a third party that is used to supply the

qualified data center's primary power.

(d) "Qualified data center" means a facility composed of 1 or

more buildings located in this state and the facility is owned or

operated by an entity engaged at that facility in operating,

managing, or maintaining a group of networked computers or

networked facilities for the purpose of centralizing, or allowing 1

or more colocated businesses to centralize, the storage,

processing, management, or dissemination of data of 1 or more other

persons who is not an affiliate of the owner or operator of a

qualified data center or of a colocated business and the entity

receives 75% or more of its revenue from colocated businesses that

are not an affiliate of the owner or operator of the qualified data

center.

Sec. 14b. (1) If an exemption from the tax under this act is

claimed, the seller shall obtain identifying information of the

purchaser and the reason for claiming the exemption at the time of

the purchase or at a later date. The seller shall obtain the same

information for a claimed exemption regardless of the medium in

which the transaction occurred.

(2) A seller shall use a standard format for claiming an

exemption electronically as adopted by the governing board under

the streamlined sales and use tax agreement.

(3) A purchaser is not required to provide a signature to

claim an exemption under this act unless a paper exemption form is

used.

(4) A seller shall maintain a proper record of all exempt

transactions and shall provide them when requested by the

department.

(5) A seller who complies with the requirements of this

section is not liable for the tax under this act if a purchaser

improperly claims an exemption. A purchaser who improperly claims

an exemption is liable for the tax due under this act. This

subsection does not apply if a seller does any of the following:

(a) Fraudulently fails to collect the tax under this act.

(b) Solicits a purchaser to make an improper claim for

exemption.

entity-based exemption if both of the following occur:

(i) The subject of the transaction sought to be covered by the

exemption form is actually received by the purchaser at a location

operated by the seller.

(ii) The state in which the location operated by the seller is

located provides an exemption form that clearly and affirmatively

indicates that the claimed exemption is not available in that

state.

(6) A seller who obtains a fully completed exemption form or

captures the relevant data elements as outlined in this section

within 120 days after the date of sale is not liable for the tax

under this act.

(7) If the seller has not obtained an exemption form or all

relevant data elements, the seller may either prove that the

transaction was not subject to the tax under this act by other

means or obtain a fully completed exemption form from the

purchaser, by the later of the following:

(a) 120 days after a request by the department.

(b) The date an assessment becomes final.

(d) In the instance of a credit audit, the issuance of an

audit determination letter or informal conference decision and

order of determination.

(e) The date of a final order of the court of claims or the

Michigan tax tribunal, as applicable, with respect to an

assessment, order, or decision of the department.

(8) The department may, in its discretion, allow a seller

additional time to comply with subsection (7).

(9) A seller is not liable for the tax under this act if the

seller obtains a blanket exemption form for a purchaser with which

the seller has a recurring business relationship. Renewals of

blanket exemption forms or updates of exemption form information or

data elements are not required if there is a recurring business

relationship between the seller and the purchaser. For purposes of

this section, a recurring business relationship exists when a

period of not more than 12 months elapses between sales

transactions.

Enacting section 1. The legislature shall annually appropriate

sufficient funds from the state general fund to the state school

aid fund created in section 11 of article IX of the state

constitution of 1963 to fully compensate for any loss of revenue to

the state school aid fund resulting from the enactment of this

amendatory act.