Amends existing law to revise a sales tax exemption for data center equipment and to revise a property tax exemption for certain capital investments.

LEGISLATURE OF THE STATE OF IDAHO Sixty-eighth Legislature Second Regular Session - 2026 IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 609 BY REVENUE AND TAXATION COMMITTEE AN ACT1 RELATING TO TAXATION; AMENDING SECTION 63-3622VV, IDAHO CODE, TO REVISE PRO-2 VISIONS REGARDING THE IDAHO INFORMATION TECHNOLOGY EQUIPMENT SALES TAX3 EXEMPTION; AMENDING SECTION 63-4502, IDAHO CODE, TO LIMIT ELIGIBILITY4 FOR THE TAX EXEMPTION FOR NEW CAPITAL INVESTMENTS AND TO MAKE TECHNICAL5 CORRECTIONS; AND DECLARING AN EMERGENCY.6

Be It Enacted by the Legislature of the State of Idaho:7

SECTION 1. That Section 63-3622VV, Idaho Code, be, and the same is8 hereby amended to read as follows:9 63-3622VV. IDAHO INFORMATION TECHNOLOGY EQUIPMENT. (1) On and after10 July 1, 2020, and before July 1, 2036, there is exempted from the taxes11 imposed by this chapter the purchase or use of eligible server equipment12 and new data center facilities, as defined in this section. The exemption13 provided in this section shall be available only to qualifying business14 entities and contractors installing eligible server equipment or building15 new data center facilities for qualifying business entities. The exemption16 provided in this section shall not be available for property that has been17 the subject of business incentives granted to a taxpayer or its affiliates,18 pursuant to the Idaho reimbursement incentive act, sections 67-4737 through19 67-4744, Idaho Code.20 (2) As used in this section:21 (a) "Business entity" means a separate legal entity or separately oper-22 ated segment of business that exists for the primary purpose of engaging23 in a commercial activity for profit and whose sole purpose is the oper-24 ation of a data center. For the purposes of this section, a separately25 operated segment of business is a segment of a business for which sep-26 arate records are maintained and that is operated by an employee or em-27 ployees whose primary employment responsibility is to operate the busi-28 ness segment.29 (b) "Cabling" means a fiber or copper cable used in data centers to con-30 nect information sources to a server or storage device.31 (c) "Capital investment" means real or tangible personal property that32 is purchased for use in Idaho and is used by a business entity for the33 purpose of operating a data center.34 (d) "Chiller" means a cooling system used in data centers to remove heat35 from an element and deposit it into another element.36 (e) "Commencement of operations" means the date on which a certificate37 of occupancy is issued for a data center.38 (f) "Data center" means a facility comprised of one (1) or more build-39 ings in Idaho that is used to house eligible server equipment for the40 transmission and storage of data where the facility has the following41 characteristics:42

2 (i) Uninterruptible power supplies, generator power, or both;1 (ii) Sophisticated fire suppression and prevention systems; and2 (iii) Enhanced physical security and restricted access.3 (g) "Eligible server equipment" means new server equipment acquired4 by a qualifying business entity as described in this subsection that is5 maintained and operated in a data center located in Idaho for the sole6 purpose of data transmission and storage services, providing data and7 transaction processing services, information technology services, or8 computer collocation services. "Eligible server equipment" includes9 servers, rack servers, chillers, storage devices, generators, cabling,10 and enabling software integral to or installed on such equipment.11 (h) "Generator" means an engine used in data centers to convert mechan-12 ical energy into electricity.13 (i) "New data center facilities" means buildings or structural com-14 ponents of buildings, including equipment, materials, and fixtures15 thereof, that are used in or intended for use primarily as a data center16 in Idaho.17 (j) (i) "New jobs" means new jobs created in Idaho that are nonseasonal,18 full-time jobs that collectively pay an average weekly wage that equals19 or exceeds the average weekly wage for the county where the data center20 is located, as determined by the most recent report of the United States21 bureau of labor statistics. A job that merely changes locations within22 the state of Idaho shall not be considered a new job under this section.23 New jobs must exceed the business entity's highest number of full-time24 employees in Idaho during the twenty-four (24) months immediately pre-25 ceding the commencement of operations of the data center.26 (k) (j)(i) "Qualifying business entity" means a business entity27 that certifies to the state tax commission that it will make:28 1. Make capital investments in one (1) or more data centers29 after July 1, 2020, in amounts of at least two hundred fifty30 million dollars ($250,000,000) in the aggregate within the31 first five (5) years after commencement of construction and32 that it will create;33 2. Create and maintain at least thirty (30) new jobs at the34 data center within two (2) calendar years after the com-35 mencement of operations.;36 3. For a qualifying business entity that receives an exemp-37 tion provided in this section after March 1, 2026, receive38 electricity service under an electricity rate schedule or39 energy service agreement that fully recovers from the qual-40 ifying business entity all costs incurred by the utility in41 providing electricity to the property for which the exemp-42 tion is claimed; and43 4. For a qualifying business entity that receives an exemp-44 tion provided in this section after March 1, 2026, prior to45 commencing construction of a data center, provide written46 notice to the local water provider serving such proposed47 data center's location detailing the anticipated water con-48 sumption needs of the data center to ensure that the water49 consumption is compatible with the location in which the50

3 data center is being constructed. A qualifying business1 entity is encouraged to take action to conserve, reuse, and2 replace water. This includes but is not limited to:3 (A) Using water-efficient fixtures and practices;4 (B) Treating, infiltrating, or harvesting rainwater;5 (C) Recirculating or recycling water within the cool-6 ing system before discharging;7 (D) Partnering with state and local governmental en-8 tities and private individuals and entities to use data9 center discharge water for irrigation, water conserva-10 tion, or other beneficial purposes, if available;11 (E) Using reclaimed water where possible for data cen-12 ter operations; and13 (F) Supporting water restoration efforts in local wa-14 tersheds.15 (ii) Such business entities shall be entitled to a provisional16 exemption pursuant to this section during the period in which they17 make capital investments in data center property. If a business18 entity fails to meet the investment and job creation requirements19 provided within the time periods required in this section, it20 shall pay sales or use taxes that would have been due if not for the21 granting of the provisional exemption. If a business entity meets22 the investment and job creation requirements provided within the23 time periods required in this section, its provisional exemption24 shall become final without further action, and thereafter the ex-25 emption shall also apply to all additional purchases of eligible26 server equipment and purchases associated with constructing new27 data center facilities.28 (l) (k) "Rack server" means a computer in a data center dedicated to use29 as a server and designed to be installed in a framework called a rack.30 (m) (l) "Server" means a computer or computer program used in data cen-31 ters that manages access to a centralized resource or service in a net-32 work.33 (n) (m) "Storage device" means a piece of computer equipment on which34 information can be stored and that is used in data centers.35 (3) If any taxpayer receives the exemption provided in section 63-4502,36 Idaho Code, on any property owned by the taxpayer in the state of Idaho, such37 taxpayer shall not be eligible for the exemption provided in this section.38 (3) (4) The state tax commission may promulgate rules to administer39 and enforce the provisions of this section, including the promulgation of40 rules relating to the provision of information necessary to certify that the41 taxpayer satisfies the criteria for a qualifying business entity. For the42 purpose of carrying out its duties to administer and enforce the provisions43 of this section, the state tax commission shall have the powers and duties44 provided by sections 63-217, 63-3038, 63-3039, 63-3042 through 63-3067,45 63-3068, 63-3071, and 63-3074 through 63-3078, Idaho Code.46

SECTION 2. That Section 63-4502, Idaho Code, be, and the same is hereby47 amended to read as follows:48

4 63-4502. TAX EXEMPTION FOR NEW CAPITAL INVESTMENTS. (1) For calendar1 years beginning on or after January 1, 2008, the net taxable value of all2 property of a taxpayer, whether acquired before, during or after the qual-3 ifying period, in excess of four hundred million dollars ($400,000,000) lo-4 cated within a single county in Idaho shall be exempt from property taxation5 and any special assessment, but only if the taxpayer makes a qualifying new6 capital investment as defined in subsection (2) of this section.7 (2) For purposes of this section, the following definitions shall ap-8 ply:9 (a) "Qualifying new capital investment" means an investment of at least10 one billion dollars ($1,000,000,000) made during the qualifying period11 by the acquisition, construction, improvement or installation of real,12 operating or personal property related to new plant and building facil-13 ities at a project site located within the county referred to in subsec-14 tion (1) of this section.15 (b) "New plant and building facilities" means:16 (i) Qualified investments as defined in section 63-3029B, Idaho17 Code; or18 (ii) Buildings or structural components of buildings, includ-19 ing equipment, materials and fixtures thereof, whether used at a20 project site or temporarily stored off-site in the county referred21 to in subsection (1) of this section and intended for use at a22 project site.23 (c) "Qualifying period" means an eighty-four (84) month period of time24 beginning with the issuance of a building permit for a permanent build-25 ing structure at a project site and ending no later than eighty-four26 (84) months a thereafter.27 (d) "Project site" means an area or areas at which the new plant and28 building facilities described in subsection (2) paragraph (b) of this29 subsection are built, installed or constructed.30 (3) The property included in the calculation for purposes of determin-31 ing a qualifying new capital investment value shall include all real or op-32 erating property owned, and all personal property owned, leased or rented.33 With respect to leased or rented personal property, only that portion of the34 property for which a taxpayer is contractually liable for payment of prop-35 erty taxes thereon shall be included in the calculation of the investment.36 (4) Notwithstanding the exemption provided in subsection (4) of sec-37 tion 63-3029B, Idaho Code, no other exemption from property tax or any spe-38 cial assessment provided by the statutes of this state shall be applicable39 to any property described in subsection (2) of this section with respect to a40 year in which the incentives set forth in subsection (1) of this section ap-41 ply to any of the same property.42 (5) Property subject to the provisions of this section shall not be43 included on any property roll or any new construction roll prepared by the44 county assessor in accordance with section 63-301 or 63-301A, Idaho Code,45 respectively.46 (6) If a taxpayer receives the exemption provided in section 63-3622VV,47 Idaho Code, such taxpayer shall not be eligible for the exemption provided in48 this section on any property owned by the taxpayer in the state of Idaho.49

5 (6) (7) The state tax commission shall adopt all rules that may be nec-1 essary to implement the provisions of this section.2

SECTION 3. An emergency existing therefor, which emergency is hereby3 declared to exist, this act shall be in full force and effect on and after its4 passage and approval.5