wa-law.org > bill > 2025-26 > HB 2655 > Original Bill
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An exemption from the tax imposed by RCW 82.08.020 is provided for sales to qualifying businesses and to qualifying tenants of eligible server equipment to be installed, without intervening use, in an eligible computer data center to which a valid exemption certificate applies, and to charges made for labor and services rendered in respect to installing eligible server equipment.
This exemption also applies to sales to qualifying businesses and to qualifying tenants of eligible power infrastructure, including labor and services rendered in respect to constructing, installing, repairing, altering, or improving eligible power infrastructure at an eligible computer data center for which an exemption certificate has been issued.
No new exemption certificates may be issued on or after July 1, 2036.
The exemptions provided in this section expire July 1, 2048.
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In order to obtain an exemption certificate under this section, a qualifying business or a qualifying tenant must submit an application to the department for an exemption certificate. The application must include the information necessary, as required by the department, to determine that a business or tenant qualifies for the exemption under this section. The department must issue exemption certificates to qualifying businesses and qualifying tenants. The department may assign a unique identification number to each exemption certificate issued under this section.
A qualifying business or a qualifying tenant claiming the exemption under this section must present the seller with an exemption certificate in a form and manner prescribed by the department. The seller must retain a copy of the certificate for the seller's files.
The exemption certificate is effective on the date the application is received by the department, which is deemed to be the date of issuance. Only purchases on or after the date of issuance qualify for the exemption under this section. No tax refunds are authorized for purchases made before the effective date of the exemption certificate.
Exemption certificates expire two years after the date of issuance, unless construction has been commenced.
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(A) Thirty-five family wage employment positions; or, if lower
(B) Three family wage employment positions for each 20,000 square feet of space or less that is newly dedicated to housing working servers at the eligible computer data center. For qualifying tenants, the number of family wage employment positions that must be increased under this subsection (3)(a)(i)(B) is based only on the space occupied by the qualifying tenant in the eligible computer data center.
ii. After the minimum number of family wage employment positions as required under (a)(i) of this subsection (3) is established, a qualifying business or a qualifying tenant must maintain the minimum family wage employment positions required under (a)(i) of this subsection (3) while the exemption certificate is valid.
b. In calculating the net increase in family wage employment positions:
i. The owner of an eligible computer data center, in addition to its own net increase in family wage employment positions, may include:
(A) The net increase, since the date of issuance of the qualifying business's exemption certificate, in family wage employment positions employed by qualifying tenants; and
(B) The net increase in family wage employment positions described in (c) of this subsection (3).
ii.(A) Qualifying tenants, in addition to their own net increase in family wage employment positions, may include:
(I) A portion of the net increase in family wage employment positions employed by the owner; and
(II) A portion of the net increase in family wage employment positions described in (c) of this subsection (3).
(B) The portion of the net increase in family wage employment positions to be counted under (b)(ii) of this subsection (3) by each qualifying tenant is equal to the net increase in family wage employment positions assigned to an eligible computer data center as described in (b)(ii)(A)(I) and (II) of this subsection (3), multiplied by the percentage of total space within the eligible computer data center occupied by the qualifying tenant. Any combination of qualifying business and qualifying tenant family wage employment positions may meet this requirement.
(C) In the instance of an existing data center facility that was ineligible, regardless of the date of commencement of construction, that later obtains an exemption certificate under this section, the data center may count the existing employment positions that are dedicated to the data center toward the new family wage employment position requirements if the employment positions meet the requirements of a family wage employment position, as described in (c)(i)(A) of this subsection (3), other than the requirement that the position did not exist or had not previously been filled as of the date that the department issued an exemption certificate.
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i. For purposes of this subsection:
(A)(I) "Family wage employment positions" are new permanent employment positions requiring 40 hours of weekly work, or their equivalent, on a full-time basis assigned to an eligible computer data center and receiving a wage equivalent to or greater than 125 percent of the per capita personal income of the county in which the qualified project is located as published by the employment security department. The per capita personal income to be used to determine qualification for any year is the amount that was established for the immediate prior year.
(II) An employment position may not be counted as a family wage employment position unless the employment position is entitled to health insurance coverage provided by the employer of the employment position.
(B) "New permanent employment position" means an employment position that did not exist or that had not previously been filled as of the date that the department issued an exemption certificate to the qualifying business or qualifying tenant of an eligible computer data center, as the case may be, except as provided in (b)(ii)(C) of this subsection (3).
ii.(A) Family wage employment positions include positions filled by employees of the qualifying business and by employees of qualifying tenants.
(B) Family wage employment positions also include individuals performing work at an eligible computer data center as an independent contractor hired by the owner of the eligible computer data center or as an employee of an independent contractor hired by the owner of the eligible computer data center, if the work is necessary for the operation of the computer data center, such as security and building maintenance, and provided that all of the applicable requirements in (c) of this subsection (3) are met.
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i. For a qualifying business or qualifying tenant that does not meet the requirements of this subsection (3), previously exempted sales and use taxes are immediately due and payable and any exemption certificate issued to that qualifying business or qualifying tenant under this section is canceled, except as described in (d)(iii) of this subsection (3).
ii. The department of labor and industries must, at the request of the department, assist in determining whether the requirements of this subsection (3) have been met.
iii. If the department, with the assistance of the department of labor and industries, finds that a failure to meet the requirements of this subsection (3) is due to circumstances beyond the control of the qualifying business or qualifying tenant including, but not limited to, a declaration of an economic recession, pandemic, or natural disaster affecting data center operations, the department may provide exceptions or extensions to the requirements of this subsection (3).
iv. Any repayment of taxes triggered by the failure of a qualifying business or qualifying tenant to meet the requirements of this subsection (3) must be calculated in proportion to the duration of time for which any applicable requirement was not met.
v. If the department is notified that a qualifying business or qualifying tenant fails to meet the requirements of this subsection (3), the department may require a qualifying business or qualifying tenant to submit records necessary to determine whether the requirements have been met.
For exemption certificates issued:
Within three years after being placed in service, the qualifying business operating a newly constructed data center must certify to the department that it has attained certification under one or more of the following sustainable design or green building standards:
BREEAM for new construction or BREEAM in-use;
Energy star;
Envision;
ISO 50001-energy management;
LEED for building design and construction or LEED for operations and maintenance;
Green globes for new construction or green globes for existing buildings;
UL 3223; or
Other reasonable standards approved by the department.
The department may require qualifying businesses and qualifying tenants to submit records necessary to verify the requirements under (a) of this subsection have been met.
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For a qualifying business or qualifying tenant that does not meet the requirements of (a) of this subsection (4), all previously exempted sales and use taxes may be immediately due and payable, any exemption certificate issued to that qualifying business or qualifying tenant under this section is canceled, and an additional 10 percent penalty is assessed, except as described in (c)(ii) of this subsection (4).
If the department finds that a failure to meet the requirements of this subsection (4) is due to circumstances beyond the control of the qualifying business or qualifying tenant including, but not limited to, a declaration of an economic recession, pandemic, or natural disaster affecting data center operations, the department may, at its discretion, provide exceptions or extensions to the requirements of this subsection (4). The department may, at its discretion, coordinate with agencies with relevant expertise to assist in determining whether the requirements have been met.
A qualifying business or a qualifying tenant claiming the exemption under this section is encouraged to take direct steps to adopt practices to mitigate negative environmental impacts resulting from expanded use of data centers, including through:
Coordinating with the industrial waste coordination program established under RCW 43.31.625 to identify and provide technical assistance in implementing industrial symbiosis projects;
To the extent possible, procuring or contracting for power from renewable sources;
Adopting practices to improve the energy efficiency of existing data centers, including through upgrading and consolidating technology, managing data center airflow, and adjusting and improving heating, ventilation, and air conditioning systems; and
Taking actions to conserve, reuse, and replace water. This includes using water efficient fixtures and practices; treating, infiltrating, and harvesting rainwater; recycling water before discharging; partnering with local water utilities to use discharged water for irrigation and other water conservation purposes; using reclaimed water where possible for data center operations; and supporting water restoration in local watersheds.
A qualifying business or a qualifying tenant claiming an exemption under this section or section 2 of this act must complete an annual tax performance report with the department as required under RCW 82.32.534. The report must identify construction firm names and employment levels used for constructing, renovating, or remodeling the data centers.
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The certificate holder may not at any time assign or transfer a certificate without the prior written consent of the department. The department must allow certificate transfers if the certificate holder meets the following requirements:
The certificate assignee or transferee is qualified to do business in the state;
The assignee or transferee acknowledges the transfer of the certificate in writing;
The assignee or transferee agrees to keep and perform all the terms of the certificates; and
An assignment or transfer of the certificate is to an entity that:
(A) Controls, is controlled by, or under common control with, the certificate holder;
(B) Acquires all or substantially all of the stock or assets of the certificate holder; or
(C) Is the resulting entity of a merger or consolidation with the certificate holder.
b. In the event the assignee or transferee acquires eligible server equipment in a qualifying asset sale under (a)(iv)(B) of this subsection, the purchaser shall be deemed to purchase the eligible server equipment pursuant to the transferred certificate.
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Each emerging large energy use facility must sign a contractual service commitment for at least 10 years with the appropriate investor-owned utility or consumer-owned utility.
An emerging large energy use facility may meet their supply demands through purchasing electricity from an entity that is not a utility or by generating its own electricity.
The definitions in this subsection apply throughout this section unless the context clearly requires otherwise.
"Affiliated" means that one person has a direct or indirect ownership interest of at least 20 percent in another person.
"Building" means a fully enclosed structure with a weather resistant exterior wall envelope or concrete or masonry walls designed in accordance with the requirements for structures under chapter 19.27 RCW.
"Certificate of occupancy" means the certificate of occupancy issued by a local governing authority for the structure or structures which comprise the newly constructed eligible computer data center.
"Consumer-owned utility" means a municipal electric utility formed under Title 35 RCW, a public utility district formed under Title 54 RCW, an irrigation district formed under chapter 87.03 RCW, a cooperative formed under chapter 23.86 RCW, a mutual corporation or association formed under chapter 24.06 RCW, or a port district formed under Title 53 RCW, that is engaged in the business of distributing electricity to at least one retail electric customer in the state.
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"Computer data center" means a facility comprised of one or more buildings, which may be comprised of multiple businesses, constructed specifically, and used primarily, to house working servers, where the facility has the following characteristics: (A) Uninterruptible power supplies, generator backup power, or both; (B) sophisticated fire suppression and prevention systems; and (C) enhanced physical security, such as: Restricted access to the facility to selected personnel; permanent security guards; video camera surveillance; an electronic system requiring passcodes, keycards, or biometric scans, such as hand scans and retinal or fingerprint recognition; or similar security features.
For a computer data center comprised of multiple buildings, each separate building constructed specifically, and used primarily, to house working servers is considered a computer data center if it has all of the characteristics listed in (d)(i)(A) through (C) of this subsection (9).
A facility comprised of one building or more than one building must have a combined square footage of at least 100,000 square feet.
"Electronic data storage and data management services" include, but are not limited to: Providing data storage and backup services, providing computer processing power, hosting enterprise software applications, and hosting websites. The term also includes providing services such as email, web browsing and searching, media applications, and other online services, regardless of whether a charge is made for such services.
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(A) Located in a county east of the Cascades that borders another state and has a population of at least 500,000 persons;
(B) Having at least 20,000 square feet dedicated to housing working servers; and
(C) For which the commencement of construction occurs after June 30, 2026, and before July 1, 2035.
ii. For purposes of this section, "commencement of construction" means the date that a building permit is issued under the building code adopted under RCW 19.27.031 for construction of the computer data center. "Commencement of construction" does not include soil testing, site clearing and grading, site preparation, or any other related activities that are initiated before the issuance of a building permit for the construction of the foundation of a computer data center.
h. "Eligible power infrastructure" means all fixtures and equipment owned by a qualifying business or qualifying tenant and necessary for the transformation, distribution, or management of electricity that is required to operate eligible server equipment within an eligible computer data center. The term includes wiring; cogeneration equipment; and associated fixtures and equipment, such as electrical switches, batteries, and distribution, testing, and monitoring equipment. "Eligible power infrastructure" does not include substations or backup generators that use diesel fuel.
i. "Eligible server equipment" means:
i. For a qualifying business whose computer data center qualifies as an eligible computer data center, "eligible server equipment" means the original server equipment installed in a building within an eligible computer data center on or after July 1, 2026. Server equipment installed in movable or fixed stand-alone, prefabricated, or modular units, including intermodal shipping containers, is not "directly installed in a building."
ii. For a qualifying tenant who leases space within an eligible computer data center, "eligible server equipment" means the original server equipment installed within the space it leases from an eligible computer data center with an exemption certificate on or after July 1, 2026.
j. "Emerging large energy use facility" means a data center that has a maximum aggregate contract demand of 20 megawatts or more and is primarily engaged in providing a service described under code 518210 of the 2022 North American industry classification system.
k. "Investor-owned utility" means a company owned by investors that meets the definition of electrical company in RCW 80.04.010 and is engaged in distributing electricity to one or more retail electric customers in the state.
l. "Qualifying business" means a business entity that exists for the primary purpose of engaging in commercial activity for profit and that is the owner of an eligible computer data center. "Qualifying business" does not include the state or federal government or any of their departments, agencies, and institutions; tribal governments; political subdivisions of this state; or any municipal, quasi-municipal, public, or other corporation created by the state or federal government, tribal government, municipality, or political subdivision of the state.
m. "Qualifying tenant" means a business entity that exists for the primary purpose of engaging in commercial activity for profit and that leases space from a qualifying business within an eligible computer data center. "Qualifying tenant" does not include the state or federal government or any of their departments, agencies, and institutions; tribal governments; political subdivisions of this state; or any municipal, quasi-municipal, public, or other corporation created by the state or federal government, tribal government, municipality, or political subdivision of the state. The term also does not include a lessee of space in an eligible computer data center if the lessee and lessor are affiliated and that space will be used by the lessee to house server equipment that replaces server equipment previously installed and operated in that eligible computer data center by the lessor or another person affiliated with the lessee.
n. "Server equipment" means the computer hardware located in an eligible computer data center and used exclusively to provide electronic data storage and data management services, including cloud services, for internal use by the owner or lessee of the computer data center, for clients of the owner or lessee of the computer data center, or both. "Server equipment" also includes computer software necessary to operate the computer hardware. "Server equipment" does not include personal computers, the racks upon which the server equipment is installed, and computer peripherals such as keyboards, monitors, printers, and mice.
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An exemption from the tax imposed by RCW 82.12.020 is provided for the use by qualifying businesses or qualifying tenants of eligible server equipment to be installed, without intervening use, in an eligible computer data center for which an exemption certificate under section 1 of this act has been issued, and to the use of labor and services rendered in respect to installing such server equipment.
Until July 1, 2048, this exemption also applies to the use by a qualifying business or qualifying tenant of eligible power infrastructure, including labor and services rendered in respect to installing, repairing, altering, or improving such infrastructure at an eligible computer data center for which an exemption certificate under section 1 of this act has been issued.
The exemptions provided in this section expire July 1, 2048.
A qualifying business or a qualifying tenant is not eligible for the exemption under this section unless the department issued an exemption certificate to the qualifying business or a qualifying tenant for the exemption provided in section 1 of this act.
The definitions and requirements in section 1 of this act apply to this section.
The exemption provided in subsection (1) of this section does not apply to the use of eligible server equipment and eligible power infrastructure, and the labor and services provided in subsection (1) of this section, if first used by qualifying businesses or qualifying tenants on or after July 1, 2048.
This section expires July 1, 2053.
From June 9, 2022, in order to obtain the exemption provided in RCW 82.08.986 , 82.08.9861, or section 1 of this act, a qualifying business or qualifying tenant must certify to the department that, for new construction work to be performed on the site of the computer data center, the computer data center receiving an exemption under RCW 82.08.986 , 82.08.9861, or section 1 of this act will be constructed by the prime contractor and its subcontractors in a way that includes community workforce agreements or project labor agreements and the payment of area standard prevailing wages and apprenticeship utilization requirements, provided the following apply:
The owner and the prime contractor and all of its subcontractors regardless of tier have the absolute right to select any qualified and responsible bidder for the award of contracts on a specified project without reference to the existence or nonexistence of any agreements between such bidder and any party to such project labor agreement, and only when such bidder is willing, ready, and able to become a party to, signs a letter of assent, and complies with such agreement or agreements, should it be designated the successful bidder; and
It is understood that this is a self-contained, stand-alone agreement, and that by virtue of having become bound to such agreement or agreements, neither the project contractor nor the subcontractors are obligated to sign any other local, area, or national agreement.
This section is the tax preference performance statement for the tax preferences contained in sections 1 and 2, chapter . . ., Laws of 2026 (sections 1 and 2 of this act). This performance statement is only intended to be used for subsequent evaluation of the tax preferences. It is not intended to create a private right of action by any party or be used to determine eligibility for preferential tax treatment.
The legislature categorizes these sales and use tax exemptions on eligible server equipment and eligible power infrastructure equipment at eligible computer data centers as ones intended to: Induce certain designated behavior by taxpayers, improve industry competitiveness, create or retain jobs, and reduce structural inefficiencies in the tax structure, as indicated in RCW 82.32.808(2) (a), (b), (c), and (d).
It is the legislature's specific public policy objective to improve industry competitiveness and to increase, create, or retain jobs in computer data centers in counties located east of the Cascades and bordering another state with a population over 500,000, as determined by the April 1, 2025, office of financial management population estimates, thereby increasing family wage jobs.
The legislature intends to extend the expiration date of the tax preference. The joint legislative audit and review committee shall conduct a review and determine if the tax preference is (a) generating capital investment in new computer data centers, (b) generating state and local tax collections from data center investment and operations, and (c) generating or maintaining construction and trade jobs in the state.
In order to obtain the data necessary to perform the review in subsection (4) of this section, the joint legislative audit and review committee may refer to any available data source.