For a certified large data center project that requires creating 40 qualifying jobs, can those new employees work temporarily at an affiliated, already-existing data center in the same county while the new data center is still under construction?

Plain-English summary

Texas offers a valuable sales tax exemption to owners of certified "large data center projects" that commit to creating at least 40 qualifying jobs, investing at least $500 million in capital over five years, and contracting for at least 20 megawatts of electricity transmission capacity. A company building a brand-new certified data center in a county where its corporate affiliate already runs an existing, separately certified data center asked a practical question: while the new building is still under construction, can the 40 new employees it's hiring for the new project temporarily work out of the existing (already-operational) data center in the same county, and still count toward the new project's job-creation requirement?

The Comptroller said yes. The statute and rules require qualifying jobs to be (1) created after the project's certification date, (2) located in the same county as the project, (3) full-time and expected to last at least five years, (4) paying at least 120% of the county's average weekly wage, and (5) not transferred from another Texas county or created merely to replace a previously existing job. Nowhere do these requirements say the employee has to physically sit inside the specific building under construction — only that the job be based in the right county. Since the new hires are being coded to the new project in payroll/accounting records, are newly created (not transferred from elsewhere), and are staying within the same county the whole time, temporarily housing them at the affiliated existing data center during construction doesn't disqualify them. Once the jobs are created, the employer still has to file the required Job Creation Report, and the whole project gets audited at its five-year mark to confirm the capital investment, job creation, and electricity-contract requirements were actually met.

What this means for you

Data center developers building near an existing affiliated facility

If you're standing up a new large data center project in the same county as an affiliate's existing, already-operational data center, you can bring on and ramp up your qualifying workforce at the existing facility during construction without jeopardizing the new project's job-creation certification — as long as the jobs are newly created (not simply moved from the existing project) and properly coded to the new project in your records.

Companies planning multi-phase or multi-site data center campuses

The controlling factor for "qualifying job" status is the county location and the job's own creation date/permanence — not the specific physical building. This gives some real flexibility in sequencing hiring ahead of a new facility's completion, as long as you don't cross county lines or repurpose an existing employee's position as a "new" one.

Accountants and tax professionals

Keep close track of the distinction between a genuinely new job (counts) and a job "transferred" from another Texas county or recreated to replace a prior employee's position (doesn't count) — Rule 3.335(a)(7)'s anti-transfer and anti-replacement conditions are the two traps to watch for when structuring workforce ramp-up across affiliated projects, along with the five-year audit that will test whether the job-creation, capital-investment, and electricity-contract commitments were actually satisfied.

Common questions

Q: Does it matter that the two data centers share the same qualifying occupant and operator?
A: The ruling doesn't treat that as a problem — the focus is on whether each project independently meets its own job-creation, investment, and electricity-contract certifications, not on whether affiliated entities are involved.

Q: Could jobs be counted if the employer moved existing Existing Data Center employees over to the New Data Center's headcount instead of hiring new ones?
A: No — the facts here specifically involve newly hired employees coded to the new project, not existing employees reassigned; Rule 3.335(a)(7) separately excludes jobs "created to replace a qualifying job that was previously held by another employee."

Q: Does this ruling apply to other multi-site or multi-phase data center projects?
A: Not automatically. This is a private letter ruling binding only on the Comptroller as to this taxpayer's specific facts. Similar situations should confirm their own job-creation timing and location with a Texas tax professional, especially given the five-year audit requirement.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.3595 (Property Used in Certain Large Data Center Projects), incl. (a)(3) permanent job, (a)(4) qualifying job, (d)-(e) certification requirements
• 34 Tex. Admin. Code § 3.335(a)(7) (qualifying job location, duration, non-transfer, non-replacement requirements)
• 34 Tex. Admin. Code § 3.335(g)(4), (g)(5) (five-year audit; Job Creation Report)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/202310014L

Original ruling text

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:

create at least 40 qualifying jobs in the county in which the project is located;

make at least $500 million of capital investment in the project in the five-year period following the date of certification; and

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).

The Texas Tax Code and Texas Administrative Code are accessible at: www.comptroller.texas.gov/taxes/.

If you have questions about this private letter ruling, please email us through our website at https://comptroller.texas.gov/web-forms/tax-help/ and reference Private Letter Ruling No. 20230227091823.

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.