SB 374

As Introduced
136th General Assembly
   Regular Session  S. B. No. 374
       2025-2026
  Senators Smith, Blessing
        Cosponsors: Senators Antonio, Blackshear, DeMora, Weinstein
  To amend section 122.175 of the Revised Code to  1
  prohibit new data center sales tax exemptions  2
  from being granted.  3
 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
     Section 1. That section 122.175 of the Revised Code be  4
amended to read as follows:  5
     Sec. 122.175. (A) As used in this section:  6
     (1) "Capital investment project" means a plan of  7
investment at a project site for the acquisition, construction,  8
renovation, expansion, replacement, or repair of a computer data        9
center or of computer data center equipment, but does not  10
include any of the following:  11
     (a) Project costs paid before a date determined by the tax  12
credit authority for each capital investment project;  13
     (b) Payments made to a related member as defined in  14
section 5733.042 of the Revised Code or to a consolidated  15
elected taxpayer or a combined taxpayer as defined in section  16
5751.01 of the Revised Code.  17
     (2) "Computer data center" means a facility used or to be  18
S. B. No. 374  Page 2
As Introduced
used primarily to house computer data center equipment used or  19
to be used in conducting one or more computer data center  20
businesses, as determined by the tax credit authority.  21
       (3) "Computer data center business" means, as may be  22
further determined by the tax credit authority, a business that  23
provides electronic information services as defined in division  24
(Y)(1)(c) of section 5739.01 of the Revised Code, or that leases  25
a facility to one or more such businesses. "Computer data center  26
business" does not include providing electronic publishing as  27
defined in that section.  28
       (4) "Computer data center equipment" means tangible  29
personal property used or to be used for any of the following:  30
       (a) To conduct a computer data center business, including  31
equipment cooling systems to manage the performance of computer  32
data center equipment;  33
       (b) To generate, transform, transmit, distribute, or  34
manage electricity necessary to operate the tangible personal  35
property used or to be used in conducting a computer data center  36
business;  37
       (c) As building and construction materials sold to  38
construction contractors for incorporation into a computer data  39
center.  40
       (5) "Eligible computer data center" means a computer data  41
center that satisfies all of the following requirements:  42
       (a) One or more taxpayers operating a computer data center  43
business at the project site will, in the aggregate, make  44
payments for a capital investment project of at least one  45
hundred million dollars at the project site during one of the  46
following cumulative periods:  47
S. B. No. 374  Page 3
As Introduced
       (i) For projects beginning in 2013, six consecutive  48
calendar years;  49
       (ii) For projects beginning in 2014, four consecutive  50
calendar years;  51
       (iii) For projects beginning in or after 2015, three  52
consecutive calendar years.  53
       (b) One or more taxpayers operating a computer data center  54
business at the project site will, in the aggregate, pay annual  55
compensation that is subject to the withholding obligation  56
imposed under section 5747.06 of the Revised Code of at least  57
one million five hundred thousand dollars to employees employed  58
at the project site for each year of the agreement beginning on  59
or after the first day of the twenty-fifth month after the  60
agreement was entered into under this section.  61
       (6) "Person" has the same meaning as in section 5701.01 of  62
the Revised Code.  63
       (7) "Project site," "related member," and "tax credit  64
authority" have the same meanings as in sections 122.17 and  65
122.171 of the Revised Code.  66
       (8) "Taxpayer" means any person subject to the taxes  67
imposed under Chapters 5739. and 5741. of the Revised Code.  68
       (B) The tax credit authority may completely or partially  69
exempt from the taxes levied under Chapters 5739. and 5741. of  70
the Revised Code the sale, storage, use, or other consumption of  71
computer data center equipment used or to be used at an eligible  72
computer data center. Any such exemption shall extend to charges  73
for the delivery, installation, or repair of the computer data  74
center equipment subject to the exemption under this section.  75
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As Introduced
       (C) A taxpayer that proposes a capital improvement project  76
for an eligible computer data center in this state may apply to  77
the tax credit authority to enter into an agreement under this  78
section authorizing a complete or partial exemption from the  79
taxes imposed under Chapters 5739. and 5741. of the Revised Code  80
on computer data center equipment purchased by the applicant or  81
any other taxpayer that operates a computer data center business  82
at the project site and used or to be used at the eligible  83
computer data center. The director of development shall  84
prescribe the form of the application. After receipt of an  85
application, the authority shall forward copies of the  86
application to the tax commissioner, who shall review the  87
application to determine the economic impact that the proposed  88
eligible computer data center would have on the state and any  89
affected political subdivisions and submit to the authority a  90
summary of their determinations. The authority shall also  91
forward a copy of the application to the director of development  92
who shall review the application to determine the economic  93
impact that the proposed eligible computer data center would  94
have on the state and the affected political subdivisions and  95
shall submit a summary of their determinations and  96
recommendations to the authority.  97
       (D) Upon review and consideration of such determinations  98
and recommendations, the tax credit authority, before October 1,  99
2027, may enter into an agreement with the applicant and any  100
other taxpayer that operates a computer data center business at  101
the project site for a complete or partial exemption from the  102
taxes imposed under Chapters 5739. and 5741. of the Revised Code  103
on computer data center equipment used or to be used at an  104
eligible computer data center if the authority determines all of  105
the following:  106
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As Introduced
       (1) The capital investment project for the eligible  107
computer data center will increase payroll and the amount of  108
income taxes to be withheld from employee compensation pursuant  109
to section 5747.06 of the Revised Code.  110
       (2) The applicant is economically sound and has the  111
ability to complete or effect the completion of the proposed  112
capital investment project.  113
       (3) The applicant intends to and has the ability to  114
maintain operations at the project site for the term of the  115
agreement.  116
       (4) Receiving the exemption is a major factor in the  117
applicant's decision to begin, continue with, or complete the  118
capital investment project.  119
       (E) An agreement entered into under this section shall  120
include all of the following:  121
       (1) A detailed description of the capital investment  122
project that is the subject of the agreement, including the  123
amount of the investment, the period over which the investment  124
has been or is being made, the annual compensation to be paid by  125
each taxpayer subject to the agreement to its employees at the  126
project site, and the anticipated amount of income taxes to be  127
withheld from employee compensation pursuant to section 5747.06  128
of the Revised Code.  129
       (2) The percentage of the exemption from the taxes imposed  130
under Chapters 5739. and 5741. of the Revised Code for the  131
computer data center equipment used or to be used at the  132
eligible computer data center, the length of time the computer  133
data center equipment will be exempted, and the first date on  134
which the exemption applies.  135
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As Introduced
       (3) A requirement that the computer data center remain an  136
eligible computer data center during the term of the agreement  137
and that the applicant maintain operations at the eligible  138
computer data center during that term. An applicant does not  139
violate the requirement described in division (E)(3) of this  140
section if the applicant ceases operations at the eligible  141
computer data center during the term of the agreement but  142
resumes those operations within eighteen months after the date  143
of cessation. The agreement shall provide that, in such a case,  144
the applicant and any other taxpayer that operates a computer  145
data center business at the project site shall not claim the tax  146
exemption authorized in the agreement for any purchase of  147
computer data center equipment made during the period in which  148
the applicant did not maintain operations at the eligible  149
computer data center.  150
       (4) A requirement that, for each year of the term of the  151
agreement beginning on or after the first day of the twenty-  152
fifth month after the date the agreement was entered into, one  153
or more taxpayers operating a computer data center business at  154
the project site will, in the aggregate, pay annual compensation  155
that is subject to the withholding obligation imposed under  156
section 5747.06 of the Revised Code of at least one million five  157
hundred thousand dollars to employees at the eligible computer  158
data center.  159
       (5) A requirement that each taxpayer subject to the  160
agreement annually report to the director of development  161
employment, tax withholding, capital investment, and other  162
information required by the director to perform the director's  163
duties under this section.  164
       (6) A requirement that the director of development  165
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As Introduced
annually review the annual reports of each taxpayer subject to  166
the agreement to verify the information reported under division  167
(E)(5) of this section and compliance with the agreement. Upon  168
verification, the director shall issue a certificate to each  169
such taxpayer stating that the information has been verified and  170
that the taxpayer remains eligible for the exemption specified  171
in the agreement.  172
       (7) A provision providing that the taxpayers subject to  173
the agreement may not relocate a substantial number of  174
employment positions from elsewhere in this state to the project  175
site unless the director of development determines that the  176
appropriate taxpayer notified the legislative authority of the  177
county, township, or municipal corporation from which the  178
employment positions would be relocated. For purposes of this  179
paragraph, the movement of an employment position from one  180
political subdivision to another political subdivision shall be  181
considered a relocation of an employment position unless the  182
movement is confined to the project site. The transfer of an  183
employment position from one political subdivision to another  184
political subdivision shall not be considered a relocation of an  185
employment position if the employment position in the first  186
political subdivision is replaced by another employment  187
position.  188
       (8) A waiver by each taxpayer subject to the agreement of  189
any limitations periods relating to assessments or adjustments  190
resulting from the taxpayer's failure to comply with the  191
agreement.  192
       (F) The term of an agreement under this section shall be  193
determined by the tax credit authority, and the amount of the  194
exemption shall not exceed one hundred per cent of such taxes  195
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As Introduced
that would otherwise be owed in respect to the exempted computer  196
data center equipment.  197
       (G) If any taxpayer subject to an agreement under this  198
section fails to meet or comply with any condition or  199
requirement set forth in the agreement, the tax credit authority  200
may amend the agreement to reduce the percentage of the  201
exemption or term during which the exemption applies to the  202
computer data center equipment used or to be used by the  203
noncompliant taxpayer at an eligible computer data center. The  204
reduction of the percentage or term may take effect in the  205
current calendar year.  206
       (H) Financial statements and other information submitted  207
to the department of development or the tax credit authority by  208
an applicant for or recipient of an exemption under this  209
section, and any information taken for any purpose from such  210
statements or information, are not public records subject to  211
section 149.43 of the Revised Code. However, the chairperson of  212
the authority may make use of the statements and other  213
information for purposes of issuing public reports or in  214
connection with court proceedings concerning tax exemption  215
agreements under this section. Upon the request of the tax  216
commissioner, the chairperson of the authority shall provide to  217
the tax commissioner any statement or other information  218
submitted by an applicant for or recipient of an exemption under  219
this section. The tax commissioner shall preserve the  220
confidentiality of the statement or other information.  221
       (I) The tax commissioner shall issue a direct payment  222
permit under section 5739.031 of the Revised Code to each  223
taxpayer subject to an agreement under this section. Such direct  224
payment permit shall authorize the taxpayer to pay any sales and  225
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As Introduced
use taxes due on purchases of computer data center equipment  226
used or to be used in an eligible computer data center and to  227
pay any sales and use taxes due on purchases of tangible  228
personal property or taxable services other than computer data  229
center equipment used or to be used in an eligible computer data  230
center directly to the tax commissioner. Each such taxpayer  231
shall pay pursuant to such direct payment permit all sales tax  232
levied on such purchases under sections 5739.02, 5739.021,  233
5739.023, and 5739.026 of the Revised Code and all use tax  234
levied on such purchases under sections 5741.02, 5741.021,  235
5741.022, and 5741.023 of the Revised Code, consistent with the  236
terms of the agreement entered into under this section.  237
       During the term of an agreement under this section each  238
taxpayer subject to the agreement shall submit to the tax  239
commissioner a return that shows the amount of computer data  240
center equipment purchased for use at the eligible computer data  241
center, the amount of tangible personal property and taxable  242
services other than computer data center equipment purchased for  243
use at the eligible computer data center, the amount of tax  244
under Chapter 5739. or 5741. of the Revised Code that would be  245
due in the absence of the agreement under this section, the  246
exemption percentage for computer data center equipment  247
specified in the agreement, and the amount of tax due under  248
Chapter 5739. or 5741. of the Revised Code as a result of the  249
agreement under this section. Each such taxpayer shall pay the  250
tax shown on the return to be due in the manner and at the times  251
as may be further prescribed by the tax commissioner. Each such  252
taxpayer shall include a copy of the director of development's  253
certificate of verification issued under division (E)(6) of this  254
section. Failure to submit a copy of the certificate with the  255
return does not invalidate the claim for exemption if the  256
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taxpayer submits a copy of the certificate to the tax  257
commissioner within the time prescribed by section 5703.0510 of  258
the Revised Code.  259
       (J) If the director of development determines that one or  260
more taxpayers received an exemption from taxes due on the  261
purchase of computer data center equipment purchased for use at  262
a computer data center that no longer complies with the  263
requirement under division (E)(3) of this section, the director  264
shall notify the tax credit authority and, if applicable, the  265
taxpayer that applied to enter the agreement for the exemption  266
under division (C) of this section of the noncompliance. After  267
receiving such a notice, and after giving each taxpayer subject  268
to the agreement an opportunity to explain the noncompliance,  269
the authority may terminate the agreement and require each such  270
taxpayer to pay to the state all or a portion of the taxes that  271
would have been owed in regards to the exempt equipment in  272
previous years, all as determined under rules adopted pursuant  273
to division (K) of this section. In determining the portion of  274
the taxes that would have been owed on the previously exempted  275
equipment to be paid to this state by a taxpayer, the authority  276
shall consider the effect of market conditions on the eligible  277
computer data center, whether the taxpayer continues to maintain  278
other operations in this state, and, with respect to agreements  279
involving multiple taxpayers, the taxpayer's level of  280
responsibility for the noncompliance. After making the  281
determination, the authority shall certify to the tax  282
commissioner the amount to be paid by each taxpayer subject to  283
the agreement. The tax commissioner shall make an assessment for  284
that amount against each such taxpayer under Chapter 5739. or  285
5741. of the Revised Code. The time limitations on assessments  286
under those chapters do not apply to an assessment under this  287
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division, but the tax commissioner shall make the assessment  288
within one year after the date the authority certifies to the  289
tax commissioner the amount to be paid by the taxpayer.  290
       (K) The director of development, after consultation with  291
the tax commissioner and in accordance with Chapter 119. of the  292
Revised Code, shall adopt rules necessary to implement this  293
section. The rules may provide for recipients of tax exemptions  294
under this section to be charged fees to cover administrative  295
costs incurred in the administration of this section. The fees  296
collected shall be credited to the tax incentives operating fund  297
created in section 122.174 of the Revised Code. At the time the  298
director gives public notice under division (A) of section  299
119.03 of the Revised Code of the adoption of the rules, the  300
director shall submit copies of the proposed rules to the  301
chairpersons of the standing committees on economic development  302
in the senate and the house of representatives.  303
       (L) On or before the first day of August of each year, the  304
director of development shall submit a report to the governor,  305
the president of the senate, and the speaker of the house of  306
representatives on the tax exemption authorized under this  307
section. The report shall include information on the number of  308
agreements that were entered into under this section during the  309
preceding calendar year, a description of the eligible computer  310
data center that is the subject of each such agreement, and an  311
update on the status of eligible computer data centers under  312
agreements entered into before the preceding calendar year.  313
       (M) A taxpayer may be made a party to an existing  314
agreement entered into under this section by the tax credit  315
authority and another taxpayer or group of taxpayers. In such a  316
case, the taxpayer shall be entitled to all benefits and bound  317
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As Introduced
by all obligations contained in the agreement and all  318
requirements described in this section. When an agreement  319
includes multiple taxpayers, each taxpayer shall be entitled to  320
a direct payment permit as authorized in division (I) of this  321
section.  322
       Section 2. That existing section 122.175 of the Revised  323
Code is hereby repealed.  324