Section 521.20  Definitions

 

The following definitions are applicable to this Part.

 

"Applicant" means a taxpayer that is an owner or operator of a data center located in Illinois that seeks certification of that data center in order to claim the exemptions or credits created by Section 605-1025(a) of the Statute.

 

"Application" means the data center owner or operator's application for approval of the data centers investment tax exemption.

 

"Capital Investment" means the purchase, renovation, rehabilitation, or construction of permanent land, buildings, structures, equipment and furnishings used directly for or in the project, and any goods or services for the project that are purchased and capitalized under GAAP or an equivalent accounting principles system approved by the Department, including any organizational costs and research and development costs incurred in Illinois. Capitalized lease costs for land, buildings, structures or equipment shall be included in "Capital Investment" only if the lease term, including any extensions or options to extend, equals or exceeds the term of the memorandum of understanding, and provided that the lease costs are valued at their present value using the corporate interest rate prevailing at the time the data center owner or operator filed its application with the Department.

 

"Certificate of Exemption" means the certificate issued by the Department pursuant to the Memorandum of Understanding entered into between the Department and the data center owner, operator, or tenant that authorizes the data center owner, operator, or tenant to receive the tax exemptions set forth in Section 605-1025(a) and (b) of the Statute.

 

"Credit" means 20% of the wages paid during the taxable year to a full-time or part-time employee of a construction contractor employed by a certified data center if those wages are paid for the construction of a new data center in an underserved area. [35 ILCS 5/229(a)]

 

"Data Center" means a facility:

 

whose primary services include, but are not limited to the storage, management, and processing of digital data; and

 

that is used to house:

 

computer and network systems, including associated components such as servers, network equipment and appliances, telecommunications, and data storage systems;

 

systems for monitoring and managing infrastructure performance;

 

internet-related equipment and services;

 

data communications connections;

 

environmental controls;

 

fire protection systems; and

 

security systems and services. [20 ILCS 605/605-1025(c)]

 

A data center may consist of a building or a series of buildings that is rehabilitated or constructed to house working servers in one physical location, several adjacent sites, or multiple locations within a municipality or county.

 

"Department" or "DCEO" means the Department of Commerce and Economic Opportunity. [20 ILCS 605/605-5]

 

"Director" means the Director of the Department of Commerce and Economic Opportunity. [20 ILCS 605/605-5]

 

"Full-time Equivalent Job" means a job in which the new employee works for the owner, operator, contractor, or tenant of a data center, or for a corporation under contract with the owner, operator or tenant of a data center, at a rate of at least 35 hours per week. An owner, operator or tenant who employs labor or services at a specified site or facility under contract with another may declare one full-time, permanent job for every 1,820 hours worked per year under that contract. Vacations, paid holidays, and sick time are included in this computation. Overtime is not considered a part of regular hours. [20 ILCS 605/605-1025(c)]

 

"Illinois Procurement Code" means 30 ILCS 500.

 

"Illinois State Income Taxes" means all of the taxes imposed against the data center owner or operator or a tenant of the data center under Section 201(a) and (b) of the Illinois Income Tax Act.

 

"Incremental Income Tax" means the total amount withheld during the taxable year from the compensation of new full-time and full-time equivalent employees under Article 7 of the Illinois Income Tax Act arising from employment at the project during the taxable year, as reflected on the IRS forms W-2 for each such employee.

 

"Memorandum of Understanding" or "MOU" means the memorandum of understanding entered between a taxpayer and the Department under Section 605-1025(d) of the Statute and Section 521.90 of this Part.

 

"New Employee" means a full-time employee in a qualifying full-time equivalent job or employee first employed by the data center owner or operator or a tenant of the data center in the project and who is hired on or after the effective date of the MOU entered into between the Department and the data center owner or operator.

 

The term "New Employee" does not include:

 

an employee of the data center owner or operator or a tenant of the data center who was previously employed in Illinois by a related member (as that term is defined in Section 5.5 of the Economic Development for a Growing Economy Act [35 ILCS 10]) of the data center owner or operator or a tenant of the data center and whose employment was shifted to the data center after the data center owner or operator entered into the MOU;

 

an employee of the data center owner or operator or a tenant of the data center who was previously employed in Illinois by the data center owner or operator or a tenant of the data center and whose employment was shifted to the project after the data center owner or operator entered into the MOU; or

 

any individual who has a direct or an indirect ownership interest of at least 5% in the profits, equity, capital, or value of the taxpayer or a child, grandchild, parent, or spouse, other than a spouse who is legally separated from the individual, of any individual who has a direct or an indirect ownership interest of at least 5% in the profits, equity, capital, or value of the data center owner or operator or a tenant of the data center.

 

However, an employee shall be considered a new employee under the MOU if:

 

the employee performs a job that was previously performed by an employee who was treated under the MOU as a new employee and promoted by the data center owner or operator or a tenant of the data center to another job; or

 

the employee fills a job vacancy that had been continuously vacant for the 184-day period immediately preceding the date of the MOU. A job vacancy whose incumbent is on approved leave, is locked out, or is on strike is not a vacancy.

 

"Operation and Maintenance" means the day-to-day activities related to systems and workflows within a data center, including, but not limited to, installing and maintaining network resources, ensuring data center security, monitoring power and cooling systems, upkeep, customer environment support, system and component upgrades and refreshes, and incident resolution.

 

"Payroll" shall mean the wages paid during the taxable year to a full-time or part-time employee of a construction contractor employed by a certified data center if those wages are paid for the construction of a new data center. [35 ILCS 5/229(a)]

 

"Placed in Service" means the earlier of:

 

when the project is in a state or condition of readiness and availability for specifically assigned functions; or

 

the end of the 60-month period identified in the MOU.

 

"Project" means the development at the location set forth in the MOU.

 

"Project Labor Agreement" means an agreement with a bona fide labor organization that satisfies the provisions of the Illinois Project Labor Agreements Act [30 ILCS 571] and that is approved by the Department. For an existing data center for which construction took place prior to June 28, 2019 (the effective date of the Statute) and for which no project labor agreement was entered into simultaneously, the applicant may provide evidence as required by the Department in the form of affidavits and other supporting documentation from the contractor and the applicant demonstrating compliance with the standard provisions of a project labor agreement. Proof of the project labor agreements must be accompanied by evidentiary materials from the labor organization affirming participation in the project. Data centers that use multiple contractors during the course of the 60-month period specified in the MOU must enter into a project labor agreement approved by the Department for the labor component of any construction used to achieve the minimum required capital investment.

 

"Project Costs" include all costs incurred or to be incurred by the data center owner or operator or a tenant of the data center directly related to the project, including, but not limited to, all:

 

capital investment;

 

infrastructure development costs;

 

debt service, except refinancing of current debt; and

 

non-capitalized research and development, job training and education, lease, and relocation costs.

 

The value of State or other governmental incentives, including discretionary tax credits, discretionary job training grants, or the interest savings of below market rate loans, shall not be included as project costs.

 

"Qualified Tangible Personal Property" means:

 

electrical systems and equipment; climate control and chilling equipment and systems; mechanical systems and equipment; monitoring and security systems; emergency and back-up power generators; hardware; computers; servers; data storage devices; network connectivity equipment; racks; cabinets; telecommunications cabling infrastructure; raised floor systems; peripheral components or systems; software; mechanical, electrical or plumbing systems; battery systems; cooling systems and towers; temperature control systems; other cabling;

 

other data center infrastructure equipment and systems necessary to operate qualified tangible personal property, including fixtures;

 

component parts of any of the foregoing, including installation, maintenance, repair, refurbishment, and replacement of qualified tangible personal property to generate, transform, transmit, distribute or manage electricity necessary to operate qualified tangible personal property; and

 

all other tangible personal property that is essential to the operations of a computer data center.

 

"Qualified Tangible Personal Property" also includes building materials physically incorporated into the qualifying Illinois data center and any described tangible personal property detailed in Illinois Department of Revenue rules (see 86 Ill. Adm. Code 130.1957). [20 ILCS 605/605-1025(c)]

 

"Qualifying Illinois Data Center" means a new or existing data center that:

 

is located in the State of Illinois;

 

in the case of:

 

an existing data center, made a capital investment of at least $250,000,000 collectively by the data center operator and the tenants of the data center over the 60-month period immediately prior to January 1, 2020 or committed to make a capital investment of at least $250,000,000 over a 60-month period commencing before January 1, 2020 and ending after January 1, 2020; or

 

a new data center, or an existing data center making an upgrade, makes a capital investment of at least $250,000,000 over a 60-month period beginning on or after January 1, 2020;

 

results in the creation of at least 20 full-time or full-time equivalent new jobs over a period of 60 months by the data center operator and the tenants of the data center, collectively, associated with the operation or maintenance of the data center. Those jobs must have a total compensation equal to or greater than 120% of the average wage paid to full-time employees in the county where the data center is located, as determined by the U.S. Bureau of Labor Statistics; and

 

within 2 years after being placed in service, certifies to the Department that it is carbon neutral or attains certification under one or more of the following 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

 

an equivalent program approved by the Department. [20 ILCS 605/605-1025(c)]

 

"Responsible Bidder" means a person who has the capability in all respects to perform fully the contract requirements and the integrity and reliability that will assure good faith performance. A responsible bidder or offeror shall not include a business or other entity that does not exist as a legal entity at the time a bid or offer is submitted for a State contract.

 

"Statute" means Section 605-1025 of the Department of Commerce and Economic Opportunity Law [20 ILCS 605] (Data Center Investment).

 

"Taxable Year" means any 12 month consecutive accounting period for keeping records and reporting income and expenses. This does not preclude the data center owner or operator or a tenant of the data center from seeking a credit for a short or stub taxable year in the event that either:

 

the data center owner or operator or a tenant of the data center was not in existence for an entire taxable year; or

 

the data center owner or operator or a tenant of the data center changed its accounting period.

 

"Tenant" means a tenant of the data center owner or operator at the project.

 

"Underserved Area" means a geographic area that meets any one of the following criteria:

 

the area has a poverty rate of at least 20%, according to the latest federal decennial census, the most recent American Community Survey released by the U.S. Census Bureau, or other appropriate data source produced by the U.S. Census Bureau;

 

75% or more of the children in the area are eligible to participate in the federal free lunch or reduced-price meals program, according to reported statistics from the State Board of Education;

 

20% or more of the households in the area receive assistance under the Supplemental Nutrition Assistance Program (SNAP) according to data from the U.S. Census Bureau; or

 

the area has an average unemployment rate, as determined by the Department of Employment Security, that is more than 120% of the national unemployment average, as determined by the U.S. Department of Labor, for a period of at least 2 consecutive calendar years preceding the date of the application. [35 ILCS 5/229(a)(1) through (4)]

 

"Wages" means wages, salaries, commissions, tips and other compensation subject to Medicare tax as indicated in Box 5 of an employee's Internal Revenue Service Form W-2.