The bill, S.B. No. 2222, proposes an exemption from ad valorem taxation for the total appraised value of real property and tangible personal property used by data centers that meet specific criteria. It introduces a new section, Section 11.38, to the Tax Code, defining a "data center" as a facility of at least 100,000 square feet that is primarily used for processing, storing, and distributing data, and which includes certain security and operational features. A "qualified data center" is further defined as one that utilizes its own power sources to meet energy demands and has a contract to provide energy or ancillary services to the ERCOT power grid or another power grid.

The bill stipulates that property owners of qualified data centers are entitled to an exemption from taxation on the total appraised value of their qualified property, which includes the building, land, and energy-related tangible personal property. The changes will only apply to ad valorem tax years beginning on or after the effective date of the Act, which is set for January 1, 2026, contingent upon the approval of a related constitutional amendment by voters. If the amendment is not approved, the Act will have no effect.

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