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High-Tech Data Centers Sales and Use Tax Exemption on Equipment

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High-Tech Data Centers Sales and Use Tax Exemption on Equipment

On May 7, 2018, Georgia Governor Nathan Deal signed House Bill 696 into law creating a new sales and use tax economic development incentive for high-technology data center projects, which create jobs and make substantive investments in the state. The program will be effective for transactions occurring on or after July 1, 2018 through December 31, 2028.

This new incentive, which does not affect existing sales and use tax exemptions as provided through the Computer Hardware and Software for High-Technology Companies Program (GA. Comp. R. &Regs. 560-12-2-.107), allows for a sales and use tax exemption for colocation (a.k.a. “colo”) data centers and their qualified customers if a minimum number of new quality jobs are created, and a qualifying investment threshold is met. Additionally, single-user data centers will now be able to exempt additional types of equipment than what is currently allowed under the Computer Hardware and Software for High-Technology Companies Program.

Eligibility

To qualify for the sales and use tax exemption as a high-technology data center project under this program, the project must create at least 20 new “quality jobs.” A “quality job” is defined as one which (a) is located in Georgia; (b) has at least a 30-hour regular workweek; (c) is not a job that is or was already located in Georgia, regardless of which taxpayer for which the individual performed services; and (d) pays at least 110% of the average wage of the county where it is located. The project must incur qualifying purchases and/or leases of high-technology data center equipment, which will be incorporated or used in a facility, campus of facilities, or array of interconnected facilities in Georgia that is developed to power, cool, secure, and connect its own equipment or the computer equipment of high-technology data center customers. Additionally, the project is required to present a seven-year investment budget that meets the following minimum thresholds based on the population of the county in which the project will reside:

  • $250 million in counties with a population more than 50,000
  • $150 million in counties with a population between 30,000–50,000
  • $100 million in counties with a population less than 30,000

Customers of a high-technology data center project may receive their own sales and use tax exemption certificate for their eligible equipment and expenses in a qualified high-technology data center. An eligible customer is defined as a client, tenant, licensee, or end user of a high-technology data center that signs, at minimum, a 36-month contract for service with the data center. The Georgia Department of Revenue (GDOR) has indicated that it anticipates allowing these investments made by eligible customers to count towards meeting the minimum investment threshold as delineated above.

Eligible high-technology data center equipment subject to this exemption is defined to include “computer equipment” of a high-technology data center or its customers to be used or deployed in the data center; the materials, components, machinery, hardware, software, or equipment such as emergency backup generators, air handling units, cooling towers, energy storage or energy efficiency technology, switches, power distribution units, switching gear, peripheral computer devices, routers, batteries, wiring, cabling, or conduit, which are used to (a) create, manage, facilitate, or maintain the physical and digital environments for computer equipment; (b) protect the data center equipment from physical, environmental, or digital threats; or (c) generate or provide constant delivery of power, environmental conditioning, air cooling, or telecommunications services for the data center. Eligible equipment excludes real property and high-technology data center equipment the data center or its customers purchase and then lease to another party more than once to meet the minimum investment threshold (H.B. 696, Laws 2018, effective January 1, 2019).

As a condition of the issuance of a sales and use tax exemption certificate, the GDOR Commissioner, at his or her discretion, may require the data center to post a surety bond in an amount of up to $20 million. The Commissioner may revoke the exemption certificate at any time if it is determined that the data center is not in compliance with its seven-year investment budget plan or if it is believed that the project is unlikely to meet its minimum investment threshold. In such an event, the data center and its customers will be required to repay all taxes exempted or refunded, with interest. In the case where a surety bond has been issued and a compliance failure has been determined, the bond shall be forfeited and paid to the general fund in an amount equal to all taxes and interest required to be repaid to the state.

Conditions

The use of a sales and use tax exemption certificate(s) for a data center project under this program prohibits the data center’s ability to claim income tax credits for the same project. These credits, authorized under O.C.G.A. §§ 48-7-40 through 48-7-33 or O.C.G.A. § 36-62-5.1, include Jobs Tax Credits, Quality Jobs Tax Credits, Mega Project Tax Credits, Investment Tax Credits, Research and Development Tax Credits, Retraining Tax Credits, Child Care Tax Credits, Port Tax Credit Bonus, and Parolee Tax Credits.

Reporting

Each qualified data center that has been issued a sales and use tax exemption under this program will be required to provide the GDOR with a list of customers who have deployed high-technology data center equipment in its facility. The data center must also provide the GDOR Commissioner with an annual report stating the total amount of taxes exempted, the number of new quality jobs created and maintained, and the total payroll resulting from the construction, maintenance, and operation in and on the facility during the preceding year. Additionally, within 60 days of the conclusion of the seven-year investment period, a final report must be filed to the GDOR by the data center to demonstrate that the project expenditures have met the minimum investment threshold and report on the number of all new quality jobs that have been created.

Applications for this program will be accepted beginning on January 1, 2019. Projects that begin qualified purchases on or after July 1, 2018 can claim a refund for sales and use taxes incurred during this six-month period.

* Note – The Georgia Department of Revenue (GDOR) has noted that this program’s details are subject to revision once it is clarified by rules and regulations which will be promulgated prior to December 31, 2018. This will allow the implementation of the policy as set forth in Code Section 48-8-3 of the Official Code of Georgia Annotated. Ryan will be tracking these new rules and regulations as they are developed by the GDOR and will provide updates to clients as they become available.

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Sterling rises above $1.37 for first time since 2018; UK inflation rises

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Sterling rises above $1.37 for first time since 2018; UK inflation rises 1

By Elizabeth Howcroft

LONDON (Reuters) – A combination of heightened risk appetite in global markets and UK-specific optimism lifted the pound on Wednesday, as it strengthened to its highest in nearly three years against the dollar and five-month highs against the euro.

The dollar weakened against major currencies for the third straight session, helped by U.S. Treasury Secretary nominee Janet Yellen’s urging lawmakers to “act big” on spending and worry about debt later.

The pound rose above $1.37, hitting $1.3720 — its highest since May 2018 — at 1045 GMT. By 1136 GMT it had eased some gains and changed hands at $1.3687, up 0.4% on the day and up 0.2% so far this year.

Versus the euro, the pound hit a five-month high of 88.38 pence per euro, before easing to 88.51 at 1137 GMT, up around 0.5% on the day.

The pound’s recent strengthening can be attributed in part to relief among investors that the impact of Brexit has not caused the chaos some feared, as well as a lessening of negative rates expectations, said Neil Jones, head of FX sales at Mizuho.

“Going into early 2021, there was a bearish sentiment building into the pound on the Brexit deal, in terms of maybe it had a limited reach, and then secondly an expectation of negative rates and so to some extent the market has been cutting down on sterling shorts because neither of those things have been quite so apparent as they were,” he said.

Bank of England Governor Andrew Bailey said last week that there were “lots of issues” with cutting interest rates below zero – a comment which caused sterling to jump.

The UK’s progress in rolling out vaccines is also seen as a positive for investors, Jones said.

Currently, the United Kingdom has vaccinated 4.27 million people with a first dose of the vaccine, among the best in the world per head of population.

“Further progress in vaccinations (a pick-up in the daily rate) by the time the BoE MPC meeting takes place on 4th February may prove enough to hold off on any additional monetary easing,” wrote Derek Halpenny, head of research for global markets at MUFG.

Inflation data for December showed that prices in the UK picked up by more than expected in December, to a 0.6% annual rate.0.6

Inflation has been below the Bank of England’s 2% target since mid-2019 and the COVID-19 pandemic pushed it close to zero as the economy tanked.

(Graphic: CFTC: https://fingfx.thomsonreuters.com/gfx/mkt/oakpeyayxpr/CFTC.png)

(Reporting by Elizabeth Howcroft, editing by Larry King)

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Euro sinks amid broader risk rally against dollar

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Euro sinks amid broader risk rally against dollar 2

By Ritvik Carvalho

LONDON (Reuters) – The euro struggled to join a broader risk rally against the dollar on Wednesday as analysts said the risk of extended lockdowns in Europe to combat the spread of COVID-19 and the continent’s lag in a vaccine rollout were weighing on the currency.

Down 0.1% against the dollar at $1.2117 by 1130 GMT, Europe’s shared currency had only the safe-haven Swiss franc and Sweden’s crown for company in resisting a broad rally against the greenback by the G-10 group of currencies.

“We’re getting more headlines that the current lockdowns will be extended further, which could mean that the euro zone would be flirting with a double-dip recession before long,” said Valentin Marinov, head of G10 FX research at Credit Agricole, noting Europe’s lag in rolling out a coronavirus vaccine compared to the United States and Britain.

“So all of that plays into the story that tomorrow’s ECB meeting, while uneventful in terms of policy announcements, could convey a relatively dovish message to the market. On top of that, President Lagarde could once again jawbone the euro, so the euro is kind of lagging behind.”

Marinov also noted price action in the pound, which hit $1.3720 – a 2-1/2-year high – and 88.38 pence – its highest since May 2020 against the euro – as a contributing factor to euro weakness. [GBP/]

There was also focus on a story by Bloomberg News, which reported the European Central Bank was conducting its bond purchases with specific yield spreads in mind, a strategy that would be reminiscent of yield curve control.

Elsewhere, the risk-sensitive Australian dollar gained 0.4% to $0.7727. The New Zealand dollar, also a commodity currency like the Aussie, gained 0.25% to $0.7133.

DOLLAR WEAKNESS

While the world will be watching Joe Biden’s inauguration as U.S. president at noon in Washington (1700 GMT), traders were more focused on his policies than the ceremony.

U.S. Treasury Secretary nominee Janet Yellen urged lawmakers at her confirmation hearing to “act big” on stimulus spending and said she believes in market-determined exchange rates, without expressing a view on the dollar’s direction.

The index that measures the dollar’s strength against a basket of peers was up almost 0.1% at 90.510. The euro forms nearly 60% of the dollar index by weight.

It also fell 0.1% against the Japanese yen to 103.81 yen per dollar.

While the dollar has perked up in recent weeks on the back of a rise in U.S. Treasury yields, investors still expect the currency to weaken.

“We remain bearish U.S. dollar, and expect the downtrend to resume as U.S. real yields top out,” said Ebrahim Rahbari, FX strategist at CitiFX.

“Continued Fed dovishness remains important for our view, in addition to global recovery, so we’ll watch upcoming Fed-speak closely.”

Positioning data shows investors are overwhelmingly short dollars as they figure that budget and current account deficits will weigh on the greenback.

(Graphic: Dollar positioning: https://fingfx.thomsonreuters.com/gfx/mkt/oakveyombvr/Pasted%20image%201611132945366.png)

UBS Global Wealth Management’s chief investment officer Mark Haefele reiterated a bearish view on the dollar, saying that pro-cyclical currencies such as the euro, commodity-producer currencies, and the pound would benefit “from a broadening economic recovery supported by vaccine rollouts”.

The cryptocurrency Bitcoin fell 4%, trading at $34,468.

(Reporting by Ritvik Carvalho; Editing by Angus MacSwan)

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England soccer star Rashford nets younger buyers for Burberry

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England soccer star Rashford nets younger buyers for Burberry 3

By Sarah Young

LONDON (Reuters) – Burberry stuck to its full-year goals on Wednesday after a media campaign fronted by high-profile English soccer star and social justice advocate Marcus Rashford drew a younger clientele to the British luxury brand.

Higher full-price sales would boost annual margins and Asian demand remained strong, Burberry said, while warning that it could suffer more sales disruption from COVID-19 lockdowns.

Manchester United striker Rashford, 23, has won plaudits for his campaign to help ensure that poorer children do not go hungry with schools closed during the pandemic.

A first coronavirus wave last year cut Burberry’s sales by as much as 45% before a bounce back on strong demand in mainland China and South Korea, which continued in the last few months.

Shares in Burberry were up 5% to 1,825 pence at 0905 GMT, with Citi analysts saying that improved sales quality from fewer markdowns would drive full-year consensus upgrades.

Burberry’s 9% sales decline in its third quarter was worse than the 6% fall in the second, and the company said that 15% of stores were currently closed and 36% operating with restrictions as a result of measures to curb COVID-19’s spread.

“We expect trading will remain susceptible to regional disruptions as we close the financial year,” Burberry said, adding that it was confident of rebounding when the pandemic eases given the brand’s resonance with customers.

In the third quarter, comparable store sales in Europe, the Middle East, India and Africa declined 37%, hit by shops shut in lockdowns and a lack of tourists visiting Europe, but in the same period, it posted sales growth of 11% in Asia Pacific.

Burberry said that Britain’s new relationship with the European Union would cause headwinds, warning of a modest increase in costs to comply with new rules and also the impact of an end to a scheme for VAT refunds for non-EU tourists.

This would make Britain a less attractive destination for luxury shopping when tourism returns after the pandemic, Burberry said, adding that it would try to mitigate the effect.

(Reporting by Sarah Young; Editing by Kate Holton, James Davey and Alexander Smith)

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