There is no question that data centers have become a hot property, from the perspective of states looking for the economic development they bring. Large data center projects, with investments ranging into the multi-billion dollar range, have enough clout to change the way that prospective locations do business, motivating local government to pass tax laws advantageous specifically to the data center business.

Most states already have economic development processes in place that arrange for tax incentives, investment assistance, loan guarantees, and other forms of business assistance designed to attract business development. But with the huge investments that data centers can represent, the playing field has changed and many states have started to change their tax structure to find ways to encourage large investments from data center operators and make them more compelling locations than their neighboring communities.

Not every state has gotten aboard the data center tax incentive bandwagon, but here’s how these programs shape up in the United States, with the states that do offer such programs, through the end of 2015:

Alabama

The Alabama Data Processing Center Economic Incentive Act of 2012 provides for data center specific tax abatement on sales, use and non-education property taxes at both the state and local level. The abatements can be applied for as long as 30 years if the total capital investment exceeds $400 million. It also requires the creation of 20 new jobs (compared with 50 for non- data center employers) with an annual compensation, including benefits, of at least $40,000.

Arizona

Working with the Arizona Department of Revenue, the Arizona Commerce authority is certifying data centers as being able to receive tax abatements for the transaction privilege tax and use tax at the state and local level for as long as 20 years if all conditions are met . Depending upon where in the state a new facility is built, the minimum investment must be either $25 or $50 million.

Connecticut

While Connecticut does not have a data center specific tax abatement program it has established the Energize Connecticut program which includes assistance for data centers looking at ways to take advantage of other programs offered by the state to minimize costs associated with operating in the state. Details on the program can be found at http://www.energizect.com/events-resources/energy-articles/Technology-Data-Centers

Florida

While Florida has no data-center specific tax incentives, data centers are recognized as an approved project for inclusion in the Florida Enterprise Zone incentives programs. Full details can be found at http://www.enterpriseflorida.com/why-florida/business-climate/incentives/enterprise-zone-incentives/

Georgia

For data centers, Georgia offers sales tax abatement with the investment of $15 million or more. There is also an investment tax credit available to telecommunications support companies that may be applicable to the data center industry. This tax credit can amount to as much as eight percent of qualified investments in upgrade or expansion that are in excess of $50,000.

Idaho

Idaho has seen new data centers take advantage of the very straightforward Idaho Tax Reimbursement Incentive which went into effect in mid-2014. The incentive provides for a 30 percent, 15 year refundable tax credit for new businesses hiring as few as 20 people, depending upon location.

Indiana

In 2012, Indiana created a new tax incentive for data centers. With a minimum $10 million investment, a data center can qualify for a 100 percent exemption on sales tax for power infrastructure, physical plant, and computer equipment.

Iowa

Established by law in 2009, Iowa has a very significant tax abatement program for data centers which meet investment guidelines. With a minimum size of 5000 sq ft and investment of $200 million over the first six years of operation a data center can receive a 100 percent abatement of the sales and use tax on the physical plant, cable plant, computer equipment, cooling onfrastructureand purchased electricity. Data centers that don’t met the minimum size and investment requirements can apply for a 50 percent reduction. While not data center specific, Iowa also has no property tax on equipment.

Kentucky

The state has established a number of laws regarding tax incentives for the purchase of computer equipment starting with purchases as small as $100,000. Specific exemptions for data centers investing at least $100 million have also been approved.

Louisiana

While there is no specific set of exemptions for data centers, state law does provide for a 20 year single sales factor election program for a Louisiana site that includes a data center

Maine

There is no data center specific tax abatement program in place, but Maine offers a variety of technology tax credits that range from building in enterprise development zones to investments in high technology development. Complete information on the available programs can be found here: http://www.techmaine.com/state-incentives

Maryland

While there are no statewide tax incentive programs, local communities have taken it upon themselves to provide the type of abatement that attracts data center development. This is exemplified by Montgomery County, MD’s agreement to provide $12 million in tax breaks to data center tenants within their country.

Michigan

The most recent state to jump aboard the tax abatement bandwagon at the last possible moment in 2015, Michigan now offers a statewide sales and use tax abatement for data centers and the option for local communities to abate up to 50 percent of their property taxes for both new and existing facilities. The tax abatement is dependent upon the data center industry reaching certain goals statewide in job creation and should those goals not be met, the abatement program will end.

Minnesota

Companies making a $30 million investment in the first four years in a new data center that is at least 25,000 sq ft, will be grated a 20 year sales tax exemption on computer hardware, cooling and energy related equipment, energy use, and software. There is also a permanent property tax exemption. These exemptions can also be applied to a company that refurbishes a data center or NOC with at least 25,000 sq ft and an investment of $50 million.

Mississippi

The state offers a sales and use tax exemption for data center enterprises that covers all companies certified as data centers by the state. To qualify a business must build a new facility or expand an existing one with an investment of no less than $50 million and the creation of at least 50 jobs paying 150 percent of the state’s average wage. This second requirement can be difficult for data centers to meet, as they are increasingly automated. Once certified, the exemption also applies to components, building materials and equipment used to build new or expand existing facilities. Full details can be found at https://www.dor.ms.gov/docs/2013IncentiveBook-pdffinal.pdf

Missouri

Recently added data center tax inscentives provide state and local sales and use tax exemptions for data centers that invest at least $25 million and create at least 10 jobs at 150 percent of the local wage. Existing data centers qualify for the abatement with the investment of $5 million and 5 new jobs in their existing infrastructure. Utility company KCP&L offers a five year discounted rate in their services area that starts at 30 percent in the first year and declines to 10 percent in the final year in the program.

Nebraska

Nebraska offers a comprehensive multi-tier tax abatement and credit structure under the Nebraska Advanatge Act. From the act:

  • Tier 1 – $ 1 million new investment and 10 new jobs -  Qualifying businesses under this tier are eligible for a refund of half of the sales tax paid for qualified capital purchases at the project, the full sliding scale wage credit of 3, 4, 5 or 6 percent depending on wage level, and a 3 percent investment tax credit.
  • Tier 2 – $3 million new investment and 30 new jobs - This tier qualifies for refund of all sales taxes for capital purchases at the project, the sliding scale wage credit and a 10 percent investment credit. Also includes a personal property tax exemption on computer systems for Internet web portal or data center.
  • Tier 2 – $200 million new investment and 30 new jobs at data center - This new tier qualifies for refund of all sales and use taxes on project’s tangible personal property from the date of acquisition through the entitlement period, the sliding scale wage credit, and a 10 percent investment credit. Also includes a personal property tax exemption up to 10 years on all project’s personal property.
  • Tier 3 – 30 new jobs (no investment) - For the creation of 30 new jobs, the company receives the sliding scale wage credit. No capital investment is required.
  • Tier 4 - $12 million new investment and 100 new jobs - In addition to the sales tax refund, jobs credit, and the investment credit, qualifying businesses under this tier receive a personal property tax exemption on turbine-powered aircraft, personal computer systems, agricultural product processing machinery and personal property used in a distribution facility for up to 10 years.
  • Tier 5 – $37 million new investment and must maintain employment - Companies receive a refund of all sales taxes paid on capital purchases with the project. Also includes a personal property tax exemption on computer systems for Internet web portal or data center.
  • Super Tier 6 – $10 million new investment and 75 new jobs or $109 million new investment and 50 new jobs - Any business activity other than retail qualifies. Refund of all sales tax on projects capital purchases, 10 percent job credit on new employee “compensation”—wage thresholds per new position are the greater of 200 percent of the county average wage OR 150 percent of the Nebraska average wage, 15 percent investment credit, and personal property tax exemption for all personal property at the project for up to 10 years.

Nevada

The state has negotiated specific tax abatements and, effective January 1, 2016 a new ruling goes into effect that provides up to a 75 percent abatement on personal property, sales, and use taxes for qualifying data centers for 10 or 20 years. To qualify for the 10 year period the data center must add 10 or more full-time employees at 100 percent of the prevailing wage and have a capital investment of at least $25 million. For the 20 year abatement, the capital investment increases to $100 million and requires at least 50 new hires. Complete details on the program can be found here: https://www.leg.state.nv.us/App/NELIS/REL/78th2015/Bill/1539/Text

New Jersey

The state does not have any specific laws regarding data center investment but has been applying tax relief and credits on a case by case basis.

New York

The state offers a sales tax exemption on equipment purchased for use in data centers and has run a number of programs promoting data center development in specific areas of the state focused on tax abatement and low cost energy. Complete details on the requirements for NYS can be found here: https://www.tax.ny.gov/pdf/tg_bulletins/sales/b12_405s.pdf

North Carolina

Prior to late 2015, North Carolina had tax abatements in place that required the investment of either $150 million or $225 million depending upon the location the data center. In October, the law was changed to reduce the minimum investment to $75 million and to make abatements available to customers of multi-tenant data centers. The change also provided an exemption form the state’s seven percent tax on electricity purchases.

Ohio

Since 2011 Ohio has had a sales tax abatement for data centers investing at least $100 million and with an update to the legislation in 2013, a payroll threshold of $1.5 million annually (rather than a specific number of jobs at a specific pay level). The 2013 update also allowed for multiple customers at a single site to aggregate to qualify for the tax break, making it applicable to multi-tenant data centers.

Oklahoma

While there is no specific data center tax exemption Oklahoma does offer a sales tax exemption for computer equipment purchases, and offers a “quality job” tax abatement along with property tax abatements and investment tax credits. How a data center takes advantage of the various programs is described in detail in their business incentive and tax guide which can be found here: http://okcommerce.gov/wp-content/uploads/2015/06/Oklahoma_Business_Incentives_and_Tax_Guide.pdf

Oregon

The state has no specific tax exemptions for data centers but found that a number of large scale operations had slipped in under the state’s enterprise zone rules designed to attract manufacturers and the associated jobs such business would create. There is already no sales tax in the state and the enterprise zones abated property taxes, as well. A change to the state law in 2012 recognized data centers as an appropriate use of the enterprise zone space, making the state more attractive to data center operators even without specific tax exemptions.

Pennsylvania

The state still has pending legislation that would provide tax abatements on investments of $25 or $50 million and appropriate job creation but budget deadlock in the legislature has prevented any such legislation form moving forward as of the end of 2015.

South Carolina

As of 2012, the state has had a sales tax exemption on computer equipment, hardware, and software, plus the electricity used by data centers. The qualifying requirements are the investment of at least $25 million and the hiring of at least 50 people.

Tennessee

State law provides for sales tax abatements on equipment and power for data centers that reach the qualifying $250 million investment. With the creation of at least 25 jobs a data center would also qualify for the jobs tax credit which can be used to offset up to fifty percent of franchise and excise tax liability.

Texas

As of 2013 Texas House Bill 1223 has provided for a 100 percent abatement of sales tax on property in a data center for a 10-15 year period. The tax relief includes computers, electrical equipment, cooling systems, power infrastructure, and software. Qualifying facilities are required to invest $200 million total capital over 5 years, have 100,000 sq ft of gross building area, create no fewer than 20 new jobs, and pay at least 120 percent of the country average in wages. To make the 15 year abatement requires and investment of more than $250 million.

Utah

The state offers tax incentives on a case by case basis, making use of a number of standard incentives available to any business, with published reports of tax abatements ranging from $10 million to $40 million offered to various companies to build data centers in the state.

Virginia

Sales and use tax abatements are available to data centers that have a minimum investment of $150 million, hire at least 50 new employees and pay at least 150 percent of the prevailing wage. Changes to the law made since its introduction made colocation data center tenants eligible for the tax abatements, as well, aggregating their equipment purchases, investments and new hires to meet the capital investment requirements of the law. If the unemployment rate of the locality where the data center is constructed is 150 percent of the state average the new hire requirement drops to 25 people.

Washington

The state offers tax abatements for the purchase of server equipment and power infrastructure in rural county and community empowerment zones. The data center must cover at least 100,000 sq ft of total area (20,000 sq ft data halls) and tenants qualify for the breaks as well as operators of the facility. 35 jobs paying 150 percent of the localities per capita income, or three jobs per 20,000 sq ft of space added to an existing data center are alos required to qualify for the abatements.

West Virginia

The state offers both sales and property tax abatements for the building of new data centers. Data center plans need to be submitted and approved for tax abatements to be determined.

Wyoming

Starting in 2010, Wyoming has passed a series of bills that allow for tax abatement on sales, use, and property taxes. A basic investment of $5 million gets the ball rolling on the tax breaks with additional breaks coming in with a minimum investment of at least $50 million. The most recent changes to the law allow for the aggregation of the investment of all of the customers of a multi-tenant data center.