Both chambers of the Texas legislature have approved a bill that would introduce tax incentives for large one-tenant data center projects in the state, passing the buck to governor Rick Perry. The bill will become law if and when the governor signs it.
A tax break has been an effective tool for state and local governments to attract large data center construction projects. Usually built in rural areas, they are generally viewed as a good way to uplift local economies and project a future-oriented image.
Large technology companies that build and operate their own data centers have been rapidly building out data center capacity all over the country within the past several years, and states have been competing for their business. Some of the biggest examples include Apple's new data center in Maiden, North Carolina, Google's data center expansion in Des Moines, Iowa, Facebook's data centers in Prineville, Oregon, and Forest City, North Carolina.
If signed into law, the new rules will provide temporary sales and use tax exemptions for new data centers in buildings of 100,000 sq ft or larger, built or adapted specifically for this use. To qualify, a data center has to create at least 20 permanent jobs in the county where it is located, and its owner or operator has to commit to investing at least US$200m in the project over the next five years
Indicating that the legislation's goal is to attract large marquee data center operators, such as Facebook or Google, it specifies that only single-tenant data centers qualify for the tax break. That tenant cannot be a telecommunications services provider.
The tax exemption is for purchases of electricity, gas, IT, mechanical and electrical gear, as well as software required to operate it.
The state's Legislative Budget Board estimated that the exemption would cost Texas about $14.6m in lost tax revenue between now and August 2015.
Some real-estate companies with property to sell have been lobbying Texas lawmakers with the goal of introducing tax incentives for some time. Capstar Real Estate Advisors, for example, owns a large “shell” building it is marketing for data center us at 3000 Skyline Rd. in Dallas.
Brad Enloe, a principal at Capstar, told us in December that he and a group of colleagues were working to persuade Texas legislators that the state was loosing out on big data center projects because other states offered more favorable tax conditions.
Enloe's colleague John Patterson said at least three major data center projects were going to be announced within the next four years. “We know specifically there is a large user who was not considering Texas, but they heard about the bill, and they're now considering Texas on their shortlist,” he told FOCUS in an interview in December, referring to the tax legislation.