Despite having one of the best markets in the US for data center development, Arizona is looking to make the state even more attractive by introducing a new series of tax abatement rule programs that will apply to both existing and newly constructed data centers.
Arizona first instituted a ten year tax break program in 2013, and at least 27 tenants with 12 data center operators have taken advantage of the required construction and investment. The new rule proposals are in addition to the existing program, and are being submitted to the legislature this week. The rules provide new and additional methods for taking advantage of the tax abatements approved by the legislature in 2013.
The current tax breaks provide $25 or $50 million in relief based on the location of the data center for a period of 10 years. A special class, called “sustainable redevelopment” currently allows for a 20 year abatement if the data center was built using an existing facility that was at least half empty before acquisition by the new owner, or, if the newly developed facility meets any of the accepted green building operational standards.
The tax exemptions will provide relief from Arizona’s Transaction Privilege Tax and Use Tax. These exemptions apply at the state, county, and local level, preventing localities from implementing their own versions to derive revenue from otherwise exempt businesses.
Microsoft had expressed interest in building in Arizona, should appropriate tax relief measures be made available, but after a flurry of activity earlier this year, has gone quiet on the topic. Apple is building big in Arizona, having announced it will build a data center and global operations facility on the site of the failed sapphire screen manufacturer GT Advanced Technologies, which had been backed by Apple.
Apple’s plan to repurpose the GT facility in Mesa included retaining the tax credits already advanced to the bankrupt manufacturer. Additional tax credits for the announced solar farm construction and $2 billion investment are also possible under the new rules proposals.