House Representatives in Kentucky are looking to introduce tax breaks in order to lure data center investment to the state.
Last week, the House budget committee passed House Bill 372, An Act relating to the taxation of data centers, which would provide state sales tax exemption on data center equipment and construction materials.
The bill was put forward by Republican State Representative Phillip Pratt, alongside fellow Republicans Patrick Flannery, Melinda Prunty, and Russell Webber, as well as Democrat Ruth Palumbo.
“This measure allows Kentucky an opportunity for investment, economic advancement, and industry diversification,” said Rep. Pratt. “Large-scale data centers increase local tax revenue, provide for engineering, technician, electrical, and construction jobs, promote broadband expansion, and enhance existing network infrastructure.”
“Without HB 372, Kentucky is at risk of losing out on the next round of data center construction to states that have already enacted tax exemptions.”
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Kentucky wants its share of data center investment
The committee voted 18-to-2 in favor of the bill, which will now go to the Senate, where it is expected to be considered in the coming weeks.
In order to qualify for the tax breaks, a data center company would need to invest at least $150 million within the first five years, as well as create and maintain 20 new jobs at the facility. The bill would cost the state at least $15 million a year, according to official documents.
“The negative impact to the General Fund at full implementation will be substantial if a number of entities avail themselves of this exemption,” the fiscal note reads.
“I don’t think Facebook needs tax coupons. I think Facebook’s gonna do what Facebook’s gonna do, and I don’t want them to give better snacks to their employees in California on the backs of Kentuckians,” Democratic State Representative Josie Raymond said.
A trade association of tech companies called NetChoice is encouraging states to create tax breaks in order to compete among themselves for the data centers, with an association representative telling the House panel Kentucky should enter the contest where states like Virginia and Ohio already are celebrating ribbon-cuttings.
“Virginia recovered over a dollar in state revenue for every dollar in state taxes exempted for data center equipment and purchases,” testified Barbara Comstock, a NetChoice advisor who helped craft data center tax breaks in Virginia when she served in that state’s legislature.
The committee also approved House Bill 230, which would remove the sales tax from electricity purchased by cryptocurrency mining operations.
A number of states across the US are looking to offer tax incentives in order to lure data centers. The Connecticut Senate recently passed a new bill that provides sales tax and property tax exemptions, while Wyoming voted down a bill that would have repealed tax benefits for data centers in the state.
In Virginia, there are numerous incentives at the state and local level to attract more investment beyond the Northwestern counties. Prince William County’s latest budget spending plan includes calls for a tax increase on business computers and peripheral equipment, while Five Southwest Virginia leaders last week announced plans to set the lowest regional property tax rate on data center equipment in the state. At the state level, there are currently three bills making their way through the Senate that would reduce the qualification thresholds for tax breaks, especially in areas of low employment.