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Idaho vies to become 21st U.S. state to offer data centre tax breaks

Tue 28 Feb 2017

The state of Idaho is seeking new legislation which could add it to the growing number of U.S. states in a position to entice data centre business via tax incentives.

Officials from the Idaho Department of Commerce have proposed the Technology Equipment Tax Rebate Bill, which would provide sales rebates on server equipment not only for new builds and refurbishments, but for cyclical substitutions in centres already established in the state. Such turnarounds occur on average every 3-4 years.

Commenting on the prospect, the IDC states:

‘Like most industries, data centers tend to cluster, and many are in areas where they are running out of land to expand. Additionally, given its temperate climate, low natural disaster risk, and ample land, Idaho is an ideal location to house a data center.’

To qualify for the rebate, equivalent to the avoidance of 100% sales tax, existing builds will need to invest a minimum of $5 million in eligible server replenishment or new equipment.

New entrants to the Idaho DC sphere will need to invest a minimum of $25 million in solid plant builds, yielding 20 new jobs paying above the county’s average wage within two years of establishment.

If passed, the bill is due to sunset in 2024.

In January Midco took advantage of a data centre tax break immediately prior to its annulment. In April of 2015 Missouri passed a bill similarly providing tax incentives for existing and new data centre builds.

But a year ago in Oregon, a fierce debate emerged around one of the central disadvantages of enticing DC business to states – the lack of local employment and relative lack of ongoing income from state purchases of equipment.

There is an infrastructural tension in the U.S. data centre market which continues to prevent the sector from clustering definitively in one region, for various factors. For one, some states which require low-latency connections and relatively ‘local’ provisioning may not be on or near the best access to the cross-continental connectivity backbone, or may levy non-commercial rates and tax schemes relative to the more remote or tundral states, which have abundance of land and are willing to shape tax deals in order to attract the business.

Land, locality and legislation are preventing the emergence of any data centre equivalent of Hollywood, or the erstwhile one-industry loci such as Detroit (latterly Michigan), Wisconsin and Oregon. If latency were to become a non-issue via improved infrastructure and new technologies, the landscape of competing tax breaks seems likely to become more critical and decisive.


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