Tax Breaks for Data Centers

Tax Breaks for Data Centers

Arizona Commerce Authority is creating rules that provide data center tax breaks.

Newly crafted rules related to 10- and 20-year tax breaks for high-tech data centers have been published by the Arizona Commerce Authority.

Public comments — and concerns — about those tax breaks, which could help the likes to Apple (Nasdaq: AAPL) and Microsoft (Nasdaq: MSFT) and already benefit Apollo Education Group (Nasdaq: APOL), PayPal Inc. and GoDaddy, are due to the state economic development group today.

Rules are born out of the Commerce Authority’s administration of state incentives and tax breaks and efforts the past two years at the Arizona Legislature to attract more high-tech data centers to the state.
The tax program waives state, county and local sales taxes on equipment purchases for data centers. It also offers tax help to businesses locating such operations in redevelopment projects and sustainable developments.

Phoenix has emerged as a top U.S. market for data centers and server farms. They are also seen as big real estate drivers for industrial and R&D buildings in Maricopa County.

The tax breaks could also benefit Apple and its operations center in Mesa as well as a Microsoft data center expected to land in Phoenix.

The Commerce Authority published rules related to data centers tax breaks last month and the 30-day comment period ends today. No oral comments will be taken by the authority, which administers state business incentives and has a board made up of CEOs and real estate developers.

“The statute is what creates the framework for the program. The rules flesh out the statute with all of the applicable detail that is required to implement the program,” said spokeswoman Susan Marie.

Commerce Authority officials said 12 data centers with 27 tenants currently qualify for the tax credits:

Aligned Data Centers (Phoenix) LLC
Apollo Education Group Inc.
Avnet Logistics – Data Center
Charles Schwab
CyrusOne, LLC (2 facilities)
Digital Realty Trust LP
Phoenix NAP LLC
PayPal Inc.
GoDaddy.com LLC
US Foods Inc
IO Data Centers LLC.

Apple is not on that list yet. The company owns a former First Solar building in Mesa and could benefit from Arizona’s data center program.

Marie said the Commerce Authority isn’t sure how many more companies will fit under the new rules.

“The ACA is hopeful that the industry will continue to flourish,” she said.

Watchdogs are keeping an eye on the tax breaks, rules and the authority’s interpretation to see who benefits, including Apple and others, and how.