Nevada, North Carolina, and North Dakota hope tax breaks will attract data centers

Three states take pre-emptive approach to attracting new data centers.

Google's data center in Pryor, Okla. Google/Connie Zhou

As we head towards spring it appears that state legislators' thoughts turn to ways to attract data center construction in their states. Given the limited amount of options that the government has to do this, the method of choice is tax abatement. Property taxes, equipment tax, employment taxes, and sales tax are all fair game in attracting the construction of data centers.

The Nevada Bill (Senate Bill 170) uses sales and property taxes as the hook. The bill would provide partial sales and property tax abatements for 20 years if the data center operator meets an investment requirement of $250 million and is able to provide a minimum number of long-term employment opportunities. Nevada hopes to make the requirements sufficiently flexible to attract colocation operators, whose employment opportunities and local spending often vary based on tenants, as well as dedicated facilities.

In North Carolina, House Bill 66 doesn't use a fixed time period; it simply exempts data centers which invest at least $75 million from the 7 percent tax on electricity. North Carolina, which already is home to major facilities from Apple, Facebook, and American Express, is hoping to become a significant player in the tech market and believes that attracting additional data center projects is important to that process.

North Dakota, which has yet to attract any significant data center investment, hopes that House Bill 1089 will be the trigger for data centers to find their home in North Dakota. The bill would provide its break in the form of a sales tax exemption for hardware and software for a data center willing to meet a specific investment level. While the bill passed the House unmodified, legislators apparently were concerned that it was just too good a deal and have since amended the bill to limit it to the first four qualifying data centers. There are no reports yet of a sudden surge of interest in North Dakota as the new data center mecca.