LANSING -- Michigan could soon become the latest state to adopt a tax incentive for data center services. Data centers power computing services for businesses and websites and require significant amounts of electricity and water to run massive collections of electronic components.
The legislation would expand a current sales and use tax exemption on small data centers in an effort to attract businesses to the state. Supporters say that neighboring states have passed policies that are proving more attractive to the technology industry.
“It’s not unlike tax exemptions that we’ve had for the auto industry on manufacturing equipment over time,” said Sen. Kevin Hertel, D-St. Clair Shores. “This just takes us into a new, growing industry.”
Enterprise data centers are defined as centers with investments of at least $250 million and employing at least 30 workers at high wages.
The centers would not receive state or local property tax breaks unless approved by local officials.
For a center with a $250 million investment, the nonpartisan house fiscal agency estimates revenue losses of $15 million over the facility’s lifetime. Supporters say that encouraging companies to get their foot in the door with these exemptions would leave workers and the state economy better off.
“These types of investments do not go to states that do not have the correct tax policy, simply because they can be anywhere,” Hertel said.
Other supporters said the proposals presented economic opportunities for less populated areas, more so than other economic growth plans.
“We can locate these throughout the state of Michigan,” said Sen. Roger Victory, R-Hudsonville. “So this is an opportunity for some our rural communities that are not always at the plate when we’re talking about economic development.”
The bills attracted bipartisan support in the Senate, but some more liberal lawmakers have expressed concerns about environmental impact and providing further incentives to large companies.
“These data centers are also massive users of electricity and water,” said Sen. Rosemary Bayer, D-West Bloomfield. “Their water and energy use is unlike any other business or corporation we currently see in our state.”
The legislation could be further considered by lawmakers after returning from summer recess.