House Bill 1405 – Taxation of Data Centers
Authored by Rep. Ed Soliday (Valparaiso)
Provides that a county or municipal fiscal body may designate an area in which a property tax exemption will be provided for certain enterprise information technology equipment. Provides a state sales and use tax “exemption” for the purchase of certain data center equipment that is located in a data center that results in a total minimum qualified investment (including construction costs) within five years, ranging from at least $25 million to more than $150 million, depending on the population of the county in which the “qualified data center” is located. Requires that 75% or more of the materials, professional services, and labor used for the rehabilitation or construction of a qualified data center must be purchased from Indiana vendors. Provides that costs that meet the requirement are exempt from the state gross retail tax. Requires a qualified data center user to apply to the Indiana Economic Development Corporation (IEDC) for a specific transaction “exemption certificate.” Requires a qualified data center user to enter into an agreement with the IEDC as a condition of receiving an exemption certificate.
Chamber Position: Support
The Latest: On Tuesday, the Senate Tax and Fiscal Committee amended the bill to include the requirement that “75% or more of the materials, professional services and labor used” during the data center construction process must be purchased from Indiana vendors. The committee passed the bill 14-0 after hearing testimony from numerous stakeholders.
Then on Thursday, the bill was amended on second reading to extend the life of the exemption from 25 to 50 years for qualified data centers if the qualified investment is $750 million or greater. The bill is now on third reading and awaits a full Senate vote.
Chamber Action/Commentary: The Chamber, and specifically our Economic Development Policy Committee Chair Larry Gigerich, has been a member of the coalition supporting this policy from the outset and was pleased that the committee passed the amended bill unanimously.
The Chamber testified in support of the bill during Tuesday’s committee hearing, along with the Indiana Economic Development Association, the Northwest Indiana Forum and the Indiana State Building and Construction Trades, as well as stakeholders who are prepared to take advantage of the new law for a specific project in Northwest Indiana – NetChoice & Digital Crossroads.
Cloud computing is the new normal for this industry and demand for data centers is high and rising. Currently, Indiana is not considered by site selectors due to the lack of any tax incentive. The property and sales tax exemptions contained in HB 1405, combined with the other benefits of doing business in Indiana, will allow Indiana to compete for future, large-scale data center projects.
Resource: Adam H. Berry at (317) 264-6892 or email: [email protected]