State commerce agency wants tax break for big data

State commerce agency wants tax break for big data

by
Dustin Hurst
December 23, 2016
Dustin Hurst
Author Image
December 23, 2016

The Idaho Department of Commerce wants to give a break to businesses that want to build data centers here -- a tax break, that is.

The agency’s 2017 legislative session wish list includes a plan to give businesses that invest in data centers a break on state sales and uses taxes they would pay, provided the companies meet certain thresholds.

The proposed plan, known as the Idaho information technology equipment tax rebate, would only give breaks to big-spenders. To qualify, existing Idaho companies would have to spend at least $5 million in a calendar year on servers, cooling equipment, power and generation systems and cabling, among other items.

Out-of-state businesses would need to invest at least $25 million in Idaho to qualify for the corporate welfare, though they’d have five years to hit the mark. These companies could apply for rebates during the five years, but they would need to invest at least $5 million before submitting an application.

The agency also wants out-of-state companies to create at least 20 permanent jobs at a data facility within two years of facility operation. Those jobs’ wages must equal or exceed the average pay for workers in the county where a business would build the center.

Idaho wouldn’t be the first state to adopt tax giveaways for such projects. At least 27 states offer targeted incentives for such centers.

Some question the practicality of writing another tax break into Idaho law.

Marcus Whitfall is the sales manager of Port One Five, an up-and-coming digital design firm based in Boise. He has spent years in the tech sector and is familiar with the needs of a data center. He believes Idaho already has a significant leg up.

Whitfall said Thursday, “Idaho has a tremendous competitive advantage to have a data center here.” That advantage: low power rates and property costs.

With the growth of the modern digital economy has come the explosion of the need to store data for the programs and apps consumers and businesses use each day. That’s where data centers -- or server farms -- play a huge role.

In the last few years, companies like Apple, Google and Amazon have invested billions in data centers to handle digital growth.

To function, these centers have a few basic needs: lots of energy and property. As Whitfall notes, Idaho offers good deals on both.

He points out, “I think what people outside of Idaho are looking at is the cost of electricity and the low cost of living.”

According to the U.S. Energy Information Administration, in September of this year, Idaho offered the lowest commercial electricity rate in the nation.

Whitfall isn’t alone in noting that data companies likely prioritize other factors ahead of tax breaks when they decide where to build.

In an October 2016 report, Money Lost to the Cloud, Good Jobs First, a left-leaning group skeptical of most corporate welfare, called power rates “the most important consideration” for site selectors, and suggested proximity to roads, airport, water and cabling take precedence over tax breaks.

“Subsidies come at the last stage of the data center site selection process and often don’t function as true economic development incentives.” That is, tax breaks don’t cause something to happen that wouldn’t otherwise.

Good Jobs First recommended capping how much governments give.

The report said, “Internet-based companies have to grow the cloud and they will choose stable areas with cheap electricity.”

The Idaho Department of Commerce did not reply Thursday to IdahoReporter.com questions about the the rebate proposal.

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