Pennsylvania Considering Data Center Tax Breaks

Data center tax break legislation is moving through the Pennsylvania Senate and House of Representatives. Both data center owners and tenants would be exempt from sales and use tax on equipment and software purchases if they satisfy a set of criteria.

Pennsylvania is not a major data center market, but judging by the legislative effort, there’s willingness among lawmakers to make the state more attractive for data center construction. While data centers don’t create lots of jobs, they bring tax revenue from massive power purchases and attract other high-tech businesses, and the jobs they do create usually pay high salaries.

States that passed laws to create or extend data center tax breaks this year include Missouri, Oregon, and Washington. Officials also sometimes decide on data center tax incentives on a project-by-project basis. A recent example of this was a package of tax breaks for Google’s upcoming data center in suburban Atlanta.

Tax breaks have become a common tool state and local governments use to compete with each other for big data center projects in recent years. Availability of tax incentives is among key factors companies consider when going through the data center site-selection in addition to things like power cost and availability and network infrastructure.

Not all states that have data center tax breaks provide them to data center tenants. The bills introduced in Pennsylvania are for both owners and tenants, as long as they invest $25 million or $50 million in the data center over the course of four years, depending on the size of the county the data center is in, according to the text of the senate bill.

In addition to the investment requirement, the data center owner or tenant has to pay a minimum of $1 million in salaries per year to its employees.

The bills would exempt all data center equipment and software purchases for new builds from state, county, and city sales and use taxes. The tax breaks would not, however, apply to telco data centers that do not provide colocation services.

Another exception is equipment that generates energy the operator sells to a utility company.