Report: Arizona Wants to Hop on Data Center Tax Break Bandwagon

State officials mulling new tax breaks that would benefit likes of CyrusOne and IO, as well as Apple and Microsoft

Karen Riccio

August 13, 2015

2 Min Read
Report: Arizona Wants to Hop on Data Center Tax Break Bandwagon
CyrusOne’s Phoenix I data center in Chandler, Arizona (Photo: CyrusOne)

Following in the footprints of Missouri, Washington, and Oregon, the State of Arizona is inching closer to instating new 10- and 20-year tax breaks for high-tech data centers.

If the state legislature adopts the tax program, data center providers would be excluded from paying state, county, and local sales taxes on equipment purchases. It would also provide tax incentives for related businesses looking to locate their operations in Arizona, Phoenix Business Journal reported.

Even without extensive data center tax breaks, Phoenix has emerged as a top US market for data centers and server farms. So, this could provide a very lucrative boost to the Grand Canyon State as well as the companies with data center operations already established there. According to the article, those that currently qualify are:

  • Aligned Data Centers

  • Apollo Education Group

  • Avnet Logistics

  • Charles Schwab

  • CyrusOne

  • Digital Realty Trust

  • Phoenix NAP

  • PayPal

  • GoDaddy

  • US Foods

  • IO

Although Apple is missing from the list, once it completes its $2 billion project to convert a former 1.3 million square foot manufacturing plant in Mesa it bought early this year into a data center, it, too, will qualify for tax breaks. State officials forecast the Apple data center to create 300 to 500 construction and trade jobs and 150 permanent Apple jobs over a committed 30-year period.

Meanwhile, Microsoft plans to turn the former Phoenix-based home of a Honeywell International manufacturing plant into a data center. Although currently being leased by a private equity fund and other third-party companies, it is slated to house a Microsoft data center totaling up to 575,000 square feet.

State and local governments have turned to tax breaks to compete for big data center projects in recent years. These incentives are often deal-makers when companies are going through the data center site-selection process. Tax breaks rank just as high as considerations for power cost, availability, and network infrastructure.

Earlier this year, Oregon officials approved a new package of tax breaks for a new data center Google is considering building—its third in the state—currently valued at $1.2 billion.

Data center tax break legislation is also 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.

Other states that passed laws to create or extend data center tax breaks this year include Missouri and Washington, where the total data center investment has exploded to nearly $4 billion since 2006.

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