Electronic tax

Washington state approves more tax breaks for data centers

A bill to further encourage construction of data centers in Washington state passed the Senate on the last day of the legislative session last week.

the Bill of 1846 encourages private investment in building, building, maintaining, and modernizing data centers in the state by expanding and extending current tax exemptions on sales and use.

Importantly, the bill applies some of the existing incentives for rural data centers to facilities built in urban settings and in counties with populations over 800,000.

“Legislature recognizes that investments in rural county data centers are necessary but insufficient for the overall economy and the competitiveness of the state,” the bill’s text reads.

“Washington is the only state that geographically limits incentives. As a result, data centers serving urban counties that require higher performance and that offer colocation services for multiple tenants that foster technology ecosystems are being lost to other states, especially neighboring Oregon.

The House bill was expected to become law in 1846 when signed into law by Governor Jay Inslee.

How to get more data centers

The text of the document highlights the importance of digital infrastructure for local economies.

“The legislator believes that data centers are the cornerstone of a robust Internet infrastructure that is essential to the continued prosperity of Washington’s vibrant digital economy,” the bill states.

“The Legislature further finds that the data center industry is experiencing explosive growth across the nation and interstate competition for data center investment has increased significantly.”

The new sales and use tax exemptions will apply to eligible server equipment, electrical infrastructure, and all data centers, including labor and related services.

It is important to note that there will be limits to the number of data centers participating in the program: for example, each calendar year, no more than six tax exemption certificates can be issued for eligible data centers thanks to the renovation.

To qualify, data centers will need to meet a set of criteria, such as having at least three permanent and family salaried jobs for every twenty thousand square feet of white space leased.

According to the Port of Quincy — a major data center destination that counts Sabey, Microsoft, H5, CyrusOne, NTT and Vantage among its residents — existing incentives for rural data centers in Washington state have generated more than $250 million in property, sales and utility taxes; $95 million contribution to public services; and more than $400 million in wages and benefits in Central Washington since 2017.

“The passage of HB 1846 will expand the data center tax incentive to promote investment, development and construction of data centers in rural areas of Washington State, which will continue to create new development economy, new jobs and will significantly increase the property tax base,” the Port of Quincy Government said in a statement.