Bills Giving Tax Breaks to Data Centers Moving Quickly

Jennifer Smith

By Jennifer Smith, MASB Director of Government Relations

DashBoard, Dec. 9, 2015

The House and Senate are currently working on a legislation package that would exempt data centers from sales and use taxes, as well as the personal property tax. Senate Bills 616-618 and House Bills 5074-5076 would pave the way for Nevada-based data storage center, Switch, to move into the former Steelcase Inc. pyramid building in Kent County. However, as with any tax exemption bill, there is a cost to schools and local governments.

As introduced, the bills would exempt current and future data centers from paying sales and use taxes and would exempt a large amount of its personal property from tax. The center would still pay real property taxes. Estimates from the House and Senate Fiscal Agencies put the cost to schools and locals of these bills between $20 and 30 million. MASB has been working diligently to hold the School Aid Fund harmless in the package to attract Switch.

During consideration in the House Tax Policy Committee, an amendment was added to the PPT bill that would require the local tax collecting unit and the county to pass a resolution to allow the PPT exemption. The Senate Committee adopted the same language in its version.

MASB has been arguing that the School Aid Fund should not be harmed in working out a deal for Switch to come to Michigan. We don’t oppose the project—it could bring jobs and investment to west Michigan. We oppose losing SAF revenue to do it.

During debate in the Senate, an amendment was added to hold the SAF harmless in the sales tax bill (SB 616). We were pleased to see that adopted. It states that the Legislature shall determine if the SAF would have lost funds under this policy and then appropriate that amount to the SAF; the bill also sunsets in 2030. The package passed the Senate by a vote of 21-15.

We continue to talk to members of the House to urge support for that version of the sales tax bill and to add a hold-harmless amendment to the use tax bills (617 or 5074). Finally, we continue to talk to legislators to get schools included in the local unit that would need to vote to allow the PPT exemption. The House is continuing hearings and possibly floor debate this week.

We are encouraged by the progress made so far on these bills and are hopeful that we can work to support the project and protect the SAF revenue streams. This issue is moving quickly and we expect it to be completed by the end of the year.

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