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Growing Involta is working on data center tax exemption for 2019

photo of involta data center

Involta, which recently expanded its Boise data center, is working with industry on a bill to exempt such equipment from sales taxes. Photo by Sharon Fisher.

How is a data center like a tractor? Supporters of past failed attempts to exempt data center equipment from sales taxes will be trying another tactic in the upcoming legislative session: Equating data center equipment to agricultural and manufacturing equipment.

Proponents of the exemption say that it would attract data centers to Idaho, noting that surrounding states such as Nevada, Oregon, and Washington – all with cheap power – now house a number of them. Washington, Nevada, and Wyoming all have such an exemption, while Oregon and Montana have no sales tax.

photo of ken kremer

Ken Kremer

Tax incentives are second only to cost of power in determining where to site data centers, said Ken Kremer, chief operations officer for Involta LLC, a Cedar Rapids, Iowa-based company with 14 data centers across the U.S. The company recently expanded its Boise data center, which it first built in 2014. (See box.) Several of the company’s other data center sites, including Minnesota and Ohio, have such exemptions, he said, noting that his Boise facility had lost some deals because Idaho didn’t have that exemption. “When you’re talking about tens of millions of dollars in equipment, it makes a big difference,” he said.

photo of bobbi jo meuleman

Bobbi Jo Meuleman

Two years ago, a bill to exempt data center equipment from sales taxes passed the Idaho House by a single vote, but didn’t make out of the Senate Local Government & Taxation Committee. Last year, an identical bill didn’t even get printed. Idaho Director of Commerce Bobbi Jo Meuleman had indicated earlier this year that future efforts might come from industry itself rather than from Commerce.

Heidi Jarvis-Grimes

That’s what’s happening. The Idaho Technology Council’s public policy committee — headed by Jayson Ronk, director of state government affairs for Micron — is working with companies such as data center providers Fiberpipe and Involta, as well as utilities such as Idaho Power, with the goal of putting forth legislation for the upcoming legislative session, said Heidi Jarvis-Grimes, vice president of development for the ITC. The working group’s next meeting is scheduled for August 23.

photo of john foster

John Foster

The group is working with the lobbying firm Kestrel West on the legislation, which is not yet written, said John Foster, partner of the Boise-based company. “There’s a lot of drafts floating around,” he said. “We work on broad concepts with legislators, and then draft it.”

Foster wouldn’t say which legislators or committees the group was targeting, but noted that there would be a number of personnel changes in the upcoming legislative session — including a new governor. Revenue bills are required to come from the House. Revenue and Taxation chair is now Gary Collins, R-Nampa, and Business chair is now Vito Barbieri, R-Dalton Gardens, both of whom are running in November; Environment, Energy, and Technology chair Dell Raybould, R-Rexburg, is not.

Conceptually, the bill would give a broad variety of companies, not just data centers, a sales tax exemption on computer equipment, supporters said. They hope that by crafting the exemption more broadly than just to household names such as Apple, Facebook, Google, and Microsoft – all of which are thought to be able to afford to pay sales taxes on their equipment – they will generate more support in the Legislature. Continuing growth is also a factor, Jarvis-Grimes said. “As the economy grows, we see an opportunity we didn’t have before,” she said.

Their argument is that industries such as agriculture and manufacturing have tax exemptions on the “midstream” equipment used to create their end products, which are taxed, and that companies that use data centers to help create their end products should have the same tax benefits. The bill may also have other sideboards, such as a ceiling on the total amount of tax exemption granted, Foster said.

Whether such a strategy will work is another question. The Legislature has shown increasing reluctance to grant tax exemptions in recent years. On the other hand, the improving economy and a new set of legislators may change things.

Involta adds to its Boise data center

Involta LLC, which built its first data center in southwest Boise in 2014, has expanded its capacity, and has the capability of doubling it should it choose to.

photo of involta network operations center

The network operations center of the Involta data center in southwest Boise. Photo courtesy of Involta.

A recently completed 31,000-square-foot building is intended to provide data center services, such as managed services, disaster recovery, and backup to companies that don’t wish to operate their own data centers, said Ken Kremer, chief operations officer for the Cedar Rapids, Iowa, company. While he couldn’t name any of the facility’s 200 clients, healthcare providers are often anchor tenants in the company’s 14 data centers across the U.S. The company also acquired the assets of SolutionPro, in Boise, in 2012.

The new construction is “Data Room B,” which was completed about six weeks ago as part of a $3.5 million second phase of construction.

Data center site selectors look for low-cost, available power, Kremer said, noting that Idaho Power has two expandable 5Mw transformers onsite. The building uses 2.5 Mw of power but needs two separate power infrastructure setups for redundancy, he said. The building has two bays of data center, one of which is new, separated by a mechanical bay that lets workers modify the infrastructure without having to enter the room with the computer equipment, he said. It uses half of its 10-acre parcel and could double its capacity by mirroring the structure on the other side.

Some companies that build and operate data centers require that their power companies offer a certain percentage – sometimes as much as 100 percent – of electricity from renewable sources such as sun and wind. Idaho Power provides 56 percent of its power from hydroelectric power, which is renewable.

The higher-security center portion of the building has 12-inch precast concrete walls assembled on site. Some of the company’s data centers also have perimeter fencing, and the facility is set up to provide it if a customer requests it, Kremer said. It also has a cage facility where shipped materials are unboxed to keep wood, paper, and other flammable materials out of the data center itself, and uses iris scanning as a second form of authentication for people entering the building.

The mechanical bay houses the HVAC system, which means units can fail or be maintained without affecting the other units. Two out of the system’s five air conditioning units could fail and still cool the room, Kremer said. When it gets cool enough outside, the Freon in the system is pumped through outside condensors, but outside air isn’t allowed into the building, he said.

When siting a data center, Involta needs to make sure the market can support it and that technical talent is available to staff the facility, Kremer said. “Boise is more challenging due to its growth,” because of the region’s low unemployment rate, he said.

The building’s architect was Solum Lang, while the contractor was Rinderknecht.

About Sharon Fisher

Sharon Fisher is an Idaho Business Review staff writer, covering financial institutions, technology, and business development. She holds a bachelor of science in computer science from Rensselaer Polytechnic Institute, and a masters in public administration and graduate certificates in geographic informational analysis and in community and regional planning from Boise State University. She likes explaining things and going to meetings. Join me on Twitter at @IBR_SLFisher.

3 comments

  1. Tax exemptions make sense for states wanting to attract new business. Data centers are no different than many other competitive businesses who are looking for the best deal from a give area to entice the business to pick their state.

  2. This is about sales tax exemptions for purchasing equipment, not about incentives for siting a location. Thank you, though.

  3. jordanmorales@boisestate.edu

    I’m an old school Cecil Andrus fan and he got HP here without tax exemptions. Just sayin.