Data center sales tax exemption to get another try

Idaho’s technology industry is going to take another shot at a sales tax exemption for data center equipment.

“I think this will be the year for data center legislation,” Jay Larsen, president and CEO of the Idaho Technology Council, at its monthly Tech2Market meeting, a recurring monthly presentation where entrepreneurs describe how they brought their technology to market.

What will make this year different?

The industry has been trying to get the exemption since at least 2017. In that session, a bill to exempt data center equipment from sales taxes passed the Idaho House by a single vote, but didn’t get out of the Senate Local Government & Taxation Committee.

In the 2018 session, an identical bill didn’t even get printed. Then-Idaho Director of Commerce Bobbi-Jo Meuleman indicated at that time that future efforts might come from industry rather than from Commerce. A 2019 bill got an informational hearing.

Proponents say Idaho’s lack of the exemption, which would apply toward equipment in a data center, is keeping the state from landing data centers that are instead going to Oregon, Washington and Nevada, which either have such an exemption or no sales tax at all. Data centers bring jobs to rural areas and provide statewide upgrades to information infrastructures, they say.

Supporters also point out Idaho wouldn’t lose any revenue, because the state isn’t getting data centers now. They contend the exemption is more than made up by other revenue such as property tax, corporate income tax, taxes paid by employees and sales taxes on other equipment.

Opponents say data centers don’t provide many jobs, especially compared with how much electricity they use. In addition, some oppose adding further industry-specific tax exemptions in principle, especially with revenues down in the previous year. Some opponents have also objected to giving tax breaks to giant companies such as Facebook and Google, thought to be well able to afford to pay taxes.

In response, last year’s bill was supposed to add a sales tax break for smaller data centers as well. However, that didn’t happen. Sponsor Greg Chaney, R-Caldwell, had said after this year’s session that the threshold would be worked out during the interim period, which is ending. He expects next session’s bill to be “substantially similar” to this year’s, he said in an email message.

‘Why aren’t we doing it this year?’

Larsen said he hoped this year would be different after an informational hearing held during the waning days of the 2019 legislative session. Held by lobbyists representing Facebook, the hearing was made to a joint session of the House and Senate Revenue & Taxation committees, with no public testimony.

Several legislators on the committee had sounded receptive. “Time is of the essence,” said Sen. C. Scott Grow, R-Eagle, at the time. “Why aren’t we doing it this year?”

It isn’t clear what organization, other than the ITC, will spearhead the 2020 legislation. Data center provider Involta, which led the legislative effort in 2019, isn’t going to be participating, according to John Foster, partner with Kestrel West and a lobbyist for the company, in an email message.

A meeting was held on Nov. 11, according to Wayne Hammon, CEO of Associated General Contractors, in an email message. However, he wasn’t available to provide details other than that the effort will be led by attorney Jeremy Pisca, a partner in the firm of Risch Pisca, who didn’t respond to press inquiries.

“We are working on a few changes that are being vetted,” Larsen said in an email message, but wouldn’t provide other details.

“We still intend on supporting this concept,” said Bill Connors, president and CEO of the Boise Metro Chamber. “It’s an ideal industry cluster for Idaho. The informational hearing we participated in at the Capitol at the end of last session left us feeling good about the interest in this effort. The big new FBI data center in Pocatello will be cutting a ribbon soon, and that will be a good case study for the economic benefits of these facilities. We are continuing to look at strategies and allies.”

But how will the new bill be different? “We’re still working on that answer,” Connors said.