‘Bold’ Data Center Tax Incentive Bill Passed By Indiana Senate

The Indiana Senate unanimously approved a bill Monday that will create tax incentives aimed at attracting the building of data centers and the expansion of existing facilities in the state. The bill, House Bill 1405, will allow the equipment purchased by companies that seek data center services to be exempt from business personal property tax and the state’s sales tax.

“This is a move that’s ahead of the curve,” said Zeus Kerravala, principal analyst at ZK Research, in an interview with CRN. “Data is what companies are going to compete on in every vertical. That data needs to be stored somewhere. Not everyone is going to use the cloud—a lot of companies are going to build their own data centers. Indiana being centrally located, there’s some geographic benefits to that and now if they throw in the tax incentives, that could persuade big companies to store it there.”

The bill also states that the electricity used by customers for data center equipment can be exempt from state sales tax. The senate passed the bill in a 46-0 vote that positions the state as a more desirable location to build or relocate data centers.

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“It is forward-looking because companies are going to compete on their ability to find insights in data—that means you’re going to be collecting more data than ever. That’s only going to increase. Indiana putting the incentives in place to let companies build data centers there could really give their economy a boost,” said Kerravala. “CEOs today say they compete on the customer experience. Well, in order to understand the customer experience, you need massive amounts of data and you need to keep that data somewhere. It’s a bold move.”

Last year broke the record for the most Capex spent on data centers in a single year at an astounding $120 billion, up 43 percent compared with 2017, according to Synergy Research Group. The spending growth was led by hyper-scale operators Amazon, Apple, Google, Facebook and Microsoft.

In the fourth quarter of 2018 alone, the hyper-scale operators spent a whopping $32 billion on equipping, expanding and building new data centers.

For businesses to receive Indiana’s sales tax break on the equipment purchased, the data center will need to have a qualified investment of between $25 million and $150 million within a five-year span. In addition, the data center will have to be constructed using a minimum of 75 percent of the services, materials and labor from Indiana-based businesses.

The bill, which was already approved in a 95-1 vote by the House, will need to be approved once again by the House due to a Senate-added amendment before it can be signed into law by Gov. Eric Holcomb.