Sweeping Data Center Tax Exemptions Passed In Illinois

Data center owners and operators will be exempt from paying sales taxes on the equipment inside the facility such as storage, servers and liquid cooling solutions.

One of the largest data center markets in America will exempt data center owners and operators from paying sales tax on the IT inside the facilities – from servers and storage to liquid cooling solutions.

Illinois lawmakers recently passed a data center tax incentive as part of the state’s $45 billion capital construction budget that exempts qualifying data centers from state and local sales tax on the equipment inside the facilities for the next 10 years. The budget was signed by Illinois Gov. J.B. Pritzker this week.

“[This is] a giant step in aligning Illinois to 30 other states that offer incentives to attract data centers,” said Tyler Diers, legislative relations director for the Illinois Chamber of Commerce, a major proponent of the data center tax intensive, in a statement. “This proposal will offer our downstate communities a shot at the digital economy, while providing great paying, local IT and construction jobs. The Illinois Chamber applauds this bipartisan effort to strengthen our technology ecosystem.”

[Related: ‘Bold’ Data Center Tax Incentive Bill Passed By Indiana Senate]

To qualify for the tax breaks, data center operators and their tenants need to invest a minimum of $250 million in expenses within Illinois over a five-year period. New data centers are also required to meet green building standards aimed at making the facilities more sustainable and environmentally friendly.

Additionally, new data centers must employ at least 20 full-time local workers with salaries at least 25 percent higher than the median income in the county where the data center resides.

Another inclusion in the budget provides a 20 percent income tax break for developers who build new data centers in low-income, high poverty areas in Illinois.

New tax incentives specifically targeting data centers has sprouted up across the country over the past several years, with each state having its own unique tax proposals. For example, Indiana approved a bill this year in which the electricity used by customers for data center equipment can be exempt from state sales tax.

These types of tax incentives are an effort to sway technology companies to build new or expand data centers in states to help spur job growth and attract large IT companies to the area.

Hyperscale data center operators like Apple, Amazon, Facebook, Google and Microsoft are spending billions each quarter on building new and expanding data centers as well as on the IT equipment inside. The record-setting 2018 saw large-scale data center operators spend a whopping $120 billion in a single year on data centers.

Chicago is one of the country’s largest data center hubs alongside the likes of Northern Virginia and Dallas.