Idaho Legislators Want Data Center Tax Benefits Limited Again

Idaho lawmakers are attempting to restrict the number of tax breaks new data center expansions can receive in the state. Last Monday, Bill 328 was introduced, and the House voted 59-9 to pass it. The Senate has now received the measure. The measure modifies the language in the state's urban renewal laws that a data center must be included in the property tax base evaluation roll if it makes capital investments of at least $250 million over five years and creates and maintains at least 30 new employment within two years. The legislation effectively prevents data centers from gaining an advantage in urban regeneration areas. Idaho approved a law in 2020 exempting operators from paying sales tax if they invest $250 million or more and provide at least 30 jobs in a bid to entice additional developers to the state.

According to existing regulations, data center developers are eligible for both the sales exemption and a property tax break known as an urban renewal district that boosts the area's infrastructure. Urban renewal district property taxes are used to fund infrastructure upgrades there rather than the general base, basically funding the infrastructure a data center will need. The original version of HB 328 was Bill 159, which sought to stop data centers from receiving benefits twice by making them pick between the sales tax advantage and the urban redevelopment incentive. At the beginning of March, Bill 159 received a negative vote. It briefly reappeared after receiving more support before being abandoned and the new measure being put up in its stead. In order to prohibit data centers that fulfill the requirements for the sales tax exemption from making use of the benefits of urban revitalization, the new HB 328 offers simpler wording with the same effect as the previous measure.