Microsoft Azure: New Bill To Give Data Centers Certain Tax Breaks Has Competitive Benefits

May 14, 2023 | Posted by Abdul-Rahman Oladimeji

A bill submitted Monday would exclude data center equipment, software, and other costs from state sales and use taxes. Microsoft's projected Mount Pleasant data center would presumably benefit first. The bill's creators, Rep. Shannon Zimmerman, R-River Falls, and Sen. Romaine Robert Quinn, R-Cameron, believe the exemption is essential to entice tech businesses rapidly build data center networks to service cloud computing customers. They claim that exclusions in Illinois, Iowa, and Minnesota have spurred billions in development. According to a 2022 assessment by Virginia-based Mangum Economics, a 2019 tax law change in Illinois spurred $4 billion in data center investments, and forthcoming projects will treble that.

Zimmerman said taxing data centers' capital-intensive but frequently supplanted or upgraded property would place Wisconsin at a competitive disadvantage when demand for massive "hyper data centers" is on the rise and expected to grow with the rise of AI.  The state's publicly-traded and active power utilities, Wisconsin Manufacturers & Commerce, the Wisconsin Economic Development Association, NetChoice, an association of e-commerce companies, and the Data Center Coalition, comprised of 24 of the nation's largest data center administrators, including Microsoft, which would save millions on its Mount Pleasant data center, back the bill.

Microsoft stated it considered "customer demand, site-specific data points, and business environment" when building a data center in a coalition declaration of support. Microsoft purchased a 315-acre site east of Foxconn for a $1 billion data center from Mount Pleasant in April. By July, that agreement should be done. Zimmerman said the bill's timing—less than a month after the Microsoft deal—is not a coincidence, but its purpose is "so much bigger than just Microsoft." He said he's looking forward to AI's expansion and data management and processing requirements. Tax benefits for data center operators would be offset by economic growth, development and data center employment opportunities, and property and income tax payments.

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