New Law Encourages Data Centers

The Arizona Legislature established a tax incentive program in September 2013, encouraging mid-size and large companies to move their computer data centers to Arizona. Qualified data center owners and operators will be exempt from all transaction privilege taxes, use taxes and local levels of purchasing data center equipment for 10 years. Data centers that fall under the “Sustainable Redevelopment Project” category are looking at 20 years of exemption. “We are in the rule-making process through the Arizona Commerce Authority currently,” says Russell Smoldon, CEO of B3 Strategies, government relations and public affairs affiliate of law firm Jennings Strouss, “and we hope to have the rules in place sometime this September.”

“The thing about Arizona that is so attractive to the technology sector is the fact that we have an unbelievable climate for data centers,” says Smoldon. “We don’t have tornados or earthquakes or anything of natural disaster type situations to affect the data center, and remember, the goal of a data center is to keep running 24/7.” Many companies, specifically those on the East Coast that suffered major losses due to hurricane Sandy, are looking for a more reliable source of power and a stable atmosphere that provides inexpensive power and renewable resources. 

“Arizona has done the right thing for the state by trying to attract new headquarter relocations as well as new start-up activity by incenting businesses to locate their data centers there, which becomes important for statewide economic development,” says Matt Miszewski, a senior vice president at Digital Realty. “We [computer data centers] act as a magnet for additional activity, not just on the small business side in terms of support services but there is also an awful lot of activity that springs up alongside when we build a large data center complex.” 

Editor’s Note: Per the procedure with such laws, the ACA has one year to promulgate rules for certification since the law was passed in legislative session and went into effect, after which there will be a 30-day period for the public to comment on the draft before the rules are finally filed. Please check here for periodic updates on the rules.