Politicians in Idaho are considering a new bill that would limit tax breaks for data centers in the state.
Currently, data center developers can qualify for both sales tax exemption and a property tax benefit that improves local infrastructure where the facility is located. The new bill would force data center developers to choose to benefit from one tax or the other, and not both.
Idaho passed a bill in 2020 granting sales tax exemption for operators that hit investment thresholds of $250 million or more and create at least 30 jobs.
Property taxes in urban renewal districts don’t go back to the general base but go towards infrastructure improvements in that area, essentially paying for infrastructure the data center will use.
Introduced by Democrat Representative John Gannon, the new bill would require data centers to either have a sales tax exemption or benefit from urban renewal districts – but not both.
“These amendments provide that data centers that take advantage of the sales tax exemption and are located in an urban renewal district, will have their incremental property tax value included in the base assessment roll. If a data center does not take advantage of the sales tax exemption and is located in an urban renewal district, then the property data incremental value will be included in the urban renewal district,” reads the bill’s statement of purpose.
The fiscal note says the exact impact of the bill ‘is not known’ but would create an increase in revenue to either the state of Idaho or the local property tax base, depending on which tax exemption a company chooses to forgo.
Gannon said the bill will prevent ‘double dipping.’ Republican Speaker Mike Moyle and Representative Barbara Ehardt are also on the bill.
“All in all this is a bill that promotes tax fairness,” Gannon told the House Local Government Committee. “Nobody’s taking away what the legislature said because the legislature did say you’re going to get this tax break, fine. But I don’t think anybody thought there would be two tax breaks.”
"I'll bet all of the people watching this would love to have just either no property taxes or no sales taxes for a few years, well the data center is still going to get one or the other, just not both," he said.
Idaho isn’t known for having a large data center industry – the FBI, DataSite, Tonaquint, and Involta all have facilities in the state – but the bill will mostly affect Meta.
In early 2022 the social media firm announced plans for a new data center campus in Kuna, Idaho. The company said it was investing $800 million in the project, set to be 960,000 sq ft. The company broke ground around September 2022, with construction anticipated to continue through 2025. Meta had been working with the city under the title Project Peregrine. At the time of the original announcement, Meta said it was investing approximately $50 million in a new water and sewer system for the city that would be dedicated to the City of Kuna to own and operate.
The project was large enough to qualify for sales tax exemption, with the City of Kuna then creating an urban renewal district encompassing the 325-acre industrial park in which the data center was located.
The Kuna site was one of the sites where construction was recently paused amid a ‘rescoping’ of Meta’s future data center portfolio as it looks to cater to more AI-dedicated hardware and applications.