michigan data center tax break

Data Center Tax Break Lures Big Fish to Michigan

Last week, the Michigan legislature presented a bill to Governor Rick Snyder that might stimulate data industry growth in the state. If signed into law, Senate Bill 616 will amend Michigan’s General Sales Tax Act to exempt companies engaged in data center related business from paying sales and use taxes.

Lawmakers developed this legislation after Switch, a Nevada-based data company, expressed interest in purchasing the former Steelcase “pyramid”outside Grand Rapids. Switch would use the space to house a 2 million square-foot SUPERNAP data center. However, Switch made the move to Michigan contingent on the state exempting it from sales, use, and property taxes. Senate Bill 616 took the request a step further by exempting all data centers and companies engaged in data center related business from sales and use taxes, but it does not exempt the industry from property taxes.

Senate Bill 616: Hard & Fast Facts

  • The bill provides sales and use tax exemptions. The Michigan sales tax requires individuals or businesses selling tangible items to consumers to pay a 6% sales tax on their retail sales. The Michigan use tax accompanies the sales tax; it requires that 6% must be paid on the price of all taxable items brought into Michigan or purchased from retailers in other states.
  • The bill does not provide for property tax exemptions, but data centers can still get property tax cuts up to 50% from local governments. Distressed cities can offer up to 100% property tax cuts.
  • Described in a rather lengthy manner, the bill provides sales and use tax exemptions to companies that operate or are otherwise engaged in business with data center facilities. A data center is a location that houses a large group of networked computer servers used for remote storage, processing, or distributing large amounts of data.
  • The tax breaks begin on January 1, 2016, but certain benchmarks must be met for the tax breaks to remain effective:
    • By January 1, 2022, at least 400 new jobs in the data center industry must have been created for the tax exemptions to continue.
    • By January 1, 2026, at least 1,000 new jobs in the data center industry must have been created for the tax exemptions to continue.
    • Assuming each of these requirements is met, the tax exemption will expire on December 31, 2035.
  • Michigan economic development corporations are responsible for monitoring the industry job growth and reporting the numbers to the Department of Talent and Economic Development.
  • Any revenue taken from the state school aid fund will be replenished each year from the state’s general fund.

If the bill is signed into law, Michigan will join several other states that have recently offered tax breaks to attract data centers. If you are in the data center industry, or you have questions about this legislation, contact the attorneys at Revision Legal here or call 855-473-8474.