New legislation proposes tax breaks for data centers to make Wisconsin more competitive

Listen to this article

Riding on the heels of Microsoft’s announced $1 billion investment in Mount Pleasant, Wisconsin State Rep. Shannon Zimmerman (R – River Falls) and fellow lawmakers on Monday introduced a bill to create tax breaks for future “server farms” in Wisconsin with certification from the Wisconsin Economic Development Corporation (WEDC).

A server farm, otherwise known as a data center, is a cluster of computer servers, power supply and cooling systems housed in a single building and maintained by one entity. They’re the physical infrastructure that makes the internet possible, according to a letter from Zimmerman.

The bill would amend current state law for general tax exemptions and create a sale and use tax exemption for equipment or software used at a data center for processing, storage, retrieval or communication of data, according to the Legislative Reference Bureau (LRB.) The exemption would apply to “qualified data centers,” which are built to house server computers, with a minimum investment depending on cost and population and has an owner or operator certified under state law, according to the bill text.

In a letter with Rep. Robert Wittke (R – Racine) and State Sen. Romaine Quinn (R – Cameron), Zimmerman wrote the bill’s goal was to attract more data center investment and promote high-tech economic development in Wisconsin.

“For communities across Wisconsin to compete for this investment and the economic benefits they bring, the state needs to exempt data center equipment from sales taxes – just like the state exempts business equipment for agriculture and manufacturing,” Zimmerman wrote in the letter.

Data center equipment such as servers, power systems and cooling equipment is expensive for almost all businesses to locate in a state without a sales tax exemption, Zimmerman added. Wisconsin’s neighbors such as Illinois and Iowa already had created a data center market with similar tax exemptions in place, he noted.

According to the measure, qualified buildings must have an investment over five years from the date when the corporation certifies the data center as eligible to claim the exemption. For example, a company must invest $50 million in a county where the population is no more than 50,000. The bill goes up to a company investing $150 million into a building in a county with more than 100,000 people.

The WEDC will determine tangible and intangible essential personal property for data center operations, excluding property used in data center administration, according to the bill text.

Several organizations such as the Wisconsin Economic Development Association, Wisconsin Technology Council, WEC Energy Group and Wisconsin Manufacturers and Commerce supported the legislation, Zimmerman added.

As previously reported by The Daily Reporter, tech giant Microsoft entered a deal to buy 315 acres of land from Mount Pleasant for $50 million. The parcel sits on tax increment district land originally designated for Foxconn. Microsoft wants to build a $1 billion data center.