In 2013, the Arizona Legislature established a tax incentive program directed towards Computer Data Centers. Owners, operators, and qualified co-location tenants of a CDC may be eligible to receive exemptions.
Only a few qualified candidates are taking advantage of this opportunity. If someone you know is an owner, operator or a co-location tenant of a CDC, please consider forwarding this information to them. The goal of this program is to encourage and expand high quality CDC development within the state of Arizona. We can only achieve this goal if members of our community commit to spreading the word about this opportunity and encourage candidates to apply.
For ten calendar years, qualified owners, operators, and qualified co-location tenants can be exempt from all Transaction Privilege Taxes (TPT) and Use Taxes at the state, county, and local levels of the purchase of Data Center Equipment. For a CDC that qualifies as a Sustainable Redevelopment Project, the exemptions are available for up to 20 full calendar years.
Data Center Equipment includes:
- Equipment necessary for transformation, generation, distribution or management of electricity required to operate computer server equipment.
- Equipment necessary to cool and maintain a controlled environment for the operation of the computer server and other Computer Data Center components.
- Water conservation systems, including facilities or mechanisms that are designed to collect, conserve, and reuse water.
- All enabling software, computer server equipment, chassis, networking equipment, switches, racks, cabling, trays and conduits.
- All monitoring equipment and security systems.
- Modular Data Centers and preassembled components of any item described in this paragraph, including components used in the manufacturing of Modular Data Centers.
- Other tangible personal property that is essential to the operations of a Computer Data Center.
The exemptions do not cover Personal Property Taxes, Real Property Taxes, Taxes on Power or Telecommunications, or Prime Contracting TPT on Building Materials.
To qualify as a Sustainable Redevelopment Project, your CDC must either:
- Have had a vacancy rate of at least fifty percent (50%) for six of the twelve months prior to the acquisition by purchase or long term lease,
OR
- “Attain” a green building standard that they were not previously certified under, such as Green Globe, Energy Star, LEED, or other similar building standards.
More CDC facilities qualify for this tax exemption than are currently taking advantage of this opportunity. To certify your facility, qualified CDC owners or operators must satisfy the following:
- Submit an Application for CDC Certification and receive a Letter of Certification from Commerce,
- Satisfy the requisite Capital Investment Threshold in a timely manner and submit evidence of one of the following:
o If the CDC Facility is located in either Maricopa or Pima County, a Capital Investment of at least $50 million is made within five years of the date of the Letter of Certification from Commerce,
o If the CDC is located in any other county than Maricopa or Pima, a Capital Investment of at least $25 million is made within five years of the date of the Letter of Certification from Commerce,
o In the case of an Existing CDC, regardless of location, a Capital Investment of at least $250 million was made during the period between September 1, 2007 and August 31, 2013,
- Remit a non-refundable processing fee of $50.00 at the time of certification of the CDC,
- Comply with the employer requirement set forth in A.R.S. §§ 23-214(B).
Once your facility is certified as a qualified CDC, the process to certify your qualified co-location Tenant is extremely straightforward. Tenants in a qualified CDC are eligible for benefits if they have signed a lease of at least 500kW per month for a period of two or more years. To certify your qualified co-location Tenant, they must submit the following:
- Tax ID number for their certification letter.
- Proof of filing with the Federal e-verify program.
- $50.00 application fee made out to the Arizona Commerce Authority.
The goal of the program is to encourage business investment and the creation of high quality Data Center opportunities in the state. Over the course of ten years, a 1 MW deployment in Chandler, AZ could save over $2.4 million.
If you are interested in more information, or believe you may qualify for this tax exemption but are unsure of what the next steps are, contact me at [email protected] or Jim Grice with Lathrop & Gage, LLP at [email protected]. The application process may at first seem daunting, but with a little help navigating the application process your facility will be able to receive significant benefits.
For more information about the Computer Data Center Program visit http://www.azcommerce.com/incentives/computer-data-center-program, for detailed application guidelines visit http://www.azcommerce.com/media/107572/CDCinstructions.pdf, for the online application visit http://www.azcommerce.com/incentives/apply-now.
