Snyder signs bills granting tax breaks to data centers
Lansing — Two days before Christmas, Gov. Rick Snyder delivered sales tax and use tax exemptions to the data server industry and a $5-billion Grand Rapids area development planned by Las Vegas-based Switch corporation.
Snyder signed into law two bills on Wednesday that west Michigan lawmakers and development officials had sought to land the server center.
Michigan “is quickly becoming known as an ideal place for high-tech jobs and growth of the emerging technology industry,” the Republican governor said. The tax breaks also apply to 40 existing data centers hosting electronic equipment that stores companies’ data for them.
Senate Bills 616 and 617, sponsored by Republican Sens. Tonya Schuitmaker of Lawton and Peter MacGregor of Rockford, exempt from the two taxes all computers, servers, routers, cabling and wiring used in operating, managing or maintaining data centers.
The bills easily passed last week despite opposition from groups such as the Michigan Chamber of Commerce and free-market Mackinac Center for Public Policy. They argued special breaks for selected businesses shift more of the cost for schools and government to other taxpayers who don’t get the same deal.
But Switch said the company and its international clients, ranging from DreamWorks to eBay, won’t come to Michigan without tax exemptions available in 16 other states. Switch proposes a 2-million-square-foot server campus for customers in the eastern U.S., officials said.
A House Fiscal Agency analysis said Michigan will lose $13 million in annual tax revenue from existing data centers. The state must shift money from its General Fund, or main checkbook, to the School Aid Fund each year so schools don’t suffer loses as a result of the tax write-offs.
The Fiscal Agency couldn’t estimate how much additional revenue the state will forgo as the Switch facility and others are built. But exempting $1 billion of capital expenditures from sales/use taxes would represent forgone revenue of $45 million in the year in which the equipment is purchased, the analysts said.
Data server companies have to create 400 new jobs in Michigan by 2022 and 1,000 new jobs by 2026 to keep the tax exemptions. Switch officials told lawmakers their company and its corporate clients will employ about 1,000 workers when its center is fully developed in a decade.
Lawmakers didn’t approve controversial personal property tax exemptions also sought for the Switch facility. It’s still up to municipalities, such as Gaines Township, to decide whether to provide those equipment taxes, which support such government functions as police and fire protection.
While signing, Snyder said state tax policies should “evolve to meet the needs of the jobs of tomorrow.”