Advancements in information technology and the need for storage have thrust data centers into the limelight as one of the fastest growing asset classes in the real estate sector. The pace of private investment, coupled with complex tenant landlord leasing fundamentals, have left taxing authorities struggling to accurately value both the real and personal property at these locations. The resulting assessments often mean paying more in property taxes than what is required.

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The Wild World of Data Center Taxation

The pace and variety of investment, complex leasing structures, and competition for site selection has left taxing authorities struggling to check the right boxes in the tax code as it applies to data centers. The result is disparate tax liabilities for neighboring properties and impossible budgeting and financial forecasting as jurisdictions implement new laws to capture tax revenue. Some jurisdictions are looking to others that already have good tax policy and credit and incentive structures in place, while others are pioneering new taxation ideas, usually not to the benefit of the data centers.

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Publications

Sale Leasebacks and Property Taxes

Why the prevalence of these transactions is part of the aggressive upward trend in data center property tax assessments, how this issue came about, the unintended consequences, and why property owners need to pay attention.

Authored by Nicholas W. Carter, MAI, Senior Valuations Manager

The Evolving Nature of Data Center Taxation

Data Center Dynamics interviews Ross Litkenhous on this uncharted territory of data center taxation and his presentation at the April DCD Conference in New York City.

Q&A with Ross Litkenhous, Global Head of Business Development, Altus Expert Services

Data Center Location Myths to Avoid

Data centers require nominal services while generating considerable tax revenue. States and localities offer incentive plans and tax credits to lure the industry, and in doing so are exploding some myths about data center location strategy.

Authored by Thomas T. Dubel, Senior Director, Location and Incentive Stratgies

 

Podcast: The Driving Expansion of Data Centers in Northern Virginia

Guest: Josh Levi, Vice President of Policy at the Northern Virginia Tech Council (aired 10.29.2018)

 

Being the largest regional data center market in the world, Northern Virginia continues to be a key destination for companies looking to own and operate these specialized facilities – reinforcing the area’s reputation of being “Data Center Alley.” Since data centers are highly capital intensive, tax considerations and incentives are vital for companies expanding in the region. Along these lines, the State of Virginia offers compelling sales tax incentives on equipment purchases to qualifying data centers through 2035, further helping to propel the region’s data center footprint.

  • More about the NTVC’s mission. (1:04)
  • What makes Northern Virginia ideal for data centers, and key statistics about the rise of “Data Center Alley.” (1:40)
  • Insights into NVTC’s report titled, “Virginia’s Data Centers Have Significant Economic Impact, Sensitivity to State Tax Regime.” (5:13)
  • How data centers are valued differently from a property tax perspective. (9:31)
  • Insights into regional investment by major technology companies, such as Microsoft’s purchase of 332 acres of Leesburg property from Peterson Companies. (14:14)
  • How Virginia Senate Bill 268 could positively impact NVTC member companies from a personal property perspective. (18:23)
  • Skilled labor shortages, rising labor costs, and new tariff concerns with regards to the construction and development of data centers in the region. (22:03)

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Data centers really look at taxes as a cost of either ownership, or occupancy, or both, when making siting decisions and the various factors that are taken into consideration when looking to expand or locate...there are now more than 30 states offering incentives to attract and grow their data center sectors.

Josh Levi, Vice President of Policy, Northern Virginia Tech Council

Case Studies

Real Property Tax

Data Center

Results: $2,500,000 tax savings annually
Services: Asset Reclassification, Valuation Reduction
Real Property Tax

Data Center

Results: $137,000, $150,000, and $165,000 for years 1, 2, and 3
Services: Asset Reclassification, Valuation Reduction
Location & Incentive Strategies

Data Center

Results: $4 million in incentives value
Services: Incentives Negotiation

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