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Idaho Legislature killed this tax break for tech in ’17, ’18. What happened in ’19.

Why Idaho’s location makes it ideal for data centers

Matthew Klinger, president of Fiberpipe Data Centers in Boise, says data centers are vital for today's Internet-based commerce. Klinger wants a state tax break on infrastructure purchases to attract, and keep, data centers in Idaho.
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Matthew Klinger, president of Fiberpipe Data Centers in Boise, says data centers are vital for today's Internet-based commerce. Klinger wants a state tax break on infrastructure purchases to attract, and keep, data centers in Idaho.

As the Idaho Legislature winds down for the session, another business-oriented bill appears to be falling by the wayside, this one a sales tax exemption on equipment for data centers.

After several similar attempts failed over the past few years, the most recent bill didn’t even get a print hearing. Supporters blamed the busy legislative schedule and concerns about revenue, with individual tax collection down for most of the fiscal year. In addition, the Legislature needed to deal with issues such as Medicaid expansion and the school funding formula.

“There were a lot of moving parts, with the Legislature focused on health care and education issues, as well as several new legislators, a new governor and revenue shifts,” said Jay Larsen, president and CEO of the Idaho Technology Council, which was spearheading the effort. “The consortium will work with stakeholders and legislators so the legislation will be introduced early during the 2020 session with anticipation that the legislation will be law beginning in July 2020.”

People familiar with the bill said that the difference between this year’s legislation and previous attempts — geared toward large out-of-state vendors such as Facebook, Google and Microsoft — is that it was intended to include smaller local vendors who already provide data centers, such as Involta and Fiberpipe.

Supporters believe Idaho is being passed over as a site for data centers despite attractive qualities like the low cost of electricity and relative lack of seismic activity because it lacks such an exemption. All surrounding states either have such an exemption or don’t have sales tax at all. Bill supporter Involta — a Cedar Rapids, Iowa-based company with 14 data centers across the U.S., including one in Boise — reportedly has lost deals because Idaho lacks that exemption.

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Hundreds of servers on racks are kept in an ideal-performance environment at Fiberpipe Data Centers in Boise. Darin Oswald doswald@idahostatesman.com

Google, for example, announced in February that it was investing more than $13 billion in data centers, with major expansions in 14 states, creating more than 10,000 new construction jobs. The company now has a presence in 24 states, but not Idaho.

While data centers may not provide many jobs once initial construction is completed, their supporters contend that one data center tends to attract others, and data centers get updated, creating new renovation projects. Moreover, the jobs they do have are high-paying with high multipliers, meaning they spawn other jobs at electricians, utility companies and HVAC companies to support them.

In the 2017 legislative session, a bill to exempt data center equipment from sales taxes passed the Idaho House by a single vote, but didn’t get out of the Senate Local Government & Taxation Committee. In the 2018 legislative session, an identical bill didn’t even get printed.

A number of other business-oriented bills haven’t made it through the Legislature this session, including ones legalizing autonomous vehicles and providing a state-based historic preservation tax credit.

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