- Associated Press - Wednesday, December 2, 2015

LANSING, Mich. (AP) - State lawmakers on Wednesday took an initial step toward enacting tax breaks to ensure that a major data developer chooses Michigan as the site of its first mega-campus in the eastern U.S.

The fast-tracked bills, approved 8-5 by the House Tax Policy Committee, would exempt data centers from sales taxes, use taxes and property taxes owed on business equipment. The legislation is needed to finalize Las Vegas-based Switch’s plan to locate a facility near Grand Rapids, but it drew concerns from Gov. Rick Snyder and business interests such as the Michigan Chamber of Commerce worried about the budget implications and a lack of job-creation guarantees.

The company provides security, power and cooling for stacks of thousands of servers owned by more than 1,000 clients including eBay, Google and Amazon.

Supporters say the tax breaks are essential to keep Michigan competitive with at least 22 other states offering incentives to a growing sector that functions as the brains of the Internet and cloud computing. Switch estimates that the company and its clients will employ 1,000 workers and spend $5 billion at the Michigan “supernap” campus over 10 years.

“We bring companies to our environs. When they come, they bring their employees,” said Jason Mendenhall, a Switch executive vice president.



The Snyder administration expressed concern with the bills applying to all data centers, including about 40 already operating in Michigan. The lost tax revenue could be at least $20 to $30 million annually, not including losses associated with client businesses in data centers that also could qualify for tax exemptions, according to the nonpartisan House Fiscal Agency.

“At this point in time, I think the administration would prefer to look at this as a more narrow, pilot project type of scale,” said Jeremy Hendges, deputy director of policy and legislative relations for the state Department of Talent and Economic Development.

It was unclear when the House could vote, though legislators want to finalize the deal before adjourning later this month. The House panel changed the bills so local governments with an existing data center would have until April 1 to reject a property tax exemption on business equipment. State sales and use tax breaks would apply regardless.

The Senate Competitiveness Committee held an initial hearing on similar legislation Wednesday and may vote Thursday.

Yan Ness, of the Michigan Data Center Alliance, which is a group of nine companies with 38 data centers in the state, said all data centers - not just the Switch project - should qualify for tax breaks as part of a strategy to make Michigan a top industry destination.

“We shouldn’t use the tax code to pick winners and losers, especially when we can pick winners and winners,” he said.

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Online:

House Bills 5074-76: https://1.usa.gov/1lY5Y3E

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Follow David Eggert at https://twitter.com/DavidEggert00 . His work can be found at https://bigstory.ap.org/author/david-eggert

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