Michigan Data Centers Gets Business-Friendly Tax Laws

Data center real estate markets can offer economic and technological benefits for businesses in the areas where they are constructed. The exploding IT industry has driven many states and communities to take action and make their financial and business development conditions more favorable to data center design and deployment. Michigan has been in the news recently for the ongoing economic woes and population decline of its largest city, Detroit, which became the largest ever U.S. city to file for bankruptcy earlier this year. However, there are some positive developments where the data center facilities market is concerned.

Several tax reform initiatives will make Michigan a more appealing area for businesses, especially those in the burgeoning tech industry. In March, the state repealed the Michigan Business Tax (MBT), a targeted incentive program that Tax Foundation vice president Joseph Henchman called "uniquely awful" and destructive for businesses. This Byzantine system was overturned and replaced with a straight 6 percent corporate income tax.

State officials recently announced that they will also be eliminating the Personal Property Tax (PPT), according to Henchman, which was originally intended to tax homeowner possessions but is today mostly used to levy additional costs on business equipment. This tax was especially problematic for data center owners and operators, as taxes on all their equipment could significantly drive up the costs of construction. Both public sector and private industry leaders applauded the decision to cut the PPT, which Michigan Governor Rick Snyder described as "the second dumbest tax in the United States," behind only the MBT, Henchman said. Michael Finney, President of the Michigan Economic Development Corporation, recently spoke to the many overarching benefits that eliminating the tax offers businesses in an interview with Area Development.

"Phasing out the PPT gets to the heart of the overall cost of doing business in Michigan," he said. "Without the PPT, companies will have an incentive to invest in capital equipment."

The benefits of data center research
Many states and communities have experienced the benefits of strong initiatives for data center growth firsthand, and both analytic and empirical evidence continues to drive more companies to increase their investment. Data centers are able to help level the playing field for startups and tech entrepreneurs, who outsource IT by necessity but can take advantage of colocation to invest in top solutions that contribute to business growth. Larger enterprises can help themselves by shedding some of the dead weight of legacy systems and operations methods that can be sped up, consolidated and better managed in a colocation setting. Some high profile companies are helping to increase Michigan's visibility – the Detroit-headquartered General Motors, the state's top Fortune 500 company, is spending $100 million on the construction of a new company data center in Milford, Mich., Bloomberg reported. The new facility will join another data center opened last year in Warren, Mich., allowing GM to consolidate from 23 data centers to two. The automakers' exit from the old facilities means that there could be more data centers for lease in the near future.

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