Nebraska Data Center Tax Incentives Won’t Meet Future Market Needs

With the increasing need for computing capability, data center construction projects continue to rise. As a way to draw economic benefits to their area, many states have begun offering incentives for companies looking to build these facilities. In fact, 17 states have passed legislation providing data center tax incentives since 2005.

Nebraska, one of the 17 states to offer tax credits, may need to rethink its plan. Data center location experts are finding problems with Nebraska's data center tax incentives, as the future of the market doesn't align with the state's offerings. The Nebraska Advantage Act has proved beneficial for large, enterprise-level data centers, but doesn't help those companies leasing wholesale space in an existing facility.

The Nebraska Advantage Act offers a 100 percent sales tax refund on equipment, construction and capitalized software for companies making a minimum $200 million investment in data center infrastructure and creating at least 30 jobs. The NAA has other benefits, including a 100 percent refund on real estate taxes paid to the locality where the facility is built, 100 percent exemption on personal property and limited refunds on employee income taxes. A less expansive set of data center tax incentives are also offered to companies making a minimum $37 million investment, but that threshold still excludes businesses leasing rack space.

The city of Omaha, where many large-scale data centers are already located, offers many incentives to developers, including access to affordable utility services. The city's proximity to a major airport and an available technical labor force are also advantageous to data center providers, yet no new facilities have been announced in the area in almost a year.

Companies are increasingly turning to the option of leasing wholesale data center space because of the benefits it offers to the bottom line. Organizations are able to budget information technology expenses as operating expenses, instead of labeling them as capital expenditures, which is ideal considering the uncertainty caused by the technologies rapid changes. Tenants who are unable to find a favorable tax environment in Nebraska will certainly look elsewhere, excluding the state from a growing section of the data center market. 

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