(The Center Square) – A group of Wisconsin lawmakers are looking to expand the amount of data center spending eligible for sales tax exemptions despite the fact the current exemption has led to $70 million in forgone sales tax in its first two years, exceeding Department of Revenue estimates.
Assembly Bill 245 would expand the server computers eligible for the tax exemption from networked computers that are linked together to include individual standalone computers at a site. It is scheduled to be heard in the Assembly Committee on Ways and Means on Wednesday.
The bill was introduced by nine representatives, with Rep. Shannon Zimmerman, R-River Falls, authoring the amendment, while the Senate version of the bill is sponsored by Sen. Romaine Robert Quinn, R-Birchwood, and Sen. Julian Bradley, R-New Berlin.
The definition of qualified data centers would also expand to include data centers that include multiple companies, called colocation data centers. Data centers must include an investment of $50 million, $100 million or $150 million within five years from the certification date depending on the population of the county where it will be located.
“Because the Sales and Use Tax Exemption can be used for eligible items purchased by any entity for the benefit of the Data Center, it is difficult to track and monetize,” the Wisconsin Economic Development Corp. said in its fiscal estimate. “Data Centers currently certified well-exceeded the current Minimum Qualified Investment requirement for their respective counties in year one, and the exemption never expires.”
Good Jobs First Senior Research Analyst Kasia Tarczynska said that it is “safe to assume that most of that lost revenue went to Microsoft” of the $40 million in foregone sales tax last year alone.
The sales tax exemptions, enacted in the 2023-25 budget, are good for equipment, construction materials, electricity and more at qualified data centers in the state. So far, WEDC has certified three eligible data centers in the state.
“Broadening the eligibility criteria as proposed will increase the pool of potential data center projects, resulting in additional expenditures at the state and local level in the form of exemptions,” WEDC said in its fiscal note.
The sales tax exemptions are good for equipment, construction materials, electricity and more at qualified data centers in the state.
Many of the usually benefits of a business entering the state – property taxes, sales tax and employment – have already been conceded by the state while questions remain about the impact of energy and water use at the facilities.
The amount of long-term good paying jobs at data centers are also questioned.
Wisconsin’s Department of Revenue estimated the value of the incentives would be $8.5 million for the full multi-year construction of a facility and $735,000 recurring afterward. The department attributed the estimates to the U.S. Chamber of Commerce estimates that a typical data center costs about $215.5 million to construct.
But many of the Wisconsin data centers are much more expensive, with Microsoft recently announcing a second data center in Mount Pleasant that will cost $4 billion.
“The state budget accounted only for regular data centers, not hyperscale like the Microsoft one you have in Wisconsin,” Tarczynska told The Center Square. “Therefore, the cost estimates in the tax expenditure report might be way higher than what they predicted in the budget in 2023.”
The 2023 estimates are the same used for the new bill.
