In 2019, Indiana passed a multi-pronged incentive to attract enterprise, colocation, and tenants by appealing to some of their biggest operational hurdles: taxes and energy.
“We heard the pain points directly from Data Center operators and worked to address that in the legislation,” said Brian Anderson, a Director of Credits and Incentives at DMA, who was a member of the group supporting the bill. “Exempting sales tax is considered table stakes for Data Center attraction, but Indiana took it a step further by writing energy and local taxes into the bill.”
As Indiana grows into a hotspot for data center development, it’s crucial for new facilities to navigate the complex tax landscape effectively.
How DMA Can Help
DMA is headquartered in Indiana. Our team of experts understands the array of state and local taxes that impact these high-value facilities and equipment, and we work with operators to model the costs and opportunities within Indiana’s data center tax landscape. Our comprehensive approach allows for successful outcomes that benefit the community and business operator, achieving long-term sustainability and cost efficiency.
Our collective expertise includes:
Property Tax Management
Data centers often involve substantial real estate investments. DMA’s expertise in property tax ensures that data center operators benefit from accurate assessments and potential tax reductions. Our comprehensive approach includes:
- Assessment Reviews: Ensuring that property valuations are fair and equitable
- Appeals and Negotiations: Representing clients in appeals to secure lower assessments
- Exemption Analysis: Identifying and securing applicable property tax exemptions
Sales and Use Tax Optimization
Data centers incur significant expenses on hardware and infrastructure. Our sales and use tax services help maximize tax savings through:
- Taxability Analysis: Determining which purchases are taxable and securing exemptions where applicable
- Audit Defense: Providing support and representation during tax audits to minimize liabilities
- Tax Recovery: Identifying overpaid taxes and securing refunds
Credits and Incentives
Indiana offers various tax incentives to attract data center investments. Our team assists clients in navigating and securing these benefits, including:
- Project Modeling: By accurately factoring in equipment depreciation, reinvestment, community tax rate appreciation, and a host of other factors, DMA’s property tax experts work hand in glove to model total tax impacts while creating several scenarios to generate tax savings while preserving new value creation for localities
- Property Tax Abatement: Working with local elected officials, DMA experts specialize in procuring discretionary property tax abatements
- Job Creation and Investment Incentives: Securing state-offered tax credits and grants for creating new jobs and investment in the state
- Energy Programs: Taking advantage of incentives for energy usage and implementing energy-efficient technologies
Compliance and Technology Integration
Ensuring compliance with tax regulations is critical for data centers. Our technology services and solutions streamline tax administration and reporting by:
- Compliance and Tax Managed Services: DMA can operate as an extension of your tax department, taking the burdensome tasks of compliance, and all the processes and operations that go into it, off your shoulders
- Integrated Tax Technology Solutions: Our tax technology experts help maximize the benefits of tax automation to find tax advantages, automate processes, optimize systems, and maximize fiscal and staff resources
Unique Tax Issues Data Centers Face
Sales Tax Exemptions on Equipment
Data Centers can benefit from sales tax exemptions on servers, cooling systems, and other essential equipment. Understanding the eligibility criteria and application process for these exemptions is crucial for maximizing tax savings. Indiana exempts sales tax on Data Center equipment through a state-administered program.
Energy Usage and Utility Taxes
Given the high energy consumption of data centers, managing utility taxes is a significant concern. Indiana offers certain incentives for using renewable energy sources, which can lead to substantial tax benefits. Indiana exempts sales tax on energy related to data storage and processing systems in a state-administered program. DMA can help data centers navigate these incentives and reduce their overall tax burden.
Property Tax Abatements
Local governments in Indiana may offer property tax abatements to attract data center investments. These abatements can significantly reduce the tax liabilities of data centers, especially during the initial years of operation. Indiana allows local communities to abate personal property taxes for Data Centers, and additional real property incentives may be available at the discretion of the locality. Our expertise ensures that Data Centers can effectively apply for and maintain these abatements.
Income Tax Incentives
Indiana provides income tax incentives for businesses that create jobs and invest in the state. Data centers can leverage these incentives to offset their income tax liabilities. The state of Indiana offers state-approved credits based on payroll and investment. Our team helps identify and claim these incentives, ensuring compliance with state regulations.
Managing Property Tax Valuations
Technological advancements and aging infrastructure present unique valuation challenges for data centers. Upgrading facilities to meet new demands can lead to reassessments and higher property taxes, while older infrastructure may face depreciation issues. DMA leverages its local expertise to help Indiana Data Centers manage these impacts, ensuring optimal tax outcomes and compliance with state regulations.
Find Success by Partnering With DMA
The surge in data center construction in Indiana presents both opportunities and challenges. Our comprehensive tax services allow Data Center operators to navigate the tax landscape efficiently, maximizing savings and ensuring compliance. As experts in tax management, DMA is the ideal partner for Data Centers looking to optimize their tax strategy and secure a competitive advantage.
| This website content should be used for general informational purposes only, and not as a substitute for consultation with professional tax, legal, or other competent advisors. Before making any decision or taking any action based upon information contained on this website, you should consult with a DMA professional. |
Optimize Your Data Center Tax Strategy in Indiana
Contact DMA today to leverage our expert guidance and maximize savings while ensuring compliance with state and local tax regulations.
Indiana has recently become a focus in the Data Center industry. Companies such as Google, Meta, Amazon, and Microsoft have announced plans to build facilities in the state due to its advantageous location, pro-business climate, and aggressive tax incentives.