How Indiana’s tax breaks could lead to major data center development

Indiana is making massive changes to draw technology companies and data centers into the state.

First introduced in January, House Bill 1405 passed in Indiana this week with a unanimous vote. This bill creates tax exemptions for data centers that invest between US$25m and US$150m in the state over a five-year period. The investment amount is dependent upon the population of the county in which the center is built, and includes clauses for locally sourced materials and labor. Exemptions include IT equipment, software, networking equipment, generators and power consumption from business personal property taxes, as well as the state's 7% sales tax.

Currently, no major data centers exist in the state, which makes this an important move to increase infrastructure and draw in technology companies. As many of the bordering states begin to look at incentives to draw in data centers, this move was strategic to increase appeal to Indiana. In fact, the announcement came shortly before Illinois passed their own data center tax incentive legislation. With data campuses – large properties consisting of multiple data centers – gaining popularity, a US$25m to US$150m investment is easily achievable over five years. 

The goal of this new bill is to draw technology and innovation into Indiana and position the state as an area where companies can expand. Data centers create infrastructure that is imperative for large technology companies. With data centers popping up around the U.S., Indiana hopes that these tax incentives will help it compete with other Midwestern states. 

Indiana proves to be an excellent location to build a data center. A large, rural landscape, access to Lake Michigan and a variety of other clean water sources make it an ideal area for data centers. The state can provide water for cooling the centers without having to pump it in from afar. There also is less competition in Indiana. Digital Crossroads of America Data Center is the only planned data center for the state, and it has yet to break ground. This means that data centers can take advantage of the tax breaks without having to compete. The desire to create technology-focused jobs will surely lead to other major benefits for data centers that invest in the state. 

It won’t be long until other data centers take advantage of the new laws to create hyperscale facilities. Although the tax breaks vary by county, it still proves to be a huge advantage for data centers looking to build. While other centers are looking towards technology innovation hubs, these incentives may prove to be the perfect way for data centers to get in on the ground floor of a potential new hub.

Three keys to data center development in Indiana:

With competition rising in the race to draw in technology companies and increase job opportunities, Indiana is one state that is doing it right. Below is a summary of the three reasons that this Midwestern state is poised for significant data center growth:

1. Tax breaks: First introduced in January, House Bill 1405 recently passed in Indiana, allowing tax exemptions for data centers that invest between US$25m and US$150m, depending on the county, in the state over a five-year period. There are also clauses in the bill that stipulate that centers use locally-sourced materials and labor.

2. Less competition: With no major data centers currently existing in the state, and only one planned (Digital Crossroads of America Data Center), this is an excellent time to stay ahead of the trend and take advantage of the lack of competition. Data centers will benefit from the desire to bring them in through a variety of initiatives, including the tax breaks, without an oversaturated market.

3. Ideal environment: Located on Lake Michigan, with a large land mass and plenty of smaller lakes, Indiana is the ideal state to meet the needs of data centers. There is plenty of access to clean water to cool the data plants. Also, the land mass makes it ideal for large data centers or campuses.

Although we’re seeing an increase in popularity in desert states, such as Nevada and Arizona, in attracting new data center developments, Indiana’s push to increase technology-related jobs will intrinsically benefit the data center community. Powerful data centers will draw technology companies into the state, which will create jobs and stimulate the economy in Indiana. The newly introduced tax breaks show that this state is willing to compete to bring in the services that technology companies are looking for.