Use tax: definitions; data center equipment used by an enterprise data center; exempt. Amends sec. 4cc of 1937 PA 94 (MCL 205.94cc).
The bill stipulates stringent requirements for maintaining the tax exemption, including the establishment of a minimum number of jobs in the data center industry—first requiring at least 400 jobs by 2022 and increasing to 1,000 jobs by 2026. The department of talent and economic development is tasked with monitoring job creation, and local economic development corporations must certify and report these numbers to ensure compliance. This ensures that tax benefits are linked to tangible investments and workforce development in the state.
House Bill 4905 proposes amendments to the Use Tax Act in Michigan, specifically targeting the taxation of data center equipment utilized by qualified data centers and colocated businesses. The bill aims to exempt the storage, use, or consumption of data center equipment from tax for the owners or operators of qualified data centers. This tax exemption is set to commence on January 1, 2016, and is applicable until December 31, 2035, or 2050, depending on specific criteria outlined in the bill related to job creation and economic performance.
The general sentiment surrounding HB4905 appears to be supportive among business interests, which view the tax exemptions as a means to attract investment into the data center sector and stimulate job creation in Michigan. However, there may also be concerns around the dependency on job metrics, which could lead to uncertainty regarding the availability of tax benefits if job creation targets do not meet expectations. Stakeholders in various sectors may also express differing opinions based on their interests in local economic growth versus broader tax policy implications.
Notable points of contention center around the enforcement of job creation metrics and the potential for discrepancies in reporting. Critics may argue that reliance on specified job numbers could disadvantage smaller entities or those struggling to meet aggressive employment targets. Furthermore, there is the concern that should a facility lose its status as a qualified data center—possibly leading to tax liabilities being retroactively applied—this could create financial burdens and deter businesses from investing in Michigan.