Tax incentives for data center projects considered

The state would offer additional tax benefits intended to incentivize the construction of large data centers in Nebraska under a bill heard March 1 by the Revenue Committee.

Lincoln Sen. Eliot Bostar, sponsor of LB209, said Nebraska has fallen behind other states in providing favorable tax treatment for data center projects. Without changes like those proposed in LB209, he said, it is unlikely that technology companies will build additional projects in the state.

Under LB209 as introduced, computers and related equipment used in the operation or maintenance of a data center in Nebraska would be exempt from personal property tax and state sales and use tax.

It also would provide sales and use tax exemptions for electricity or other fuel used to operate a data center as well as for certain types of tangible personal property related to a data center.

The state Department of Revenue estimates that the bill as introduced would reduce state general fund revenue by $7.6 million in fiscal year 2023-24, $19.5 million in FY2024-25 and $20.7 million in FY2025-26.

Bostar said he would introduce an amendment to retain only the proposed sales and use tax exemption on computers and related equipment, significantly reducing the amount of lost tax revenue.

Luke Peltz testified in support of LB209 on behalf of the Lincoln Partnership for Economic Development, the Greater Omaha Chamber of Commerce, the Nebraska Chamber of Commerce and Industry and the Nebraska Economic Developers Association.

He said the state’s newest business tax incentive program, the ImagiNE Nebraska Act, passed in 2020, puts the state at a disadvantage when trying to attract large data center projects because the program does not allow companies enough time to fully utilize the tax credits they earn.

Bill Conley testified in opposition to the bill on behalf of the Sarpy County Board of Commissioners. He said the county, home to four data centers, loses $5.8 million in personal property tax revenue each year as a result of state tax incentives designed to attract those projects.

LB209 as introduced would reduce county tax revenue by an additional 3.6 percent, Conley said, which would force the county to raise taxes to maintain services.

Lynn Rex, who provided neutral testimony on behalf of the League of Nebraska Municipalities, said her organization opposed LB209 as introduced. With the adoption of Bostar’s proposed amendment, however, the measure’s benefits for Sarpy County cities would outweigh the costs, she said.

The committee took no immediate action on the bill.