LANSING – The Michigan House continues to work with its members to get the votes needed to pass legislation that would provide sales, use and property tax exemptions for data centers in the state, something inspired by Switch, a Nevada-based center looking to move into West Michigan.
The House Tax Policy Committee on Wednesday reported the Senate bills (SB 616, SB 617 and SB 618) to join the House bills (HB 4074, HB 4075 and HB 4076) on the floor.
Changes to the Senate bills include extending the sunset to 2035 like the House bills, and other more technical changes. The first two bills were reported 8-5 with Rep. Pat Somerville (R-New Boston), Rep. Martin Howrylak (R-Troy), Rep. Gary Glenn (R-Midland), Rep. Lee Chatfield (R-Levering) and Rep. Jim Townsend (D-Royal Oak) voting no.
On the final bill, the same five members voted no, and Rep. Brandt Iden (R-Oshtemo Township) abstained.
The bills have not yet come up on the House floor and Rep. Jeff Farrington (R-Utica), chair of the Tax Policy Committee, said there are a variety of different issues for members. Those include making the bills “fair” for all data centers and answering whether the tax changes are a “carve-out” for one industry.
“My take on it is it is new tax policy for an industry that didn’t exist 15 years ago,” Mr. Farrington said. “And there’s been discussion on why would you change this for one industry? And I retort back banks are taxed differently, service companies are taxed different, we have a complex tax code that makes a lot of changes based on what a company does.”
Rep. Al Pscholka (R-Stevensville), chair of the House Appropriations Committee, said he is still waiting to see the hit to the General Fund the bills could create.
“I am hearing a number of $25 million, it gets my attention,” he said. “Anything more than that and I start to get a little worried.”
Pscholka said there are General Fund hits in other bills as well, like the aviation fuel legislation (SB 418, SB 425, SB 426, SB 612, SB 613 and SB 614) sitting on the House floor. Though he said that should have been done “years ago.”
Still, “We’ve got to be careful,” he said.
Farrington said he expects changes on the House floor to the bills.
The Michigan Data Center Alliance has been lobbying for a “fairness” amendment that would keep all current data centers in the state paying the same taxes as they are now, but allow new data centers going forward to get the exemptions.
Under the bills, to get the property tax exemptions, a local community would have to approve the center.
Farrington said the amendment is not bad policy, but local governments and the data centers are not coming to a compromise.
“At the end of the day, this isn’t the state’s money, this is the local’s money,” he said. “When we did PPT reform a couple of years ago, we reimbursed it all. We are not in this case. I think the best and more fair way to do it is to leave it up to the locals to decide if they want those jobs in their community or not.”
But the alliance is calling for the House not to act on the property tax piece (SB 618 and HB 4076).
“We are deeply dismayed that members appear willing to give special treatment to an out of state company over those that have been paying taxes, creating jobs and playing by the rules here in Michigan for years,” Yan Ness, spokesperson for the alliance, said in a statement. “We urge lawmakers in both parties to delay action on a flawed personal property tax bill that creates an uneven playing field. Lawmakers must recognize that ramming through bad policy in the frenzy to bring one company to Michigan could drive many other existing businesses out of our state.”
Rep. Andy Schor (D-Lansing), sponsor of the personal property tax bill in the House, said the data center group is looking to strip the bill of the local control piece so the date centers won’t have to pay property taxes on new investments. And, he said, the amendment they want to see would actually reimburse local governments for their property taxes through a formula.
“I think the personal property tax bill is going to be held back because there is more work that needs to be done on it to make everybody comfortable. You’ve got the locals, you’ve got the data centers, there’s just a variety of questions,” he said.
Schor said he is disappointed it is his bill that will not pass. But noted he is not in the majority so does not know for sure.
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