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Ext. PublicationData Center Tax Incentives | Podcast
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Location Cubed
How can data center developers make the most out of tax incentives to optimize their investments? In this episode of Weaver: Beyond the Numbers, Location Cubed, Alex Hill and Evan Staggs unpack the landscape of state tax incentives and their impact on data center development for artificial intelligence (AI) and cloud storage.
Key Points:
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- Bonus depreciation provisions allow 100% write-offs for certain properties, significantly enhancing investment returns.
- Opportunity zones incentivize development in designated areas, offering tax advantages for long-term holdings.
- State and local property tax abatements stabilize tax expenses and support financial planning for new data center projects.
Alex and Evan open the conversation with tax changes in 2025 that are most likely to influence data center investment. Evan explains the return of 100% bonus depreciation for certain property assets with a useful life of 15 years or less, noting that this treatment can benefit organizations planning equipment-heavy facilities. “That’s a huge benefit to property owners looking to build fixture-intensive buildings,” he says, especially when supported by a cost segregation study.
The episode also digs into the benefits of opportunity zones and how they can shape development and investment decisions. These zones support growth in designated areas while offering tax deferral and basis step-ups that are particularly attractive in rural locations. Because incentives vary, understanding the nuances of each zone is crucial, as different areas may offer varying degrees of tax relief, shaping where organizations choose to invest.
Another key point Evan highlights is the value of state and local property tax abatements, which can stabilize multi-year tax expenses and provide certainty for planning new data center projects. Developers and investors entering the market should understand and leverage these programs. “It’s really important to talk to somebody who’s played this ballgame before,” he adds, illustrating the value of guidance in managing these incentives effectively.
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