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February 25, 2021

Data center tax-break vote delayed despite governor’s endorsement

YouTube | digitalcarbonzulu A rendered image of the first phase of the data center proposed by EIP in New Britain.

The State House approved a fast-tracked bill this week that would give tax breaks to data centers setting up shop in Connecticut. 

House Bill 6514 would waive state sales taxes for 20 years on any company that invests at least $200 million on a data center in the state, or invests $50 million if the data center is located in a designated enterprise zone. The bill was approved 133-13 on Wednesday.

Some lawmakers questioned the energy usage and environmental impact of data centers, in addition to the fast-tracked process the bill went through before adoption. To address those questions, a planned Senate vote on the bill was delayed until to Monday,

“Connecticut needs to get in the game and bring this industry to our state,” Gov. Ned Lamont said in a statement of support for the bill. “This is a once-in-a-generation opportunity to show the technology industry that Connecticut supports this sector and we welcome their development in our state.”

With 11 data centers currently located in Connecticut, technology boosters are seeking incentives to lure more companies into locating here and creating highly paid IT jobs.

“We need to approach emerging technologies like these data centers with the utmost focus, as they represent changing trends and stronger economic results,” State Sen. Steve Cassano (D-Manchester) in support for the bill. “A warmer reception to these locations in our state could lead to many strong years of business growth and resulting economic strength.”

A data center, defined as a facility built to house a group of networked computer servers, would also be exempt from any financial transactions tax or fee that may be imposed by the state through trades of stocks, bonds, or any other financial products for 30 years from the date a new facility is completed.

CT Mirror reporting was used in this report.

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February 26, 2021

This bill could give an outsourcer such as Infosys an unfair advantage in Connecticut IT Market. Waiving taxes for 20 years would give any outsourcer that were to spin up a Data Center an unfair operational cost advantage over any existing Data Centers already in the state. This could allow any outsourcer to submit unsolicited bids to any of the existing eleven company providing internal IT Processing Services. It would be highly probable this bids could now significantly undercut those of the existing providers. If this were to happen, it could leave the state with one or two "no tax" outsourcing Data Centers, as opposed to the eleven taxable centers we currently already have. That would cause a significant loss in tax revenue and jobs provided by existing Data Centers if they were to be successfully outsourced. Additionally, outsourcers are notorious for running their facilities "just beyond adequate", and with staff that is many times brought in under H-1B Visas. Legislators must be very cautious in how the handle this exposure.

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