Locales are rustlin’ up new ways to get more tax value out of data centers

I’ve been writing articles and speaking on data center valuation and taxation for years. In the world of property tax, they are one of the most fascinating and complex asset types. When you consider more than 75% of the world’s Internet traffic flows through data centers in Northern Virginia (our backyard), it’s an asset type we see all the time.

Given our unique expertise in understanding how data centers operate, we are quite proficient at dissecting their value from a property tax perspective. You can expect to see quite a few blog posts on data centers going forward. We’ll cover topics like how they’re valued and why they’re a minefield when it comes to taxation.

With the proliferation of data centers throughout Northern Virginia and the sheer dollar value of information flowing through them, they have become a target for local jurisdictions seeking higher revenues. This is not news to most.

However, what is just over the horizon will be.

Data centers sit at the nexus of virtually all major technological leaps in today’s industries. Whether you’re a FANG stock, a government agency, or any other type of business that stores, transmits, and creates data over the Internet, you’re using one in some capacity. They are indispensable to our lives. The services and revenue streams being created through them are evolving faster than most can fathom.

As their use becomes more intensive and services more complex and diversified, the cost to lease “space” in a data center or operate inside its four walls becomes more expensive. Any time more revenue is generated through an asset, jurisdictions become more interested in capturing that value via taxation.

It is critical to impress upon our readers that in the eyes of a taxing jurisdiction, there is no greater positive net fiscal real estate asset that exists on this planet than a data center. And, no easier well to keep drinking from. The revenue flowing through the fiber and equipment scales exponentially and the public service costs are minimal compared to other asset types.

Data centers don’t vote, don’t put kids in public schools, and rarely need much from a jurisdiction other than intensive power from the local utility. That means it is only a matter of time before local jurisdictions find additional creative ways to tax the inherent value in these assets.

Continue to follow our blog series, where we will lead you into the wild world of data center taxation…