Data Center Tax Incentives
Does Alberta need incentives to compete?
Taxes are boring.
What about tax breaks..? … for an industry amidst a boom (not a nascent new energy technology)…
With hyperscaler capex (i.e. Amazon, Google, Microsoft, Meta, etc.) likely to spend over $300 billion in 2025 the data center boom doesn’t seem to need incentives to get going.
So why would a state or province feel the need to provide tax incentives for these projects?
I generally group tax incentives often fit into two buckets. The first is to support technologies and industries that have not yet hit commercial escape velocity (i.e. their economics don’t support investment at scale). Renewables historically fit this definition.
The other is to attract strategic industries to a region. This is more about outcompeting other regions for jobs, skills, etc. This is what appears to be happening with data centers today.
The boom is so big that competition to attract investment means tax breaks for the industry. Consider this: 36/50 states surveyed by Husch Blackwell have a form of tax incentives for new data center development.
Why am I interested in this?
I keep wondering about the Alberta data center advantage? While the province’s energy resources, low corporate taxes and regulatory environment are strengths, it does not (as yet) have a specific tax incentive for the industry.
Does Alberta need a tax incentive to compete with top tier destinations like Virginia and Texas? Both have incentives:
Texas offers a sales tax exemption on property, including electricity and equipment, in addition to no state income tax.
Virginia offers sales and use tax exemptions for equipment, software, and electricity in addition to some of the best fibre connectivity in the world.
So are Alberta’s strengths enough to outcompete the likes of States like Texas and Virginia? Or is the province left to compete with second and third tier markets?
𝘿𝙚𝙩𝙖𝙞𝙡𝙨:
Two graphics to complement the text:
𝙇𝙞𝙣𝙠𝙨:
Husch Blackwell’s 50-state survey of data center tax incentives
NAIOP Articles on Tax Incentives McKinsey: How data centers and the energy sector can sate AI’s hunger for power https://www.mckinsey.com/industries/private-capital/our-insights/how-data-centers-and-the-energy-sector-can-sate-ais-hunger-for-power
Enverus Blog: Data Center Demand | Framing the Frenzy