Last week, Sentinel Data Centers announced that it had qualified for a property and utility sales tax exemption that became law on Sept. 30, 2015. As we discussed in October, the Data Center Infrastructure Act, a vital component of Gov. Pat McRory’s North Carolina Competes initiative, provides a sales tax exemption on electricity and datacenter support equipment when a datacenter owner invests at least $75 million of private funds within five years of his first tangible property investment in the datacenter (after Jan. 1, 2012).
Sentinel designs, builds, owns and operates best-in-class data center facilities for large enterprises. As detailed on its website, its value proposition centers on leveraging the economies of a mega-scale operation, including infrastructure and engineering expertise, for individual firms. As a result of satisfying the conditions of the act, all the tenants of Sentinel’s 420,000 square foot facility located in Durham, North Carolina, will be able to take advantage of the sales tax exemptions on information technology, related data center equipment purchases, and on electricity consumption. With this new development, Sentinel expects to be able to offer its tenants a total cost of occupancy that is “irrefutably among the lowest in the country.”
BizJournals reported that prior to the act’s passage, the minimum required investment was quite a bit higher, between $150 million and $250 million, and did not enable tax benefits to accrue to occupants of multi-tenant facilities. This meant that the sales tax exemptions were out of reach of any but the largest tech companies, like Facebook. In light of the growing trend of multi-tenant data center facilities, the act comes at a good time.
When Gov. McCrory signed the act into law, Sentinel acknowledged that it had worked hand in hand with the executive and legislative branch leadership, along with other technology and data center businesses, for its passage. Sentinel also noted that the Tar Heel state was an early adopter of data center tax incentive legislation that supported large, single tenant facilities like Google, Facebook and Apple, but that the act made North Carolina even more attractive. The BizJournals article pointed to other North Carolina companies that will be able to take advantage of the act’s exemptions, like Windstream and Compass.