Tax breaks are perfect topping on Chicago pie

by Evan Bass
24 July 2020

For data centers, Chicago had it all … almost. 

Great connectivity. Low latency to both U.S. coasts. Hundreds of temperate days without the need to cool the data floor. Affordable power. Deep dish pizza. Sorry, did that last item make you hungry? Well, keep reading, you’ll be glad you did. 

While Chicago offered a deep, broad list of benefits for data center customers, something was missing. And other data center markets had it. 

So close to perfect 

The missing topping on Chicago’s data center pie? Tax incentives. And that left a noticeable blank spot on an otherwise delicious dish. 

Chicago’s situation came to a somewhat dramatic head on Jan. 27, 2019, when Ally Marotti of the Chicago Tribune wrote an article describing what was at stake if Illinois could not provide the same data center tax incentives that were offered in 30 other states. And of those 30 states, it was nice, quiet Iowa that figuratively sounded the alarm that Illinois could not help but hear. 

Back in 2017, Iowa enticed Apple to start building a 400,000 square-foot data center near Des Moines by offering $20 million in tax incentives. A comprehensive report paid for by the Illinois Chamber of Commerce Foundation found that if Apple had chosen to build its project in Illinois, the state could have added 3,360 jobs, $203.9 million in labor income and $521.7 million in economic output.  

Let’s do something about it  

Illinois did not want to watch more major players become drawn to Iowa as a top Midwestern magnet for data centers while forsaking Chicago and all its great benefits. 

Tyler Diers, executive director of the Illinois chamber’s technology council, made that point clear in Marotti’s article, saying “We hear the war stories all the time, and [data center operators] do too. We’re increasingly losing our desirability and our competitiveness. Even though we’re still relatively high, we want to stop the bleeding before we no longer [are] a desirable location.” 

Those are strong words, and they made a powerful impression. Instead of standing by idly as other states flushed their economic coffers full of data center-driven cash, Illinois bore down and did something about the situation. After all, this state is personified by Chicago, the city of the big shoulders where “dem Grabowskis” root for “Da Bears”. The Windy City was not about to get blown away by Iowa. 

In June 2019, Chicago essentially called dibs on the Midwest data center market when Illinois added data center tax incentives to the state’s capital spending budget. Now qualifying data centers -- and their customers -- are exempt from paying state and local sales taxes on equipment in the data centers, including everything from cooling and heating equipment to servers and storage racks. To qualify, a data center must spend at least $250 million on the facility and employ at least 20 full-time employees over a five-year period. In addition, it must prove it meets a green building standard, such as  LEED  or  Energy Star.  

NTT’s Global Data Centers Americas division will meet all of those qualifications as we build two 36MW data centers on our 19-acre campus in Itasca, Illinois, which is about 27 miles outside of the city of Chicago and right near airports, restaurants, hotels, beautiful lakes, and other amenities.  

Here’s what’s in it for you 

So how does that tax break benefit data center colocation customers? Well, the sales tax rate in Itasca is 7.5%. For businesses that are new to colocation, they may have to invest money in new equipment. Say they invest $500,000, that’s an extra $37,500 in sales tax they don’t have to pay because of this benefit. 

And this Illinois sales tax exemption is locked in for 20 years, so data center customers will pay no sales tax when they refresh their equipment down the road too. 

So that’s the Chicago story, and it’s a darn good one. This is a town that saw it was falling behind, so it lowered its broad shoulders, and charged forward to take the lead again. Now data center customers can enjoy significant tax savings for decades to come in a market that already had everything else they could possibly need. 

Oh, still thinking about that deep dish pizza? I understand. Here’s a great tip: you can get an authentic Chicago deep dish pizza shipped frozen to you from Giordanos or Lou Malnati’s. Either way you can’t go wrong. You’re welcome -- enjoy! 

P.S. You can talk the talk – Chicago-style! To learn more about the flavor of Chicago through the city’s unique jargon, check out this page to find out the meanings of frunchroom, the bean, grachki, sammich and more. 

Evan Bass

Marketing Communications Manager