A data center bill that originated in the Kent County Economic Development Office is soon to arrive on Gov. Larry Hogan’s desk and put Maryland on the map with surrounding states that have lured data center firms with tax incentives.
The bill faced uncertainty as lawmakers rushed to finish the session early in order to deal with the COVID-19 pandemic.
“Getting this data center exemption passed is a huge win for Maryland as we compete in the market to attract this emerging industry to our state,” said Senate Minority Whip Steve Hershey with only hours left in the session. “I’m quite proud this initiative started in Kent County.”
Hershey, R-Queen Anne’s, the lead sponsor in the Senate, said the bill will bring in considerable tax revenue from “construction and development–and ancillary businesses that feed off data centers.”
“This bill became the priority of the Maryland Department of Commerce and the Maryland Chamber of Commerce, this was a heavy lift,” he continued. “We usually don’t see any tax incentive bills pass in Maryland. But we had the right coalition of advocates, had informative bill hearings and worked the bill right up to the last day. It was quite an accomplishment.”
Hershey praised Kent County Economic Development Director Jamie Williams for bringing this bill to the attention of lawmakers.
“Jamie Williams and the economic development team researched the incentives in surrounding states and realized Maryland could not compete,” he said.
“The Kent County Team has been working on data center attraction for the past two to three years, with the knowledge that Maryland would not be a competitor for data center site location without a sales and use tax exemption,” Williams said in an email after learning the bill had passed both chambers. “We are pleased the legislation…is headed to the Governor’s desk. It was truly a team effort and we thank our partners for stepping up.”
“The Maryland Chamber of Commerce has been a valuable asset in leading the Maryland Data Center Coalition and getting this legislation through in such uncertain times,” she continued. “This will truly allow all of Maryland to be competitive in an industry that will only continue to grow and pour capital into the communities where they locate.”
Jay Jacobs, R-Kent, the lead sponsor of the House version of the bill, said “it was a huge effort in a difficult year and revenues from the data centers will help fund the Kirwan mandates that will hit the counties hard.”
“The legislature is always passing some sort of tax increase,” Jacobs said. “It’s nice when we can pass tax incentives that will actually produce revenue in an area that has been very lucrative in the other parts of the country.”
Jacobs said he worked with House Majority Leader Eric Luedtke to have the bill heard on second and third reader in one day, which requires a suspension of the rules.
“Without it, the bill would not have passed, the clock would have run out,” he said. “I stressed the importance of this bill to Luedtke for the state and for my district, which needs the revenue and the jobs these data centers produce.”
The bill is expected to bring in a windfall of revenues that Loudon County, VA has enjoyed since 2012. Revenues from tax exemptions there have grown from $50 million to $350 million in 2019.
The bill offers data centers firms exemptions to Maryland’s personal property and sales and use tax, provided they invest $5 million within three years of filing for the exemption — and hire at least five personnel earning 1.5 times the state’s minimum wage.
The investment requirement drops to $2 million in the Tier I counties of Allegany, Baltimore City Caroline, Dorchester, Garrett, Kent, Somerset, Washington, Wicomico and Worcester–because these counties have unemployment rates the exceed 150 percent of the state average.