Microsoft works to unwind tax breaks for its metro Atlanta data centers

It’s part of the Big Tech firm’s recent charm campaign to ease tensions over its hulking data centers, which have emerged as one of Georgia’s largest controversies.

Credit: Courtesy of Microsoft

Credit: Courtesy of Microsoft

The property tax breaks were approved in recent years by the development authorities representing those respective project sites. Though county and city leaders appoint board members, the authorities often operate independently and use tax incentives as a business recruitment tool.

Data center incentives and the potential tax revenue waived in their recruitment were highlighted Wednesday during the Fulton County Commission’s meeting, where the board unanimously approved a resolution opposing new tax breaks for these projects.

Commissioner Bridget Thorne mentioned Microsoft’s shift in property tax break strategy as proof Big Tech has shown it wants to come to Georgia regardless of incentives. She also referenced how Georgia law already grants lucrative sales tax exemptions for data center equipment, which racks up a multibillion-dollar tab annually.

“For instance, Microsoft has even given back the tax abatement it was awarded,” Thorne said during the meeting. “They said they didn’t want to take from the property taxes, because the state incentives were good enough for them. Georgia is already a good place to invest without having Fulton County property taxes going to them.”

She told the AJC in an email after the meeting that she learned of Microsoft’s effort to void its tax breaks through Select Fulton, one of the county’s economic development arms.

The Development Authority of Fulton County, also known as Develop Fulton, has approved or considered multiple property tax breaks for data center proposals and expansions. The agency said it has been contacted by Microsoft over its plans.

“Develop Fulton acknowledges that it is coordinating with Microsoft to unwind the existing bond transactions between the parties,” the authority said in a statement.

Credit: Courtesy of Microsoft

Credit: Courtesy of Microsoft

These types of property tax breaks typically involve reducing a project’s taxable value and then gradually increasing the amount of taxes owed each year until it’s assessed at its full market value. Most of the time, that takes place over 10 years.

Microsoft’s tax breaks in Fulton and Douglas counties are partway through that 10-year abatement schedule, so voiding these agreements means each project will jump to being assessed and taxed at its full market value. It’s unclear how much extra in taxes Microsoft will pay as a result of this, but it’s likely several million dollars.

The Palmetto data center incentive was adopted in 2020 and worth an estimated $14.6 million over its 10-year abatement schedule. A 2021 tax break for its East Point project was valued at $17.1 million. The estimated tax savings for the Douglas County project near Lithia Springs was not made public.

Microsoft leases lots of data center space in metro Atlanta in facilities it does not own, and tax breaks associated with those projects will not be affected.

One is EdgeConnex’s data center campus that’s under construction in Union City, a project that ultimately received a $75 million tax break from Union City’s development authority after first being considered by Develop Fulton. Microsoft also leases space at the QTS data center campus in Fayetteville that received its own tax break.

Data centers are unpopular with a majority of Georgians across the political spectrum, recent polling shows, and critics raise concerns over the centers’ electricity and water demands, size and tax breaks.

Several Georgia counties and cities have curtailed data center projects in the face of backlash, including Atlanta. Georgia’s capital has prohibited the computing centers from being built near the Beltline, in certain neighborhoods and near transit stations, although one project is seeking an exemption in Adair Park.

Microsoft is among the Big Tech firms that has taken notice, announcing in January a slate of what it calls “community-first AI infrastructure commitments.” Its five central promises focus on preventing electricity prices from increasing for existing customers, limiting water usage, creating jobs, generating new tax revenue and installing new workforce training programs near their data centers.

Credit: Ben Hendren

Credit: Ben Hendren

“There have been growing questions and even concerns in many communities about what the presence of a data center means for the people who live there,” Brad Smith, vice chair and president of Microsoft, told the AJC in January. “So, obviously, it’s critical that we address these issues.”

Microsoft pledged it would no longer seek local property tax incentives, and the company spokesperson said the next step in that effort is evaluating the current tax breaks it enjoys.

“For communities where we’ve previously entered into tax incentive agreements, we are conducting a case-by-case review to ensure that they live up to the commitment we’ve made to pay our full and fair share of local property taxes, adding revenue to local towns and cities,” the spokesperson’s email said.