Why Most Companies Get Property Tax Wrong (And What to Do About It)
You’re planning a major data center project. You’ve done everything right. You’ve run the numbers, analyzed the site, negotiated the power contracts. Your team is executing flawlessly.
But here’s the reality: while you’re focused on building, you’re probably making mistakes that will cost you millions in unnecessary taxes for the next 30 years.
And you don’t even know it yet.
On Episode Two of the ITC Tax Podcast, Mark Dzeda, Founder & CEO, and Stephen Shaw, COO, walk through the most common pitfalls they see data center owners make over and over again when it comes to property tax and sales tax strategy.
These aren’t minor issues. They’re multi-million dollar mistakes that happen in the first 90 days of a project and compound for decades.
The good news? Every single one of them is preventable. If you know what to watch for.
Pitfall #1: Losing Control of Your Own Story
The biggest mistake Mark sees is companies allowing information to escape before they have a tax strategy in place.
It happens innocently enough. Your PR team wants to announce the project. The local paper calls. Economic development boards ask for details. Internal presentations get shared. Numbers start floating around.
“People are almost broadcasting the value they’re going to be paying tax on,” Mark explains, “and that number may not even be realistic or taxable to begin with.”
Here’s what actually happens when you lose control of the narrative:
Press releases quote inflated project costs that include non-taxable components. Local officials start budgeting based on those numbers. Community expectations get set. And suddenly, the assessor has a publicly stated value they’re going to fight to defend.
Once that information is out there, you can’t take it back.
Think about what you’re really doing. You’re handing local jurisdictions a wish list of what they should tax you on. “$5 billion investment.” “2,000 new jobs.” Those become the baseline. The floor, not the ceiling.
And once jurisdictions believe your project is that valuable, they make budget decisions around it. They hire teachers, plan infrastructure improvements, and count on your tax dollars to fund it all.
Now try negotiating your actual taxable value down. Try explaining that only $2 billion of that is actually taxable property.
Good luck with that.
The lesson here is simple but critical: if you don’t define your story early, someone else will write it for you. And their version will cost you millions.
Pitfall #2: Waiting Too Long to Pursue Incentives
Here’s a conversation that happens way too often:
A company finalizes their site selection. Maybe they’ve even broken ground. The project is committed, moving forward, and then someone asks, “Should we look into tax abatements?”
By then, it’s usually too late.
Stephen puts it plainly: “If they realize you’re already there, you made a decision to be there, then they’re less likely to grant those abatements and incentives whether you qualify or not because now you’ve lost that competitive edge.”
This is one of the most painful conversations ITC Tax has with clients. Not because they did something wrong, but because they didn’t know they needed to act sooner.
Here’s the reality: once a jurisdiction knows you’re building there regardless, your leverage disappears. Incentives aren’t designed to reward you for showing up. They’re designed to attract investment that could go somewhere else.
No competition = no incentives.
It gets worse. Many incentives are legally prohibited once you’ve committed. The law actually prevents jurisdictions from giving you benefits after you’ve demonstrated you’re building there anyway.
What looks like a simple formality (“Let’s just file for the abatement now”) is actually “Sorry, you’re six months too late. The law says we can’t help you.”
ITC Tax has watched companies lose out on:
– Multi-million dollar property tax abatements
– Sales tax exemptions on construction materials
– Utility rate reductions
– Infrastructure support
– Training grants and cash incentives
All because the timing was wrong.
The fix? Apply for incentives early. Before announcements. Before commitments. While you still have multiple states and sites in play. While jurisdictions still have to compete for your project.
As Mark says, “You want to be driving the bus. You don’t want to be the passenger.”
Pitfall #3: Not Understanding What Different States Actually Require
Here’s a mistake that catches companies off guard every single time: treating all states the same.
If you operate in multiple states, you’re probably making a dangerous assumption. “We file property tax returns in State A this way, so we’ll do it the same in State B.”
That’s where things go sideways.
Mark explains: “If you’re used to filing in one particular state that wants more information, and you give that same amount of information to another state, Texas, Louisiana, states like that that don’t ask for the same details, then you’re handing to the state or your local jurisdictions, counties if you will, too much information.”
Here’s the real-world scenario:
State A requires detailed cost breakdowns. Serial numbers, acquisition dates, invoice amounts. That’s standard there, and you’re used to providing it.
So you take that same detailed approach to State B, which doesn’t require that level of detail. You hand over all the same comprehensive documentation because that’s what you’re used to doing.
But State B’s assessor isn’t going to sort through your information to separate taxable from non-taxable property. They’re going to take the full amount and tax all of it.
“The counties aren’t going to dig through your information and pull out what’s non-taxable and keep what’s taxable,” Mark notes. “They’re just going to take the full amount.”
Now you’re fighting to prove that portions of your equipment shouldn’t be taxed, when you could have simply not disclosed those items in the first place.
Know the law in every state you’re considering. Know what’s taxable. Know what’s required. And never disclose more than necessary.
Pitfall #4: Missing Critical Timing Windows (Because Laws Change)
Tax incentive programs aren’t static. They change. They expire. They get replaced with more restrictive versions.
And if you’re not paying attention, you miss your window completely.
Mark points to Texas as a perfect example. A few years ago, Texas had Chapter 313 agreements that provided huge school district tax abatements. Companies that understood the system filed multiple agreements, structured them strategically, and locked in benefits that lasted for years.
Then the law expired.
The new JEDI law is more restrictive. It excludes certain property types entirely. Solar and wind projects that would have qualified under the old law are now completely locked out.
Companies that moved early got grandfathered in. Companies that waited lost everything.
Even within existing laws, there are timing tricks. Some companies were able to spread agreements out over multiple years, avoiding the need to commit to inflated values too soon while still maximizing the benefit period.
Others locked themselves into high valuations on day one and paid for it for a decade.
The takeaway: know the law right now. Not just what it says, but how it’s changing. And understand that timing isn’t just important for incentives. It’s critical for maximizing benefits before programs expire or get replaced.
Pitfall #5: Treating All Counties the Same (Even in the Same State)
You’d think that within the same state, the experience would be roughly similar, right?
Wrong.
Some counties actively recruit investment. They’re collaborative, transparent, and genuinely want to work with you. They see data centers as economic engines and make the numbers work.
Other counties fight you on everything. Every line item. Every exemption. Every single tax dollar.
Stephen highlights this reality: “Different counties or different states are easier to work with than others. Some will fight you tooth and nail over everything, from a toothpick to a Mercedes, whereas other ones are much more easy to work with.”
This matters more than most people realize.
If you’re comparing two sites in the same state, one in a taxpayer-friendly county and one in an aggressive jurisdiction, the difference in long-term tax burden could be tens of millions of dollars.
Same state. Same laws. Completely different outcomes.
Rural counties often have lower thresholds for incentives than urban ones. Harris County (Houston) is going to approach your project very differently than a small rural county looking for its first major corporate investment.
You need to know:
– County-level tax behavior and history
– Willingness to negotiate and work collaboratively
– Long-term assessment practices
– How they’ve treated similar projects
This analysis needs to happen before final site selection, not after. Because once you announce, it’s too late to change your mind.
Pitfall #6: Oversharing Information (And Paying for It Later)
Here’s a pitfall that sounds counterintuitive: being too cooperative can hurt you.
Some jurisdictions offer cash incentives, grants, or economic development support. In exchange, they want detailed information. Your books. Your actual costs. Real salaries. Every expense.
It seems reasonable. They’re giving you money, so they want to verify your investment. Fair enough.
But here’s the problem: that same information can (and often does) end up in the hands of the property tax assessor.
Mark raises the critical question: “Sometimes the question is whether it’s really worth opening up and sharing all this information when that may not have actually gone into your value to begin with.”
You need to weigh the benefit of a grant against the risk of inflating your property tax exposure for the next 20 years.
A $500,000 grant sounds great. But if it leads to an extra $2 million in annual property taxes because you disclosed costs you didn’t need to, that grant just became the most expensive money you ever accepted.
Different states have different disclosure requirements. In some states, assessors have audit powers. In others (like Texas), they don’t. But if you open your books for a grant or cash incentive, you might be voluntarily giving them information they couldn’t legally demand otherwise.
This is where experience matters. You need someone who understands:
– What information is legally required
– What’s optional
– How disclosure for one purpose affects taxation
– The long-term consequences of opening your books
Sometimes the smartest move is to walk away from the grant and protect your long-term tax position.
How ITC Tax Helps You Avoid These Pitfalls
One of the most powerful advantages ITC Tax brings is something most companies don’t realize is available: independent, confidential advocacy.
Here’s how it works:
ITC Tax signs a non-disclosure agreement with you. Then the team pursues incentives, negotiates with jurisdictions, and handles all the preliminary work without revealing your identity.
Why does this matter so much?
Because it keeps your project competitive.
As Mark explains: “We can operate as an independent third party. We’ll sign a non-disclosure agreement with the taxpayer or owner, pursue abatements and incentives, and maintain confidentiality so it doesn’t get out in the press. That enables you to obtain larger incentives.”
When jurisdictions don’t know who they’re negotiating with, they can’t make assumptions about your commitment. They have to compete. They have to offer real incentives to win the project.
The moment they know it’s you, everything changes. Especially if they know you’re already committed, or if you’re a Fortune 500 company with deep pockets.
Independence preserves leverage. Confidentiality protects value.
And when ITC Tax finally reveals who’s behind the project, it’s done on the client’s terms, at the right time, with the right agreements already in place.
The Bottom Line: Your Tax Bill Gets Set in the First 90 Days
Here’s the critical takeaway:
Property tax isn’t a one-time cost. It’s an annual obligation that compounds over the life of your asset. A data center isn’t a three-year project. It’s a 20, 30, even 40-year investment.
If you overpay by $5 million in year one because you made one of these common pitfalls, you’re not losing $5 million. You’re losing $5 million per year for three decades.
That’s $150 million in unnecessary tax expense.
All because of decisions made (or not made) in the first 90 days of your project.
ITC Tax tells clients: “Under-promise and over-deliver. Come in low and deliver much more than promised.”
That’s not being sneaky. It’s being smart about what you communicate, when you communicate it, and who has access to that information.
It’s about understanding that what you say today becomes your tax bill tomorrow.
Don't Fall Into These Traps
The companies that avoid these pitfalls all share a few things in common:
They start early (before announcements, before commitments, before breaking ground)
They keep their options open (multiple sites, competitive positioning, no premature public commitments)
They control information flow (strategic disclosure, not blanket transparency)
They understand local laws (state by state, county by county, and how they’re changing)
They think long-term (decades of tax exposure, not just construction phase)
And they work with advisors who’ve seen these pitfalls destroy value over and over again.
Because here’s the truth: you get one shot at this.
You can’t rewind a press release. You can’t un-commit from a site. You can’t take back information once it’s been shared.
But you can start your next project the right way.
That’s what Episode Two is really about. The common pitfalls ITC Tax sees data center owners make with property tax and sales tax. And more importantly, how to avoid them.
Because when you get it right from day one, you’re not just saving money on taxes.
You’re protecting value for decades to come.
Are you making any of these mistakes with your current or upcoming project?
Contact ITC Tax for a confidential consultation. ITC Tax will help you identify where you’re exposed and what to do about it before it’s too late.