Integrity • Tenacity • Clarity
Welcome to the ITC Tax Podcast, where we
cut through the complexity of taxes and
help businesses plan smarter, save
money, and stay ahead.
Today, you’ll have myself, Stephen
Shaw, COO of ITC Tax, and Mark Dzeda.
He is the founder and CEO of
ITC Tax. And today we’ll be focusing on
starting points in regards to data
centers and kind of a back and forth
between myself and Mark Dzeda.
Mark, you want to kind of introduce
yourself?
Sure. Mark Dzeda. I’m the founder and
CEO of ITC Tax. I founded the firm back
in 2003 to level the playing field for
taxpayers and owners when working with
jurisdictions to make sure they get
treated fairly and equally
with other businesses in the community.
So you know we’ve been working on this
since 2003 and ever since then
we’ve been adjusting to changes
in the business businesses the
environment. I guess now the important
thing is we’re seeing data
centers have arrived, a big cost
item for companies and a big
impact on the local taxing jurisdictions
with regards to value. So something
in our mind very important to pay
attention to. So Mark, for a company
that’s considering building a data
center anywhere in the US, Texas,
from a property tax or any
kind of tax perspective what should they
be looking towards and considering
when they’re picking a site or a
location? Well, there’s several factors
that come into play when a company or
developer developer is looking at
building a data center. But from a pure
tax perspective, what’s most important
is you want to make sure you receive and
are granted the incentives that are
available to you.
And I think to obtain incentives, you
have to start early in the process
almost before the project is announced.
Yeah. Yeah. Or certainly once it is
announced or found out by the local
press, the newspapers and
the like that you make sure that this
site is competitively cited along
with other states because in order
to receive credits and incentives you
have to make sure that this is an
incentive versus a reward. Once you’ve
decided that you’re going to build in a
location or a particular state it
becomes a reward. It’s no longer an
incentive and then basically you’re
grasping at straws or crumbs when it
comes to incentives because a lot of the
more lucrative ones are actually
outlawed or won’t be granted should you
wait too long in the process. So the key
here is start early. Make sure you sign
as many agreements as you can. Even use
names that maybe do not give the
company’s owner out and make sure you
negotiate as much. Make sure that
everybody knows that this is a
competitively cited project that you
have other options available to you.
Why is that important to express
that the site selection is competitive
in a company’s mind?
It’s very important because there are a
lot of groups, no matter what their
politics are, and a lot of laws that
are actually looking to not grant
incentives. They take the position that
they would have come anyhow. Why are we
offering them an incentive if they would
come here anyhow? So, it’s very
important that you move early before you
announce the site and then make sure you
have other options, not in other
cities in the same state but in other
states or other countries for that
matter. So, you have to make this
competitive. You have to make them want
to grant you these incentives. And if
not this, but for this, you
would build the plant or build the data
center there,
right? And if they’re not an option, you
have other options to look at that are
equally as competitive
and just as equally as user friendly,
from a tax perspective,
locationwise, things like that. And
just having those different options
to bring to the table allows you to be
more of an enticing opportunity for the
taxing jurisdictions to bring you into
their market and entice you in that
sense of whatever
abatements or incentives are out there
for them.
Yes. Yeah. You want to let them know.
And also, data
centers don’t generally create a lot of
jobs.
And at one time, jobs were super
important, but now people are looking
for the investment in a data center, as
well as the jobs during construction.
So, I think it’s important you emphasize
that, hey, look, you’re not
going to be having to build a lot of
schools, which are expensive to build
and operate, but we’re going to generate
a lot of revenue without a lot of
schools. So there’s actually a plus,
especially in places where there is a
very low employment rate, such as out
in the perian. If you go outside
of Midland Odessa, some of these
neighboring counties, now you’re seeing
plants being announced up in the
panhandle, even nuclear plants going
as far as Amarillo. You’re not creating
a lot of jobs, you’re not going to
create a lot of schools, but you’re
going to add a lot of value to
the tax roll. You’re actually going to
develop sites that were brownfield
sites or sites that had
passed over for other potential
investments. So, I think you need to
emphasize how much tax dollars you’re
adding to the community and also how
you’re going to work with the
community. Improve the education,
improve opportunities, because where a
lot of these data centers are being built
are in smaller communities. And one of
the problems they have is when
their kids get older and get out of high
school or college, they flock to Dallas,
Austin, and Houston, or wherever the
data centers are being built, say
Atlanta or Northern Virginia. To keep
people at home, I think you want to say
we’re going to work with the system.
We’re going to make it so we have good
paying jobs so that the ones who do
create are going to make sure
that your kids stay here in the
community. Job opportunities for future
growth
and that are well-paying jobs, educated
jobs. They’re not
jobs that are going to go through the
cycles, but these are long-term jobs and
state-of-the-art
education is required for them. So,
you’re keeping the brains in the
community.
Yeah. A lot of times we’re telling our
clients, control the
narrative, right?
And so, you kind of touched on that. Why
is that important, controlling the
narrative? How would you explain to the
audience what we mean by that when we
tell our clients to control
the narrative or allow us to help control
the narrative? What you have to be
careful of is a lot of times there are
PR departments within a
company or in a community. You have
economic development foundations.
Then you have the press whose
job it is to discover stories. You want
to make sure that you don’t
overpromise
or announce prices that you’re going to
be stuck to. For example, if you say
you’re building a certain gigawatt
data center in a rural community and
it’s going to cost five billion or ten
billion, everybody’s already
starting to go through the numbers
saying we’ve got these tax dollars to
spend.
Yeah. And if you publish a number
of five or ten billion, they’re going
to hold you to that even if it’s not
correct. So when we say control
the narrative, we want to make sure that
you underpromise but be reasonable,
and then overdeliver
when it comes to value because these
projects are not necessarily about cost.
They’re all about value and job creation
and being a good corporate citizen.
Be careful what numbers you
announce. Be careful when you announce
how many jobs you’re going to create.
Also, when you think about jobs, make
sure you count all the jobs, even
contractors if you can, and count the
jobs during construction as well as the
jobs tied to the data center afterward.
Mhm.
So, you need to control all
those factors. Value is important, cost
is important. Time
schedules are important. You don’t want
to say you’re going to have this up and
running in 2028 when you’re going
to be waiting until 2028 or longer
just to get hooked up to the grid.
Yeah.
There are a lot of issues
that come into play. You’re also going
to have to work with the community
because you will encounter some not in
my backyard people. People don’t
understand maybe that you’ve got
hyperscale data centers, collocation
data centers, and Bitcoin miners. Some
people think these are just noisy
projects. Bitcoin mining is much noisier
than a data center, but you will
encounter local pushback from some
corporate citizens. So be prepared to
work within the community. Make sure
they don’t stop the advancement of the
project, which has happened in some
locations, including Tennessee and
Virginia. Start early, work with the
community, work with economic
development foundations so that you have
everything in place while still
emphasizing this is a competitively
cited project.
Yeah. And part of controlling the
narrative is it might on paper cost five
or ten billion, but a lot of those costs
aren’t taxable. So maybe you tell the
local jurisdictions the taxable portion
of that spending. That brings the value
down to a more reasonable taxable value
that you can manage once the site is up
and running. Would you agree? That’s
part of the process of controlling the
value narrative wholeheartedly. I think
there’s a lot of intangible value
associated with these data centers.
Yeah.
Getting the permits, getting the power
hookups, making sure you have water.
There will be issues around how much of
the value is attributable to power.
We’ve seen data centers talk about
bringing in nuclear power while using
gas power initially. What does that say
about the long-term value of gas
generation? How long will that equipment
be used? How does power flow back to the
grid? These are all issues that come
into play. But you want to control the
narrative and come in low and deliver
much more than promised.
Yeah, we touched on all of it, but didn’t
preface how executives might overlook
certain aspects of site selection from a
property tax perspective. Keeping all
this in mind, don’t just focus on the
big picture, but on the intertwined
taxes that impact the bottom line once
you’re operating.
There are many incentives and credits,
including sales and use tax exemptions.
You want projects and contracts set up
to maximize them. Once the plant is
built, you’ll have property tax in
perpetuity. Think long-term and be
careful about releasing too much
information or overstating investment
and jobs, because you’ll pay for that
for years under tax abatement
agreements.
We’ve focused on data centers because
they’re hot and large-ticket projects,
but this applies to any industry.
Existing businesses looking to expand
face the same decisions. What can a
community do to keep you and help you
expand? What incentives can they offer?
Or do you relocate to a jurisdiction
with greater incentives?
I agree. Data centers are the hot topic
right now, but this applies to
manufacturing, logistics, and warehouses
as well. Control the narrative, move
early, know your costs and value, work
with communities and economic
development groups, obtain exemptions
and incentives, and make sure projects
are competitively sited. Neighboring
states like Louisiana and Oklahoma are
very aggressive with incentives.
This is great insight for anyone
watching the podcast and trying to
understand the first steps for new
growth and starting early.
Thanks Mark for your time today. Thanks
everybody for joining the ITC Tax
Podcast. We appreciate your time and
look forward to the next time.
Thank you so much.
Bye.
Appreciate it.
