House approves tax incentives
Economy-focused bills court new data centers, aim to stop double taxation for some commuters
HARTFORD — In an effort to promote jobs in economically distressed areas, the state House of Representatives voted Wednesday to provide new tax incentives for computer data centers at a time of slow job growth.
The measure, pushed strongly by Gov. Ned Lamont, passed by a 133-13 vote with four members absent.
Rep. Sean Scanlon, the co-chair of the tax-writing finance committee, said the new data centers would each generate 1,000 to 1,500 construction jobs at a time “when our building trade industry and construction industry is looking for work.”
“Think of these data centers as the new manufacturing,” Scanlon told his colleagues on the House floor. “This is a job of the future.”
If Connecticut can attract multiple companies, the state could “become the hub of data centers in the United States,” Scanlon said.
The bill was debated on an emergency-certified basis, meaning top leaders allowed it to come to the House floor faster than the normal legislative process would allow. Some lawmakers wondered why there was an emergency.
“We live in a competitive environment with 49 other states for jobs,” Scanlon said.
“What we are trying to say to this industry is we welcome you to Connecticut. ... That means growth of a new industry of tomorrow.”
Lamont hailed the House vote as sending a signal to the industry. The measure was sent to the state Senate, where final legislative approval could come as early as Monday.
“Seeing the Connecticut House of Representatives approve this measure in a bipartisan way is exactly what our residents wantto see when it comes to our commitment to economic growth and continuing our Connecticut comeback,” Lamont said. “Data centers are the backbone of the digital age, and with this growing need, weare witnessing a significant period of national growth to build these infrastructures and create the corresponding jobs that support their operations. Connecticut needs to get in the game and bring this industry to our state. This is a once-in-a-generation opportunity to show the technology industry that Connecticut supports this sector, and we welcome their development in our state.”
Rep. Holly Cheeseman of East Lyme, the ranking House Republican on the tax-writing finance committee, said the bill was important because Connecticut has had job growth of only 0.6% over the last several years.
“This is an industry of the future,” Cheeseman said. “This is an industry that will put Connecticut on the map. ... Ohio has approached this in a very aggressive manner. Facebook and Google have located there. ... Make us known for being more than The Land of Steady Habits.”
But state Rep. Anne Hughes, a liberal Democrat from Easton, said she had concerns about the environment as the centers often use huge amounts of electricity.
“I’m concerned we are rushing this process” and not getting the best deal, said Hughes, who voted against the measure.
Hughes was the only legislator to speak against the bill on the House floor, but an unusual coalition of liberal Democrats and conservative Republicans provided the 13 votes against the measure. The opponents included members of the House Republicans’ conservative caucus, including Reps. Anne Dauphinais of Killingly, Kim Fiorello of Greenwich and Gale Mastrofrancesco of Wolcott.
The bill calls for sales tax exemptions for “certain goods and services purchased or used by the data center” and also property tax exemptions for equipment used by the center, according to a bill analysis. It also exempts the centers from any future state financial transaction tax if one were to be enacted. Lawmakers in New Jersey and New York have considered that measure, moves met with criticism by the New York Stock Exchange.
The state economic development department would oversee the centers to ensure that they made the minimum investments to qualify for the incentives. The owner of the data center must spend at least $50 million to qualify if the center is in a federal opportunity zone or an enterprise zone and $200 million if it is located outside those zones.
In other matters, the House voted 125-44 Wednesday for a three-pronged bill that would prevent double taxation for commuters who normally work in other states. Morethan100,000 Connecticut residents who traditionally commuted to Manhattan, Springfield and other places stayed home in 2020 and worked remotely. But New York and Massachusetts still charged them for the state income tax as if they had commuted there.
As a result, the House sought to prevent double taxation and make it clear that those commuters do not owe the Connecticut income tax, which they would owe if they had worked in Connecticut all year.
In the same bill, the House voted to eliminate the so-called poverty tax that forces former welfare recipients to pay back the financial help they received if they accumulate assets like houses that are then slapped with a lien that would need to be paid when the house is sold. The measure normally impacts about 1,300 people per year, lawmakers said. The issue has become a problem when residents were seeking to refinance their homes, legislators said.
Lawmakers also approved changes to the long-running system for making state payments in lieu of taxes, known as PILOT, that are meant to partially supplement cities and towns for lost property tax revenue from nonprofits and state properties. The numbers for each town will not be finalized until the budget is negotiated in early June, but the measure could provide as much as $49 million extra to New Haven and $22 million extra to Hartford.
All the bills passed Wednesday must be approved by the Democratic-controlled Senate before being sent to Lamont for his signature.
House Speaker Matt Ritter of Hartford and Scanlon said the PILOT bill’s passage was important so that mayors and first selectmen would have an early signal about how much money they might receive from the state at a time when they are setting their budgets this spring.
“For many years, we have underfunded PILOT — shamefully,” said Cheeseman, who voted for the bill. “This is a question of promises. Year after year, we don’t fulfill that charge, and we break our promises.”
If the legislature postpones the PILOT payments as it has done in the past, Cheeseman said, “We should change our mot to from The LandofSteady Habits to TheLand of Broken Promises.”