(The Center Square) – Louisiana has recruited some of the world’s largest technology companies without establishing statewide rules for how their data centers should be valued for property taxes.
A proposal before the Louisiana Tax Commission seeks to fill that gap by creating the state’s first valuation standards for servers, storage systems, networking equipment and the infrastructure needed to power and cool the facilities.
The Louisiana Association of Business and Industry commissioned the proposal to give companies and parish assessors more certainty about future tax bills as billions of dollars in data-center investment flow into the state.
“The Tax Commission’s rules and regulations are silent on data centers,” Bob Adair of Advantous Consulting, who prepared the proposal for LABI, told The Center Square.
Without statewide guidance, each parish assessor must determine how to classify and value the equipment.
The proposal would assign servers, storage systems and networking equipment a three-year economic life. Under the recommended depreciation schedule, $1 billion of qualifying equipment would be valued at $700 million after one year, $490 million after two years, $340 million after three years and $160 million after four years.
That would not be the company’s tax bill. It would be the estimated property value used to calculate taxes before assessment ratios, local millage rates and any exemptions or negotiated agreements are considered.
Electrical and cooling infrastructure used to operate the data center would receive an eight-year economic life.
Adair said the proposal is not intended to change existing agreements or reduce any payments already promised by companies such as Meta, which is building a massive artificial-intelligence data center in Richland Parish.
“This is not intended to interrupt any agreements that are currently in place or are planned to be put in place,” Adair said. “It is intended to provide general parameters for the valuation of data centers, particularly to give companies more certainty.”
Louisiana Economic Development said the state’s major data-center projects generally use payment-in-lieu-of-taxes agreements, commonly known as PILOT agreements, rather than relying entirely on conventional property-tax calculations.
Those agreements are negotiated with local taxing authorities and typically establish payments for 20 years or longer.
“These agreements provide long-term certainty for both the company and the community while ensuring sustained local revenue over the life of the project,” LED said in a statement.
That means the Tax Commission proposal may not directly change the payments Meta or other companies have already agreed to make. It could, however, affect data centers that do not operate under PILOT agreements, future negotiations and the value placed on equipment after an agreement expires.
Adair acknowledged that lower property values generally result in lower tax collections when the tax rate remains unchanged.
But he said the purpose of the proposal is to recognize how quickly computing technology loses economic value, rather than to guarantee a particular tax result.
The distinction, he said, is between equipment being “obsolete” and experiencing “obsolescence.”
A server does not necessarily stop working after three years. It may nevertheless be worth substantially less because newer equipment can process more information while using less power and space.
Adair compared it with an older cellphone that remains functional but no longer performs like a new model.
“Technology changes pretty quickly,” Adair said. “Even during the period between the design and startup of a data center, there could be some obsolescence because the technology has changed during that time.”
The proposed three-year schedule would place data-center computing equipment among the fastest-depreciating property in Louisiana’s valuation tables.
Chemical-industry machinery and equipment, for example, is assigned a 15-year economic life. Using the depreciation schedule alone, $1 billion of that machinery would retain a value of about $790 million after four years, compared with $160 million for servers under the data-center proposal.
The comparison does not account for differences in how the industries operate. Refineries and chemical plants may use major pieces of machinery for decades, while technology companies frequently replace computers and other electronics.
LED argued that continued replacement and expansion would replenish the property-tax base as older equipment loses value.
“Global companies like Meta and AWS don’t invest tens of billions of dollars to build cutting-edge AI infrastructure and then allow it to become obsolete,” the agency said. “They continually upgrade and replace equipment to keep their facilities technologically and economically competitive and viable.”
Adair agreed that replacement equipment could offset some lost value but said those investments cannot be assumed.
Companies may replace an entire generation of equipment, address only the most serious technological shortcomings or continue using older systems where replacement is not economically justified.
“Ideally,” new investment would offset depreciation, Adair said. “But those are capital-investment decisions. Companies have to decide whether it is worth completely remedying the obsolescence or remedying only part of it.”
The proposal remains in the early stages of the Tax Commission’s rulemaking process.
“The commission looks forward to receiving rebuttal next month to better understand the scope of the proposal,” commission spokesperson Michael Mathern told The Center Square.
