Data Center Property Tax Appeals

Hyperscale facilities are dense with high-cost mechanical and electrical infrastructure: redundant power feeds, large-tonnage chiller plants, raised floor systems, and hardened envelopes. Assessors who run a pure cost approach add all of that replacement cost to the real-property value without recognizing that a buyer of the building shell would not pay for infrastructure tailored to a single operator's compute load. Functional obsolescence accumulates quickly — a five-year-old air-cooled facility competes against new liquid-cooled builds at higher rack densities, and the market discount is real. Our commercial property tax assessment guide walks through how the cost approach is supposed to handle obsolescence, and our industrial property tax appeals page covers parallel arguments for specialized industrial buildings.

Sale-leaseback transactions for investor-grade hyperscale data centers often print at cap rates that reflect the credit of a single long-duration tenant, not the underlying real estate. Assessors who use those transactions as straight comparables overvalue single-tenant and colocation facilities that don't share the same lease structure. For colocation operators, the rents include power pass-through, connectivity, and managed services that should be unbundled before any income capitalization. We strip out the operating-business component and capitalize only the real-property income at a market-derived rate — the same logic explained in our cap rate and commercial property tax resource. If your data center was acquired through sale-leaseback, the gap between the transaction price and the real-estate-only value is often the largest source of over-assessment.

Yes — but they don't replace one. Abatements and tax credits reduce the bill for a fixed term, while an appeal corrects the underlying assessed value, which compounds for the life of the building. In Michigan, PA 198 industrial facilities exemptions and renaissance zone treatment can run alongside an appeal — see our Michigan special acts and abatements coverage. In Ohio, the Job Creation Tax Credit and local enterprise zone agreements address payroll and income tax, not the underlying valuation. In Indiana, abatements approved under IC 6-1.1-12.1 reduce the taxable assessed value for a phase-in period, but the base assessment still needs to be correct. We coordinate appeals with existing incentive packages so neither one is undermined.

Compute density has roughly doubled every few years, which means a building designed for 5–8 kW per rack is functionally obsolete in a market quoting 30–60 kW per rack with liquid cooling. Older facilities can't reach modern power density without significant retrofits to power, cooling, and floor loading — and that retrofit cost reduces what a buyer would pay for the existing building. Assessors who continue to value a 2015 air-cooled hyperscale shell against 2025 replacement-cost benchmarks are ignoring this curve. Documenting the physical limitations and quantifying the retrofit gap is central to a data center obsolescence argument — the same evidentiary framework we use for warehouse property tax appeals and other specialized industrial facilities.

In Michigan, the elimination of industrial personal property tax means equipment misclassified as real property creates outsized tax exposure — guidance from the State Tax Commission governs how these classifications are supposed to work. In Ohio, data centers compete for sales-tax exemption on equipment but must still defend the real-property assessment at the county Board of Revision. In Indiana, business personal property is filed annually on Form 103, and the real-property assessment is appealed separately through PTABOA — the Department of Local Government Finance sets the methodology. Each state requires a different filing path, and we handle all three.

The strongest data center appeals combine engineering, financial, and market evidence. Engineering documentation includes power capacity (kW per rack), cooling design (CRAC vs. CRAH vs. liquid), redundancy tier (N, N+1, 2N), raised-floor specs, and floor loading. Financial documentation includes the colocation rate card stripped to real-property rent, lease abstracts, and operating expense statements. Market evidence pulls comparable sales of similarly-tiered data centers and any sale-leaseback transactions adjusted for credit and lease term. Our team assembles this package in coordination with our standard appeal process, and our clients report that this level of specificity is what moves a tribunal.

EPTA represents data center owners on a pure contingency basis — no upfront fees, no retainers, and no charges unless we reduce your assessed value. Our fee is a percentage of the actual tax savings delivered over the life of the reduction, which means our financial incentive is fully aligned with the size of the reduction we secure. The engagement starts with a no-cost review of your facility's current assessment, asset schedule, lease structure, and engineering documentation. Only after we confirm that the grounds for an appeal exist do we move forward — you can request a free review in a few minutes.