Data Centers
Data halls mix a 39-year shell with large amounts of process electrical, cooling, and raised-floor equipment. There is no IRS data-center matrix. Sole-justification cooling and dedicated process power need engineering support. Life-safety generators are building in other matrices; process generators are closer to equipment.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- The building and life-safety systems are generally structural components recovered over 39 years.
- Computer equipment is typically personal property (often class 00.12 information systems, 5-year).
- Sole-justification cooling for equipment can be personal property under Treas. Reg. §1.48-1(e)(2) when a separate unit exists solely for that purpose.
- Scott Paper-style electrical allocation of primary and secondary distribution needs a design-load study. HVAC allocation is not appropriate.
- No IRS data-center field directive was found. Pharma and auto-manufacturing process-utility rows are analogy only.
- Bonus depreciation as of 2026 can apply to qualified IT equipment and process utilities acquired after January 19, 2025, not to the 39-year shell.
A data center looks like a factory for computers: redundant power, computer-room air handlers, raised floors, and generators. The building is still a building under Treas. Reg. §1.48-1(e)(1). There is no data-center matrix in Publication 5653. The pharmaceutical and auto-manufacturing matrices are the closest examiner discussions of process utilities versus building utilities and are used here only as analogy.
Computer equipment and peripherals fall in class 00.12, 5-year, in Publication 946 when that asset category describes them. Rev. Rul. 2003-81 requires checking that asset category first. Raised floors installed for specific equipment are §1245 in the pharmaceutical matrix; a raised floor that is the room’s permanent walking surface can look more like a structural floor covering under Treas. Reg. §1.48-1(e)(2). Do not say every data-hall floor “is” 5-year property.
Treas. Reg. §1.48-1(e)(2) excludes from structural components machinery whose sole justification is meeting temperature or humidity requirements essential for other machinery. The ATG example is textile-plant humidification. A CRAH plant that exists solely to keep servers within a required range can fit that exception when it is a separate system and the facts are documented. Comfort cooling for offices is building. The matrices say allocation of HVAC is not appropriate — do not take 40% of a shared chilled-water plant because 40% of the tonnage serves IT.
Emergency generators that exist for building life-safety are building in the casino and residential matrices. Generators that exist for process uptime are closer to equipment. Large own-use generation over 500 kW can fall in class 00.4, 15-year, in Publication 946. Those rows are not a data-center holding. Purpose, not the word “generator,” controls.
Fire suppression that protects the building is a structural component. Equipment-specific suppression (for example a clean-agent system for a hall of equipment) is §1245 in the pharmaceutical matrix’s special-suppression row when those facts exist. Building-protection security is §1250. Functional allocation of electrical distribution follows Chapter 8.A and Scott Paper.
This page is educational information, not tax advice. Proposed Super Intelligence data-hall overlays are explanatory only.
Process cooling and power
Document design intent: a unit that would not have been installed but for the IT load, that serves the hall, and that only incidentally serves occupied space, is the sole-justification fact pattern. A campus chilled-water loop that also cools offices is a building system. Do not allocate it.
UPS modules and batteries are equipment. Switchgear that is the building’s service entrance is generally building. Dedicated process switchgear can be personal property when the one-line and load letter support a Chapter 8.A allocation.
Raised floors, suppression, and generators
Photograph whether the raised floor is a removable equipment platform or the finished floor of the room. The pharmaceutical matrix’s equipment-specific raised-floor row is the closest official text. Permanently adhered finishes stay with the building under the regulation.
Label each generator as life-safety, process, or both. Dual-purpose machines need a factual allocation of cost only if a supportable method exists; the ATG does not offer an HVAC-style percentage. Class 00.4 has size thresholds that must be read in Publication 946 before it is used.
Documentation
Mechanical basis-of-design, electrical load letters, raised-floor specifications, suppression-system design criteria, and generator one-lines are the records that make a process-versus-building split examinable. Missing labels were fatal in AmeriSouth’s apartment electrical allocation; a data hall with unlabeled panels has the same problem.
Acquisition studies need land first. Colocation leases raise lessor-versus-lessee questions for who owns the equipment and whose activity class applies. Peco Foods can bind a written allocation of a going data-center business.
Bonus depreciation as of 2026
Qualified property acquired after January 19, 2025 is eligible for 100% bonus depreciation under Notice 2026-11. The 39-year building is not qualified property. Servers, qualifying process cooling and power, raised-floor platforms that are personal property, and 15-year site work can be. Binding contracts on or before January 19, 2025 stay on the phase-down.
Later interior improvements may be QIP if they meet §168(e)(6). Section 168(n) is a manufacturing election; this page draws no QPP conclusion for a data hall. Educational information, not tax advice.
Guidance gap
No IRS data-center field directive was found. Treat process-versus-building splits as fact-specific and document design intent. Do not invent a typical data-hall reclass percentage.
Pharma clean-room rows and casino generator rows are analogies. Flag them as such. Confirm sole-justification and functional allocation with a CPA and an engineer.
Sources
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- 3IRS Publication 5653 — Cost Segregation Audit Techniques Guide (rev. 2-2025)(opens in a new tab)
Written for IRS examiners. The guide states it is not an official pronouncement of law and cannot be cited as authority. It predates the July 2025 law.
- 4IRS Publication 946 — How To Depreciate Property (2025)(opens in a new tab)
Appendix B reproduces the Rev. Proc. 87-56 class lives.
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