Businesses should demand a tax break for cloud computing

The government subsidizes green tech through tax breaks, so why not the energy-efficient cloud, too?

Tax breaks for businesses are typically provided by government to promote a specific type of behavior, such as moving a plant to a part of the country where jobs are fewer or promoting a particularly good or service over another. Lately, it's been about promoting energy efficiency or being green.

Indeed, the U.S. Department of Energy lists a number of tax breaks that the feds will give you for using energy-efficient technology. Also, the Energy Star program points out other tax credits for green technology, including geothermal heat pumps, solar panels, solar water heaters, small wind energy systems, and fuel cells. Moreover, in the strictly business side of things there are tax credits for energy-efficient commercial buildings.

[ Get the no-nonsense explanations and advice you need to take real advantage of cloud computing in the InfoWorld editors' 21-page Cloud Computing Deep Dive PDF special report, featuring an exclusive excerpt from David Linthicum's new book on cloud architecture. | Stay up on the cloud with InfoWorld's Cloud Computing Report newsletter. ]

There are already tax incentives for using some types of computing technology. For instance, Wikibon Energy Labs lets storage vendors verify the energy savings of certain products, making them eligible for utility rebates from PG&E.

If we're providing tax credits for energy-efficient technology, then logically those using cloud computing should receive a tax break. This tax break should be pretty big, relatively to the benefit and the current tax breaks provided. Follow me here.

What's different here is the huge "green effect" of cloud computing, typically well beyond any of the "traditional" green technology out there, such as hybrid cars and sealed windows. In a recent study (PDF) sponsored by SaaS provider NetSuite, it was clear that cloud computing has an obvious green impact that's easy to account for. Even keeping in mind the bias of the vendor sponsoring the study, the data points seems logical.

The report stated that approximately 595 million kWh (kilowatt-hours) per year are saved by using cloud computing, the equivalent of the annual electricity consumption of more than 56,000 homes. This results in a reduction of greenhouse gas emissions by more than 423,000 metric tons of carbon dioxide per year, which is equal to:

  • CO2 emissions produced by the consumption of more than 48 million gallons of gasoline
  • CO2 emissions produced by the consumption of approximately 985,000 barrels of oil
  • The yearly pollution caused by more than 77,000 automobiles

That data is consistent with other cloud solutions and perhaps more so when considering the use of infrastructure as a service, which often saves even more energy dollars compared to SaaS. Moreover, this energy savings goes well beyond any benefit from geothermal heat pumps or an office building with tinted windows. In light of the huge and direct benefit, where is the tax break for cloud computing?

It will be interesting to see if any federal or state lawmakers pick up on this. A tax break for the use of cloud computing seems logical and only fair to me. However, I won't hold my breath.

This story, "Businesses should demand a tax break for cloud computing," was originally published at Follow the latest developments in cloud computing on

Copyright © 2009 IDG Communications, Inc.

How to choose a low-code development platform