Committee pares back data-center incentives, clarifies sales tax treatment

A Senate committee on Friday advanced bills aimed at scaling back certain tax incentives for data centers and clarifying which costs are exempt from sales tax.

Senator Jones explained that recent incentives for data centers were out of alignment with other economic-development programs and had contributed to upward pressure on utility costs. The amendment to SB265 narrowed the scope of abatements by explicitly preserving sales tax collection on building and construction materials after initial buildout while limiting abatements to IT equipment such as servers, and tightening the overall term of incentives discussed in committee.

"This kinda just brings the incentives in line with other economic development incentives, lowering it from 30 years to 20 years," the sponsor said, arguing the change would protect ratepayers from bearing infrastructure costs tied to large, energy-intensive facilities.

Committee members agreed to adopt the amendment; the bill as amended was reported favorably. Chair remarks and roll calls during related deliberations indicated a committee preference to require that data centers not shift long-term infrastructure costs onto municipal, local or state ratepayers.

Senators who questioned the bills emphasized protecting ratepayers and ensuring any economic-development incentive aligns with existing programs. The measures sent to the next stage carry language to preserve sales tax collection on construction materials and to make abatements narrowly apply to IT equipment and qualifying data-processing hardware.