Alabama Senate sends bill to limit data center tax breaks to governor

The Alabama Senate has unanimously passed House Bill 399, legislation aimed at curtailing tax incentives for data centers across the state. The bill, sponsored by Representative Leigh Hulsey and its Senate counterpart SB265 by Senator Andrew Jones, will now proceed to Governor Kay Ivey's desk for final approval. Under HB399, starting January 1, 2027, data processing centers will see their maximum tax abatement period limited to 20 years. However, an additional ten-year extension, totaling 30 years, can be granted if operators commit to specific community investments, such as infrastructure improvements (roads, bridges, broadband in unserved areas) or upgrades to water/wastewater systems and local education support. The bill also mandates that large-scale data centers consuming 100 megawatts or more of electricity will begin paying state sales and use taxes, with revenues directed to the state's general fund. Additionally, it allows the governor to waive tax requirements for data centers in economically struggling counties. Senator Jones, R-Centre, emphasized the bill's intent to ensure Alabama remains competitive with surrounding states without offering overly generous "sweetheart deals" to data centers, citing concerns about affordability. Governor Ivey expressed support for the legislation, stating it protects citizens from rising utility costs while maintaining the state's attractiveness for economic development. Conversely, the Data Center Coalition has voiced opposition, arguing that reduced incentives could hinder new investments in the state. Current Alabama law allows larger data centers to receive abatements for up to 30 years and sales tax incentives for projects investing at least $400 million and creating 20 jobs, a combination offered by only five states.