Pennsylvania Lawmakers Consider Ending Data Center Tax Break
Pennsylvania lawmakers are considering eliminating a sales tax exemption for data center construction and maintenance as a way to generate state revenue. An alternative proposal by Gov. Shapiro would make the tax break contingent on data centers adhering to stricter environmental and energy-use standards. These proposals are part of ongoing budget negotiations in the state legislature.
Pennsylvania lawmakers are actively debating the elimination of the state's sales tax exemption for data center construction and maintenance, alongside a proposal to extend the 5% gross receipts tax to digital ad sales. These measures are being considered to address Pennsylvania's estimated $5 billion budget deficit for the current fiscal year and generate new revenue, projected to accumulate to $2 billion by 2031 from the data center exemption alone. The discussions are part of budget negotiations ahead of a June 30 deadline, with both the Democratic-controlled State House and Republican-led State Senate weighing options.
State Rep. Elizabeth Fiedler (D., Philadelphia), a sponsor of the digital ad tax, argues these taxes would target profitable tech giants rather than small businesses. State Rep. Jamie Walsh (R., Luzerne County) and Sen. Jarrett Coleman (R., Lehigh County) have jointly introduced a bill to repeal the data center tax break to fund gas tax reductions, asserting the thriving industry no longer needs special incentives. Governor Josh Shapiro (D.) has proposed an alternative approach for the data center exemption, suggesting it be contingent on developers meeting stricter transparency, environmental, and energy-use standards.
The bill for a digital ad tax has passed the State House and is now with the State Senate, though its fate, along with the data center exemption, remains uncertain given strong opposition from business advocacy groups and potential divisions within the Democratic party due to union support for data center projects. State House Majority Leader Matt Bradford (D., Montgomery) indicated the House would "expeditiously" pass legislation reflecting Shapiro's conditional exemption, while Senate Majority Leader Joe Pittman (R., Indiana) stated concerns about the data center tax provision and the possibility of further discussions on the "right approach."