Lawmakers Slash Data Center Incentives After Private Talks With Lobbyists

Indiana lawmakers have significantly reduced a potentially multi-million dollar incentive designed to encourage cities and counties to approve future data center projects, following private negotiations with data center company lobbyists. The final provisions, which were inserted into a bill without public discussion, slashed the potential payments to local governments based on electricity usage to roughly 1/14th of the level initially endorsed by the state Senate just days prior. The revised incentive means that a large data center, with an annual electric bill possibly reaching $500 million, would contribute a maximum of $350,000 annually to local government. This is a stark contrast to the minimum of $5 million stipulated in the Senate's version, which proposed a payment of 1% of total electricity costs. The approved measure limits payments to "not more than" one penny on the dollar of the 7% sales tax exemption already granted to data centers and applies only to projects approved after June 30. The concept for this incentive emerged in response to growing public opposition against approximately 20 large data center projects either proposed or under construction in Indiana. Republican Rep. Ed Soliday, chair of the Indiana House utilities committee, initially proposed a version in January that would have required data centers to pay 1% of their sales tax savings on equipment purchases to local governments. However, data center companies lobbied against the higher payment levels, arguing they could harm Indiana's competitiveness in attracting new projects. The Data Center Coalition cited a study indicating data center growth generated over $327 million in state and local tax revenue in Indiana in 2023. Governor Mike Braun, who has publicly supported statewide data center expansion and recently participated in Meta's $10 billion data center campus announcement in Lebanon, signed the measure into law. While officials from Accelerate Indiana Municipalities expressed satisfaction that the possibility of additional revenue was approved, the uncertain impact of the reduced incentive on local officials' decisions remains. The Legislature has also commissioned a study, due November 1, to examine the true cost of various tax incentives for data centers to state and local governments.