Group calls for end to AZ data center tax breaks

The Arizona Energy Promise Taskforce, established by Governor Katie Hobbs, has released a comprehensive report proposing the elimination of state sales tax incentives for data centers and a reallocation of grid infrastructure costs to large energy consumers. This initiative seeks to manage Arizona's rapidly increasing electricity demand, which is projected to rise by 40% over the next 15 years, and to alleviate the mounting energy cost burden on households. A central recommendation calls for the Arizona Legislature to repeal a 2013 law that provides data centers with exemptions from state, county, and city sales taxes on equipment. This incentive has historically saved data centers approximately 9 cents on every dollar spent in the Phoenix area. Notably, this specific proposal encountered opposition from three members of the task force: the Data Center Coalition, Microsoft, and Google. According to the task force's findings, data centers and other major industrial customers are anticipated to contribute nearly 80% of Arizona Public Service's (APS) expected load growth through 2038, adding an estimated 2,240 megawatts of peak demand. The report also advocates for exploring "bring your own capacity" programs, where data centers would fund or construct their own power supplies, and for incentives to encourage developers to engage with communities, addressing a growing backlash against data center projects in metro Phoenix and Tucson. Maren Mahoney, director of the Arizona Governor's Office of Resiliency, emphasized the profound impact of the task force's work on the state's future energy landscape.