Lawmakers up transparency for data centers, leave $2B tax exemption untouched in Pa. budget
Pennsylvania lawmakers passed a budget measure requiring data centers using over 10 MW annually to disclose energy and water usage, but left a $2 billion sales tax exemption in place. Other legislative proposals to regulate the industry, including environmental standards and allowing local moratoriums, failed to pass due to political disagreements. Environmental advocates are pushing for more comprehensive legislation in the fall session.
Pennsylvania lawmakers recently approved a state budget that includes a provision requiring data centers consuming over 10 megawatts of electricity annually to disclose their energy and water usage. This measure, supported by environmental advocates as a step towards transparency, did not, however, address a controversial sales tax exemption for data centers, which is projected to cost the state $2 billion by 2031. Numerous other legislative proposals aimed at regulating the burgeoning data center industry, such as banning access to certain tax breaks or enabling local moratoriums, failed to pass.
The lack of comprehensive regulation has sparked a political dispute, with State House Majority Leader Matt Bradford (D., Montgomery) attributing the stalled legislation to Senate Majority Leader Joe Pittman (R., Indiana). A spokesperson for Democratic Gov. Josh Shapiro echoed this sentiment, stating that Senate Republicans "failed to act" on the Governor's plan to link data center tax credits to environmental and energy standards. Pittman, however, disputed this characterization, emphasizing the transparency measure included in the budget and expressing openness to further discussions, including local moratorium decisions.
Environmental groups, including the Sierra Club's Pennsylvania chapter and Conservation Voters of Pennsylvania, voiced frustration over the legislature's inaction, urging lawmakers to pass substantive data center regulations, particularly a bill sponsored by State Rep. Rob Matzie (D., Beaver). This bill proposes mandating data centers pay for utility infrastructure, establishing early termination fees for utility contracts, prohibiting utilities from passing on data center costs to ratepayers, requiring a third of energy from clean sources, and contributing to low-income energy assistance programs. While some, like Rob Bair of the Pennsylvania State Building and Construction Trades, support certain regulations, they caution against measures like a moratorium that could hinder economic growth.