Debate on tax incentives stalls Ohio data center legislation before Statehouse break
Legislation aimed at regulating Ohio's data centers, including changes to tax incentives and new utility requirements, has stalled in the state Senate. The bill, House Bill 646, includes provisions for tracking water usage and creating a new rate class for data centers, but House Republicans remain divided on tax break limits. Legislators are now on an extended summer break, leaving the bill in limbo until after the November general election.
Ohio legislators failed to pass critical data center legislation before their extended summer break, leaving House Bill 646 in limbo until after the November general election. The bill, which passed the House in March, aimed to establish new requirements for data centers, update utility cost regulations, and limit tax incentives.
Key areas of debate include the future of sales tax exemptions for data centers. Introduced in 2011 and finalized in 2016, these exemptions allowed eligible projects to receive partial or total sales tax breaks on construction and infrastructure if they invested at least $100 million over three years and maintained an Ohio payroll over $1.5 million annually. While Governor Mike DeWine previously vetoed attempts to end these breaks, he recently introduced an indefinite pause on new exemptions.
Lydia Mihalik, Director of the Ohio Department of Development, informed legislators that while the tax exemptions were crucial in attracting projects a decade ago, she believes they are no longer fully necessary and should be capped. The previous version of H.B. 646 would have capped sales tax exemptions at 50%, with 75% for projects with onsite generation on brownfields. Existing 40-year exemptions with companies like Amazon, Google, and Meta, approved under former Gov. John Kasich, are not expected to be impacted.
Beyond tax breaks, H.B. 646 proposes new restrictions, including requiring data centers to track and report their water usage, a major concern for Ohioans given the industry's high water consumption. The bill also seeks to create a new rate class within the Public Utilities Commission of Ohio to better regulate data center utility usage and reduce costs for taxpayers. While Ohio House Speaker Rep. Matt Huffman hopes to finalize an agreement on June 24, the Senate has no plans to reconvene until after the general election, delaying any potential progress on the bill.