KY GOP leader says state could change data center tax break offering
A Kentucky Republican legislative leader has signaled that the state's generous tax exemptions for data centers are likely to be reduced or eliminated. This comes amid increasing data center proposals across the state and growing community pushback against them. An analysis suggests the state could forgo billions in sales tax revenue under the current incentive program.
Kentucky's Majority Caucus Chair, Sen. Robby Mills, R-Henderson, indicated that the state's tax exemptions for data center construction, enacted in 2024 and expanded in 2025, are likely to be substantially reduced or eliminated. This comes as numerous large-scale data center projects are being proposed across Kentucky, prompting community pushback.
The existing sales tax exemption covers equipment purchases, installation, and repairs for qualifying facilities, potentially lasting up to 50 years for projects with at least $450 million in capital investment. The incentive, which has no cap or job creation requirements, has yet to be awarded to a qualifying project.
Sen. Mills, who was part of the leadership that expanded the incentive, now believes the exemptions are unnecessary to attract these significant investments. His comments follow an analysis by the Kentucky Center for Economic Policy, a progressive think tank, which estimates the state could lose between $1.2 billion and $2.2 billion in sales tax revenue during the construction phase if just four proposed hyperscale facilities qualify.
Mills later clarified that his comment was part of an ongoing legislative evaluation of policy, not a direct advocacy for immediate change. Other states, including Ohio, Arizona, and New York, have also begun to reconsider or pause their data center tax incentives due to growing concerns about facility scale, economic benefits, and public expense, with Virginia notably implementing a new temporary tax on large data centers' power usage.