Arizona budget pauses tax exemptions for new data centers
Arizona state leaders have reached a budget deal that includes a three-year moratorium on tax exemptions for new data centers, ending months of negotiations. While construction of new data centers can continue, they will not receive state tax breaks for this period. The decision reflects concerns among some residents about data centers' high power consumption and potential impact on utility bills.
Arizona state leaders have finalized a budget deal, concluding months of negotiations. A key component of this agreement is a three-year moratorium on tax exemptions for new data centers, a measure that prevents these facilities from receiving state tax breaks for the specified period, though construction itself can continue. This decision comes as Arizona is home to over 150 data centers, with many residents expressing concern about their high power consumption and its potential effect on utility bills.
Governor Katie Hobbs had initially proposed ending the data center tax exemption, which was originally enacted in 2013. Senate Majority Leader John Kavanagh, representing Republicans, initially opposed a full repeal, citing that existing incentives for current data centers last 5 to 10 years and canceling them could lead to lawsuits. The compromise reached was a three-year pause on new tax exemptions. Proponents of the moratorium believe it will prevent the state from being "taken over by data centers" and mitigate rising utility costs for residents. The pause does not affect data centers already receiving tax breaks.