Louisiana unable to project future cost of data center tax break
Louisiana's revenue department is unable to project the future cost of a state tax incentive for data centers, though it estimates significant sales tax losses from equipment exemptions, potentially reaching $1.71 billion by fiscal year 2027. The state actively promotes data center development, with a notable project by Hut 8 in West Feliciana Parish addressing local concerns by committing to water infrastructure upgrades and a closed-loop cooling system. The tax incentive was expanded in 2024 to include data center facility equipment and development.
Louisiana's revenue department has stated its inability to project the future cost of a state tax incentive designed to attract data center companies, citing a lack of historical data for estimation. However, a separate report estimates the state will lose $1.68 billion in sales tax revenue in fiscal year 2026 and $1.71 billion in fiscal year 2027 due to an equipment exemption for data centers. This projected loss represents a significant increase of approximately $383.5 million since fiscal year 2023, the year before the expanded data center incentive.
The state continues to actively court large data center projects, including those tied to artificial intelligence and high-performance computing, as a strategy for economic growth. Louisiana Economic Development highlights that the data center statute, which creates competitive advantages for the state, passed with broad bipartisan support.
One such development is a planned data center by Hut 8 in West Feliciana Parish. Local officials, including Parish President Kenny Havard, expressed concerns about the project's potential strain on water and electricity resources. Hut 8 has committed $16 million towards upgrading the parish's water infrastructure and is implementing a closed-loop cooling system to minimize water usage. Havard emphasized that the water commitment was crucial, stating that the project would not have proceeded without the closed system given widespread concerns about data centers' water consumption.
The data center tax incentive originated as a rebate for state and local sales and use taxes on fiber-optic cable equipment for broadband networks in unserved areas. In 2024, this provision was expanded to include certain data center facility equipment, as well as sales taxes paid for the development, expansion, and renovation of qualified data centers, upon certification by Louisiana Economic Development.