Kentucky Lawmakers Signal Changes to Data Center Tax Incentives
Kentucky legislators are planning to change the state's data center tax incentive program, which currently offers sales and use tax exemptions without caps or job requirements. Lawmakers, including Senate Majority Caucus Chair Robby Mills and Rep. Timmy Truett, express concerns about potential lost tax revenue and are drafting new regulations for the upcoming legislative session. This comes as some Kentucky cities already have data center moratoriums in place, and lawmakers seek to ensure economic benefits without burdening residents or infrastructure.
Kentucky lawmakers are actively signaling their intent to modify the state's data center tax incentive program, despite no projects having yet received the existing tax breaks. The "Kentucky Qualified Data Center Project Incentive Program," established in 2024 and expanded in 2025, offers uncapped sales and use tax exemptions for up to 50 years to projects with at least $450 million in capital investment, with no job creation requirements.
Senate Majority Caucus Chair Robby Mills, R-Henderson, indicated on social media that these breaks might be "going away or will be substantially reduced." His remarks followed an analysis by the Kentucky Center for Economic Policy suggesting the state could lose billions in sales tax revenue if several proposed mega data center projects qualify. Rep. Timmy Truett, R-McKee, who initially voted for the incentives without fully understanding data centers, now advocates for legislation to eliminate these tax breaks, though he cautions against deterring all future development.
Senate President Robert Stivers, R-Manchester, emphasized the need for "guardrails" to protect residents, infrastructure, and natural resources, stating that new grid construction or increased generation capacity costs should be fully allocated to the data center entities, not consumers. Stivers noted that Lexington and Louisville currently have data center moratoriums, with communities awaiting state-level regulations. Attorney Juliana Coffey voiced opposition to states competing for data centers, advocating for strong regulations to protect local interests.
While Gov. Andy Beshear, a Democrat, signed an executive order establishing new standards for data center developers to ensure they cover their own costs, Stivers believes the executive and legislative branches need to collaborate more on policy formation. Lawmakers are spending the interim legislative session in Frankfort discussing updates and drafting new rules, which will be considered in the regular session beginning in January.