Georgia State Senate Committee Moves to Suspend Sales Tax Breaks on Data Centers
A state Senate committee last week backed legislation to suspend sales tax breaks on new data centers in Georgia, citing concerns that the state is not seeing a significant financial return on its multimillion-dollar investment. Lawmakers are now considering whether to continue or modify the tax incentive, which has been in place since 2018.
The bill, known as House Bill 1192, has already passed the House with a 96-71 vote and recently received approval from the Senate Finance Committee. The legislation would temporarily suspend the tax break for new data centers while lawmakers conduct a study to determine the effectiveness of the incentive.
Data centers, especially large or “hyperscale” facilities, require a substantial amount of electricity to operate their servers 24/7. As these facilities continue to expand in Georgia, the state’s largest utility, Georgia Power, has requested to add almost 3,400 megawatts of new capacity to meet the growing demand. Data centers are expected to account for about 80% of this new load, according to company executives.
Despite their immense size, data centers employ only a small number of workers, primarily serving as storage centers for computer servers. Companies like Microsoft, which operate multiple data centers in Georgia, have emphasized the importance of incentives when making decisions about new facility locations. However, tax breaks are just one of many factors considered during the planning process.
Supporters of the tax break argue that it has led to significant investment in data centers within the state, benefiting local governments by generating thousands of construction jobs and providing a boost in property taxes. Niki Vanderslice, president and CEO of the Fayette County Development Authority, highlighted the role data centers play in balancing the tax digest and supporting residents.
While some senators believe that local governments should offer their own tax breaks to attract data centers, others are concerned about the potential impact of suspending the state tax incentive. Senator Jason Esteves questioned whether investors would be deterred by the uncertainty surrounding the future of the tax break.
The suspension of the tax break is expected to save the state an estimated amount between $10 million to $100 million, though the exact figures are still unclear. Companies that have already begun construction or are in the process of receiving tax break certifications will still be eligible for the incentive.
Lawmakers who have been studying various business tax breaks remain skeptical of claims that without these incentives, companies would not choose to operate in Georgia. House Ways and Means Chairman Shaw Blackmon emphasized the efforts to attract data centers to rural Georgia in hopes of stimulating job growth, despite the lower threshold for tax breaks in these areas.
As the General Assembly continues to evaluate the effectiveness of the tax incentive, the debate over the future of data centers in Georgia remains ongoing. The decision to suspend the tax break reflects lawmakers’ concerns about balancing state revenues with local economic benefits from data center investments.
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