The Georgia Senate has voted to suspend data center tax incentives in the state — legislation that could have a dramatic impact on development in one of the industry’s fastest-growing markets.
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Targeted tax breaks on the equipment housed in data centers have played a key role in turning Atlanta into one of the country’s major data center hubs. But concerns over the industry’s massive energy consumption are behind legislation to temporarily suspend those incentives, and the bill now only needs the signature of Gov. Brian Kemp to become law.
The bill, which narrowly passed the Georgia Senate Thursday two weeks after clearing the House, would suspend the state’s sales tax exemption for data centers for two years, during which time a state commission would examine the impact of data centers on the state’s power grid. These changes would not impact any company that applied for the exemption before the law goes into effect at the beginning of July.
Data center development has exploded in Georgia since the state first enacted tax breaks targeting the industry in 2018. The Atlanta area is now the country’s eighth-largest data center hub, but the region has more data center capacity planned or under construction than all but two other markets, according to JLL.
Yet supporters of the legislation to suspend data center tax breaks say the industry’s rapid growth is disproportionately straining the state’s power grid. As in other major markets, demand for new data centers in Georgia is bumping up against constraints on available power from local utilities. Speaking to the state’s Public Services Commission, executives from Georgia Power testified that data centers account for 80% of the new generating capacity the utility is looking to add in the coming years, according to Capitol Beat.
Advocates for the bill also point to a 2022 audit showing that the state is receiving less than 25 cents of tax revenue per dollar saved by data center developers.
“These do not create jobs,” Sen. John Albers said. “They create big buildings, but they do not create jobs.”
Data center developers are pushing back.
Groups like the Data Center Coalition argue that 90% of the industry’s investment would not have happened if not for the tax incentives — investments they say are responsible for $3.9B in indirect economic impact, according to a study by Mangum Economics.
And while opponents of the bill concede that the industry’s power usage is substantial, they say it’s not more than the state’s utilities can handle.
“We have plenty of power for what’s coming down the pike,” Sen. Frank Ginn told Capitol Beat.
The suspension of data center tax incentives would likely slow the pace of data center development in the state significantly, experts say. Reduced sales tax on the millions of dollars worth of servers housed in data centers can mean huge savings for the industry’s largest tenants. As a result, many developers don’t consider siting facilities in locations without this kind of program.
The Data Center Coalition and other industry leaders have also argued that the uncertainty around tax incentives is likely to slow the pace of investment in Georgia, as developers are scared off by a shifting and uncertain regulatory landscape.
“Georgia is currently a national leader in attracting data center investment and deploying the digital infrastructure that powers America’s innovation economy,” said Josh Levi, the coalition’s president, according to Capitol Beat. “Abruptly suspending the state’s data center program would send the wrong message to all capital-intensive businesses for which certainty and predictability are essential.”
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