Arizona Data Center Tax Incentive Pause Signed by Governor Hobbs

Arizona Gov. Katie Hobbs (D) signed a budget bill that imposes a three-year moratorium on new sales tax breaks for data centers, among the most restrictive state-level responses to an industry under fire from residents concerned about energy and water consumption.

The moratorium was tucked into an $18 billion budget deal announced last week by Hobbs and Republican lawmakers. The spending plan also fully conforms with changes made last year to the federal code under President Donald Trump’s signature tax law, ensuring Arizonans won’t have to refile their returns for the current year.

• Arizona joins Ohio and Illinois in pausing new tax exemptions while the states research the issue. New York lawmakers passed a bill (S 10642) that, if signed by Gov. Kathy Hochul (D), will impose a one-year moratorium on permits for new large-scale sites.
• Hobbs requested the Republican-controlled legislature repeal the data center tax incentive. The governor claimed victory in a statement Saturday, as she signed the budget bill: “We’re stopping the data center tax credit for three years, investing in border security, education and water security, and delivering a $1.4 billion tax cut for middle class Arizonans.”
• Critics contend data centers consume too much energy and water resources and shouldn’t be subsidized by the state. The tax break, approved in 2013, costs Arizona about $38 million annually.