Ohio lawmakers mull pulling data center tax break
Tech companies have long enjoyed significant tax incentives to build data centers in Ohio, but that era could be coming to an end. Lawmakers anticipate an aborted effort at regulating data centers is likely to return in the post-election “lame duck” session. Some are already drafting proposals that would force data center developers to pay more taxes.
Rep. Tristan Rader (D-Lakewood) is one of the most vocal data center skeptics in the Statehouse. He has introduced a bill to prohibit data center companies from receiving any new state sales tax exemptions, which Gov. Mike DeWine (R-Ohio) paused via executive order earlier this year.
“These data centers have more money than God, they absolutely do not need incentives to be here,” Rader said. “We’ve created a regulatory regime and a tax incentive structure that allows these things to crop up everywhere with very little contributions to the communities that they want to target to exist in.”
The sales tax breaks came under fire after Statehouse leaders learned the true extent of how much revenue they cost the state.
“We do know at least $1.5 billion dollars in 2025 is what that tax exemption for the sales tax is worth for the state,” Rader said. “I am sure the property tax exemptions are equivalent if not more.”
The degree of revenue lost to property tax breaks is difficult to determine, however. As Rep. David Thomas (R-Jefferson) noted, while sales tax incentives are granted to tech companies by the state, property tax abatements are granted by local communities.
“That’s something else that we’re looking into,” Thomas said. “What actually abatements are really all on the books for all different types. We know some types of abatements across the state but because this is purely a local government decision, that doesn’t go through our books.”
Thomas expects most of the different data center reform proposals to be consolidated, possibly into House Bill 646, which the General Assembly tried and failed to pass before leaving Columbus in June. He is already drafting language that would eliminate property tax abatements, which he suggested would be a more effective way to regulate the data center industry.
“We could say no new sales tax exemptions starting today, but the big companies will still actually get them for the next couple of decades,” Thomas said. “But no more property tax, that means even the big folks, they’re going to have to pay their property tax share which will then lower the bills for all the other property owners.”
Another proposal for eliminating the property tax abatements has been introduced by Rep. Daniel Troy (D-Willowick). For much of the past year, Troy and Thomas have been working jointly to ease the property tax burden for Ohioans, a project Troy believes would be easier if data center companies were forced to pay their share.
“Property tax reform was the No. 1 issue until data centers showed up on the scene, but they’re tied in,” Troy said. “If these entities pay property taxes based on their full unabated value, this could go a long way to reducing the burden on our residential homeowners.”
All three predict a legislative package regulating data centers is on the horizon given the public backlash and growing bipartisan agreement that the state should step in.
“We know where the public is on this, they are weighing in; they just don’t want these things in a lot of cases,” Troy said. “If we’re going to get them — and maybe we might not be able to stop them — we at least want to make sure that they’re helping out the community by paying all of their tax obligations.”