Texas lawmakers reconsider data center tax breaks as costs skyrocket

AUSTIN, Texas— Texas lawmakers are taking a fresh look at a tax break for data centers as the cost to taxpayers continues to climb.

During a Senate Finance Committee hearing Monday, lawmakers questioned whether a 2013 sales tax exemption for qualifying data centers still makes sense as artificial intelligence fuels rapid industry growth.

The incentive cost the state an estimated $14.6 million during the 2014-15 budget cycle. Today, the Texas Comptroller's Office projects that figure will reach $3.3 billion in the 2028-29 biennium.

Lawmakers also raised concerns about whether the tax incentive creates enough permanent jobs and whether stronger oversight is needed after a recent state audit found six of 20 data centers reviewed failed to meet certification requirements.

Senate Finance Committee Chair Joan Huffman said she plans to introduce legislation next session to revisit the exemption.

The review comes as Texas leaders also weigh the impact of data centers on the state's power grid, water supplies and taxpayers amid the rapid expansion of artificial intelligence.