Ohio is pausing its lucrative tax incentive program for new data center projects, a significant shift driven by mounting opposition and concerns over the sector’s economic and environmental footprint. Governor Mike DeWine announced the directive, which will suspend the acceptance of new applications for state tax breaks for these facilities.
Incentive Program on Hold
The Ohio Tax Credit Authority will cease accepting new applications for data center tax exemptions after its upcoming meeting on June 1. This pause is not an outright ban but a temporary suspension, allowing for a comprehensive review of the industry’s impact on the state’s economy. Governor DeWine stated that this action is in response to the Ohio General Assembly’s initiative to study the issue and gather facts regarding data centers, including the local benefits derived from tax exemptions.
“As this work is ongoing, I believe it is appropriate for the Ohio Tax Credit Authority to pause its consideration of new data center tax exemptions while the full impact of data center growth in Ohio is being reviewed,” DeWine said in a statement. He acknowledged the importance of understanding the local benefits that communities receive when tax exemptions are granted.
Last year, data centers that had previously received incentives from the state represented a total capital investment of $27 billion, according to figures provided by Governor DeWine. This substantial investment underscores the economic significance of the sector, which has been a target for development incentives in many states.
Growing National Controversy
The decision in Ohio mirrors a broader trend of increasing scrutiny and opposition towards data center development across the United States. Local organizations in various communities have raised alarms about the substantial water and power consumption associated with these facilities. Industry researcher Data Center Watch reports that approximately $64 billion worth of data center projects have either been canceled or delayed nationwide due to community opposition.
This growing controversy has prompted other states to re-evaluate their incentive programs. In February, Illinois Governor JB Pritzker, a Democrat, proposed a two-year freeze on all data center incentives in his state. The momentum against unchecked data center growth is also manifesting at the grassroots level. In Ohio, a group named Conserve Ohio is actively collecting signatures for a ballot measure that aims to amend the state constitution. This proposed amendment would ban new data centers that consume more than 25 megawatts of energy per month.
Developer Challenges
The increasing community pushback is forcing data center developers to invest more time and resources into persuading local populations of the economic advantages their projects offer. A notable example of these challenges occurred in April when Brookfield Asset Management-backed Compass Datacenters withdrew its long-standing plans to develop a portion of a 2,100-acre data center campus in Virginia. The project faced intense opposition from local residents and environmental groups.
The legislative committee tasked with studying the data center issue during this moratorium period will be crucial in shaping future policy. Their findings will likely influence whether Ohio reinstates, modifies, or permanently alters its approach to incentivizing data center construction, balancing the potential for economic investment against environmental and community concerns.
