Democrats in Congress are pushing for significant tax changes targeting data centers, aiming to eliminate current equipment expensing benefits. This move could reshape investment strategies and affect construction timelines in the booming data center industry.
What Happened
Democratic lawmakers have introduced several bills to remove bonus depreciation for data center equipment. This tax provision currently allows developers to immediately expense capital costs such as server racks and GPUs instead of spreading deductions over the equipment's lifetime. Senator Mark Warner of Virginia spearheaded the effort with the Data Center Tax Accountability and Disclosure Act, which projects nearly $30 billion in revenue over a decade by ending full expensing for data center owners. Additionally, Senate Finance Ranking Member Ron Wyden of Oregon proposed more extensive measures, including blocking data centers from accessing Opportunity Zone incentives and Real Estate Investment Trust (REIT) benefits.
The legislative push comes amid a backdrop of increased scrutiny and local opposition toward data centers. Recent midterm elections saw 47 local ballot measures pass that restrict AI data center development, reflecting growing public resistance. The approval rate for data center permits dropped to 34% in the third quarter, a significant decline from 54% in 2025, according to Spark. Public sentiment has also shifted, with 75% of Americans opposing data centers near their homes, up from 42% last year, based on Heatmap polling.
What This Means for Your Business
For AECM professionals, these legislative changes could have substantial implications on procurement and investment strategies. The removal of bonus depreciation would alter the financial calculus for data center projects, potentially delaying new developments or reducing the scale of planned investments. Companies may need to reassess their capital expenditure plans and explore alternative funding mechanisms to compensate for the loss of tax benefits.
Furthermore, the proposed legislation underscores the importance of aligning projects with community interests and navigating increasingly complex zoning and permitting landscapes. Compliance officers and project managers should anticipate more stringent requirements and potential delays in project timelines. The political climate also suggests a need for proactive engagement with local stakeholders to mitigate opposition and secure necessary approvals.
What US Operators Should Watch
Operators should closely monitor the legislative process, as any changes could set precedents for future tax policies affecting the broader construction and technology sectors. With Democrats gaining control of Congress, the likelihood of these bills advancing increases, though they must still pass President Trump’s veto pen.
Key deadlines and procurement windows, especially those related to federal tax incentives and zoning approvals, will be critical for decision-makers. Staying informed on developments in Opportunity Zones and REIT regulations will be essential for strategic planning.
Source: https://propmodo.com/congressional-democrats-target-equipment-expensing-rules-for-data-centers/
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