What Republican lawmakers pitched as a potentially multi-million dollar incentive for Indiana cities and counties to approve future data center projects was sliced to a small fraction of that amount in the final days of the legislative session.
Private meetings between legislators and lobbyists for data center companies resulted in rewritten incentive provisions inserted in the final bill version which cut potential payments based on electricity usage to at most about 1/14th of the level the state Senate had endorsed three days earlier.
Those changes that weren’t discussed in public mean a large data center with a possible annual electric bill of $500 million would face paying a maximum $350,000 a year to a local government rather than a minimum of $5 million as under the Senate-backed version.
The difference comes down to instead of paying 1% of their total electricity costs, that possible payment was cut to “not more than” one penny on the dollar of the 7% sales tax exemption that the Legislature first approved for data centers in 2019.
And the provision only applies to data centers gaining local approval after June 30.
“It really does diminish any sort of local benefit,” said Ben Inskeep, the Citizens Action Coalition’s program director and a data center critic.
“When you couple that with the exclusion for any data center that already has a tax exemption certificate, it really kind of shows how kind of toothless and weak it is,” Inskeep told the Indiana Capital Chronicle.
Incentive number became “so huge”
The incentive concept emerged as public opposition has grown against many of the about 20 large data center projects that Citizens Action Coalition tracking shows are under construction or have been proposed.
Rep. Ed Soliday, chair of the Indiana House utilities committee who sponsored the 2019 sales tax exemption bill, first added into legislation a version of the incentive in January. His proposal called for data centers to pay 1% of their sales tax savings on future equipment purchases to the local government.
Soliday, at the time, cited a planned data center in Hammond as an example, saying such a company would possibly spend $5 billion every five years on equipment updates. So his proposal could have resulted in $3.5 million in payments, which he called “a significant number.”
A month later, the incentive idea had migrated into House Bill 1210 — a wide-ranging measure covering numerous state and local tax matters spanning more than 400 pages in its final form.
The Senate voted in favor of a version on Feb. 24 that increased the incentive to both “at least” 1% of the equipment purchases and the electricity costs. That meant potential payments of $70 million over a few years for one data center, said Soliday, R-Valparaiso.
While lobbyists for data center companies quickly pushed back in private meetings, Soliday said he had already concluded that payment level was too high.
“That number would have been so huge, the way they had it, that was a really big piece of change to the locals,” Soliday told the Capital Chronicle this week. “I said to some other members of (House) leadership, do we really want to go this far?”
By the time the House and Senate approved the final bill language on Feb. 27, the possible electricity cost payments had been cut to the lower level and any mention of payments based on equipment purchases had been removed.
Gov. Mike Braun signed the measure into law on March 12.
Data center point to taxes paid already
Data center companies argued that they already often negotiate payment agreements with city and county governments where they are planning projects.
They also said that mandating payments based on electricity and equipment costs would hurt Indiana’s competitiveness in attracting new data center projects.
The Data Center Coalition, a national lobbying group for the industry, pointed to a study it had commissioned which found that data center growth in Indiana generated more than $327 million in state and local tax revenue in 2023.
“Data centers are also committed to being responsible and responsive neighbors in the communities they operate, including by paying their full cost of service for the energy they use, and investing in workforce development programs to support career paths for skilled technical jobs in the industry,” Brad Tietz, a Chicago-based state policy director for the coalition, said in an emailed statement.
“The data center industry will continue to work with residents, communities, and state and local leaders to ensure Indiana remains an attractive market for the continued responsible investment of this critical 21st Century industry,” the statement said.
Is incentive enough to matter?
Whether the final incentive level that emerged from the Legislature will have any impact on the decisions of local officials is uncertain.
Officials of Accelerate Indiana Municipalities, the organization representing cities and towns at the Legislature, said they were pleased that the possibility of additional data center revenue won approval.
Amy Krieg, the group’s government affairs director, said such incentives could become an “important component” in future decisions but couldn’t predict their sway.
“A big part of it is the community and what the community wants,” Krieg said. “So the aspect of incentive can only go so far when a community also has a say in (whether) the data center would come to their locality.”
Braun has given the support of the governor’s office to data center expansion around the state and took part in Meta’s announcement last month of a $10 billion data center campus in Lebanon.
The governor’s office did not address questions about whether it was involved in rolling back the proposed incentives, but said in a statement that “data centers have proven to be strong drivers of economic growth.”
“We now have examples showing that when data center operators, local communities, and electric providers collaborate effectively, these facilities can help lower energy costs and strengthen the grid — advancing energy affordability,” the statement said. “This new law creates incentives for communities to take a fresh look at these opportunities and the benefits they can deliver.”
Sponsor sees a starting point
Rep. Craig Snow, who was the lead sponsor of the bill that included the incentive provisions, acknowledged that the final version is “really just not a lot. I get that.”
Snow, R-Warsaw, said he wasn’t directly involved in discussions over the data center section as the bill’s final version with dozens of provisions was assembled.
“I don’t know that’s really going to move the needle,” Snow said of the incentive. “But at least it’s starting to set a framework, or maybe even an expectation, of what could be coming.”
Sen. Scott Baldwin, who handled the bill in the Senate, did not respond to messages through his office seeking comment.
Rep. Matt Pierce, D-Bloomington, said that in the face of widespread public opposition to data centers, Braun and Republican legislative leaders are “trying to figure out a way to create some kind of benefit for these local units to where they just can’t say no.”
“The question for the future is, will they keep attempting to find an incentive large enough that it will cause the local units to begin approving these things?” Pierce said. “Or will they just … create a way for these data centers where they really get sited without local input?”
Legislators ordered up a state-sponsored study on just how much various tax incentives for data centers are costing state and local governments.
A section of House Bill 1406 signed by Gov. Mike Braun this month requires the Indiana Finance Authority and the Indiana Economic Development Commission to prepare a report examining:
- The costs of property tax incentives offered by local governments to data centers and the state tax incentives, including the exemption from the state’s 7% sales tax on equipment and utilities.
- The impact of data centers on the cost of electricity and other utilities, along with they affect water supplies.
- The local and regional environmental impacts of data centers.
Bill author Rep. Craig Snow, R-Warsaw, said for data centers “the appearance is that they just get all this stuff for free.”
“Once we have that data, I think we can all look at it objectively and maybe create a better path forward,” Snow said. “I think right now there’s too much concern of the unknown, and hopefully this will bring to bear a little bit more factual information.”
The study must be submitted by Nov. 1 to the Legislature’s fiscal policy study committee.
Ben Inskeep, the Citizens Action Coalition’s program director, said the state has never provided an estimate on how much the sales tax exemption is benefitting data center companies.
“It’s completely unquantified by the state of Indiana, but it could be tens of billions of dollars over the next 50 years, and the state has no idea how much money they’re losing to these guys,” Inskeep said. “We’re talking about an extraordinary amount of subsidies that are just going out the door and nobody’s none the wiser.”
Indiana Capital Chronicle is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Indiana Capital Chronicle maintains editorial independence. Contact Editor Niki Kelly for questions: info@indianacapitalchronicle.com.
