Senator Josh Hawley, R-Mo., has announced plans to introduce legislation aimed at closing a tax loophole that he claims tech giants are exploiting to build data centers in low-income areas—a provision originally passed by Republicans in 2017 as part of the Tax Cuts and Jobs Act. Hawley argues that these data centers are taking advantage of Opportunity Zones, which were intended to spur investment in low-income housing and businesses, not to provide what he calls 'corporate welfare' to wealthy tech companies [1].
The Opportunity Zones program, established in 2017 and made permanent last year through the 'big, beautiful bill,' allows companies to defer, reduce, or eliminate corporate gains taxes on investments in designated areas. According to the Department of Housing and Urban Development, there are currently 8,746 Opportunity Zones in the U.S., with just under half located in rural areas where data center development is surging. A report from the National Community Reinvestment Coalition found that 14% of all data centers are in Opportunity Zones, and over 17% of permitted, approved, and under-construction data center projects are situated in these zones [1].
Hawley's proposed bill would explicitly exclude data centers from accessing these tax benefits, aiming to slow their rapid expansion. This legislative move comes as Congress faces increasing concerns over the unchecked growth of artificial intelligence, for which data centers are a critical infrastructure component. The issue has become a significant political topic, with former President Donald Trump referring to it as a 'hoax' on the campaign trail [1].
The rapid development of data centers, particularly in Texas where North Texas has been ranked as the leading global market, has heightened anxieties in Congress. Lawmakers are responding to calls from major AI industry players to slow development, reflecting broader fears about the societal and utility impacts of the AI boom [1].
CONCLUSION
Sen. Hawley's initiative to close the data center tax loophole signals growing political and regulatory scrutiny of tech industry incentives amid the AI-driven surge in data center construction. The proposed legislation could impact future data center investments, especially in rural Opportunity Zones, and reflects broader concerns about the pace and consequences of AI development.