Senator Josh Hawley, R-Mo., plans to introduce legislation aimed at preventing technology companies from utilizing Opportunity Zone tax breaks to construct data centers. Hawley characterizes these breaks as "corporate welfare" for large tech firms that do not require government assistance.
The tax loophole in question was established as part of the Tax Cuts and Jobs Act of 2017, intended to incentivize investment in low-income areas. However, Hawley contends that tech companies have found ways to exploit these provisions for building data centers, which he believes are not the intended beneficiaries.
"These data centers have figured out a way that they think that they can access all of this money," Hawley stated in an interview. "So, let's be clear. This is a form of corporate welfare. They don't need any welfare. These people are rich. They can pay their own way."
Opportunity Zones were designated by the federal government to encourage economic development in economically distressed communities. According to the Department of Housing and Urban Development, there are 8,746 such zones across the U.S., with nearly half located in rural areas. A report from the National Community Reinvestment Coalition indicates that 14% of existing data centers and over 17% of planned data center projects are situated in these zones.
Hawley's proposed bill would explicitly prohibit data centers from qualifying for these tax incentives. This move comes as Congress grapples with the rapid expansion of artificial intelligence and the significant infrastructure, including data centers, required to support it. Concerns over AI development have recently intensified following statements from industry figures about the potential risks associated with the technology.
Previous efforts to regulate AI have seen limited legislative action. Senate Majority Leader Chuck Schumer, D-N.Y., convened panels with tech leaders three years ago to discuss potential AI legislation, but little has materialized since. Hawley expressed skepticism about the tech industry's recent calls for collaboration on regulations, suggesting it may be an attempt to self-regulate and influence policy after significant campaign contributions to lawmakers.
"Any regulations, they want to write them themselves. And they're out there saying, 'The sky is falling, the sky is falling. You need to let us get together, write the regulations and figure out what we're going to do.' I'm pretty skeptical of that, I have to say," Hawley remarked.