Lawmakers fail to reach data center deal

Morgan Trau/Ohio Capital Journal

COLUMBUS — Ohio lawmakers were unable to reach a compromise on new data center regulations Wednesday before they went on summer recess.

The House and the Senate didn’t have enough votes to pass Substitute House Bill 646, which created new rules and standards for the tech hubs.

“We don’t think we should be granting tax exemptions to multi-billion dollar corporations, especially when many of them are already coming here to build these data centers anyway, because of the contract that was entered into several years ago,” Ohio House Speaker Matt Huffman, R-Lima, said, referencing a popular sentiment from his caucus.

H.B. 646 limits the size of new sales tax breaks for projects. Currently at 100 percent, it would go down to 50 percent.

However, this won’t apply to any of the companies with existing contracts, like Meta, Google and Amazon, ones that Ohio Senator Kent Smith, D-Euclid, says go for decades.

“If we pull the tax percentage back from 100 percent to zero percent, 76 percent of the market is not affected because of these deals that those three signed in the Kasich administration,” Smith said.

Figures from the Ohio Department of Taxation show the state provided almost $1.57 billion in sales-tax exemptions on purchases of data center equipment and construction materials last year.

That’s nearly 12 times what state officials initially expected, according to estimates produced by the tax department in late 2024 as part of Ohio’s budgeting process.

This tax break has to end,” he said. The general assembly actually passed an elimination of the data center sales tax exemption in the last budget. But Gov. Mike DeWine vetoed it.

For months, the lawmakers have been debating overriding his decision.

Huffman was asked if moving to 50 percent was enough for him, or if he wanted to still push for an override.

“Well, I don’t think it’s practical and perhaps even possible at this point to get a veto override,” Huffman responded.

He said that the labor unions don’t want an override, and that is preventing enough members from voting to supersede the governor’s veto. He seemed to accept a 50 percent exemption, as long as data centers comply with regulations, and to “incentivize good behavior.”

One of the major complaints from environmental groups was the water usage. The bill requires that facilities utilize a closed-loop water system or use “best practices for water conservation and efficiency.”

Additionally, date centers are required to report any “anomalies” detected through their water quality monitoring systems.

Another big topic is transparency, and companies asking public officials to sign non-disclosure agreements.

One of the provisions that everyone seemed to like was a regulation that created an electric rate class for data centers, trying to ensure that the cost of generation, transmission and distribution is paid by the companies.

Huffman said that instead of taking the rest of the summer off, as was the plan, the House will return June 24 to see if they can find a compromise.