- Senate Finance Committee ranking member Ron Wyden, D-Ore., released a discussion draft that would deny data centers bonus depreciation, research tax credits, and some opportunity zone and REIT tax benefits.
- Wyden’s draft would tax gross receipts of qualifying data centers, while broadly defining covered data center equipment and services to include cloud computing, AI training, inference, data storage, and high-volume data processing.
- Bipartisan scrutiny of AI and data center tax incentives is growing. Separate proposals from Sens. Mark Warner, Tammy Duckworth, Mark Kelly, Josh Hawley, and Bernie Moreno would restrict data center tax incentives or impose new AI-related taxes; although none appear likely to advance this year, the data center taxation could become an area for bipartisan action next year.
These Key Takeaways were generated by AI and reviewed by a BDO professional.
Senate Finance Committee ranking minority member Ron Wyden, D-Ore., has released a draft bill that would deny data centers tax benefits and impose a new excise tax on their gross receipts.
The discussion draft would exclude data centers from four specific tax benefits:
- Data center assets placed in service after the date of enactment would be ineligible for bonus depreciation.
- Costs for data center equipment would not be considered qualifying expenses for the research credit.
- Qualified opportunity zone businesses would be precluded from providing data center services.
- Rent from certain data centers would not be considered qualifying income for real estate investment trusts (REITs) unless more than 80% of the REIT’s stock is publicly traded.
The bill also would impose an excise tax on the gross receipts of data centers for taxpayers. Several exceptions would be available, including for taxpayers with gross receipts under the threshold under Section 448(c), which reached $32 million in 2026. Wyden left the rate of tax unspecified in the discussion draft while he waits on a revenue score, but an earlier white paper from Wyden suggested a tax in the “low single digits.”
Data center equipment would be defined broadly to include any equipment to process, store, or transmit digital information, and data center services would include data storage services, cloud services, artificial intelligence training services, inference services, high-volume data processing, and any similar services.
The bill represents the latest in a string of recent proposals targeting AI and data centers, including the following:
- Senate Democrats Mark Warner, D-Va., and Tammy Duckworth, D-Ill., and 28 House Democrats have introduced companion legislation that would deny bonus depreciation to data centers (H.R. 10448 and S. 5054).
- Sen. Mark Kelly, D-Ariz., has introduced a bill that would impose a digital ad, AI use tax, and AI excess profits tax (S. 5518).
- Sen. Josh Hawler, R-Mo., has introduced a bill (S. 5418) that would exclude data centers from the definition of qualified opportunity zone businesses.
- Sen. Bernie Moreno, R-Ohio, has introduced a bill (S. 5689) to make large data centers ineligible for any federal tax credit, incentive, or benefit and impose a 100% federal excise tax on state incentives.
BDO Insights
- None of the legislative proposals appear likely to move this year, but bipartisan interest in the issue is growing. If Democrats take control of either chamber of Congress, legislation targeting data center tax benefits could become one of the few opportunities for bipartisan action. The revenue raised by any such proposal could also be used to pay for other priorities.
- Taxpayers investing in data centers should monitor the legislative process, paying particular attention to effective dates. Most of the proposals do not include carveouts for construction beginning before their enactment dates.
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