This article is from Tennessee Lookout
A Nashville Democrat is pushing a three-year freeze on state tax breaks for data centers along with requirements for the Tennessee Department of Revenue to report the amount of money the state is losing.
Rep. Aftyn Behn said Tuesday she will file legislation for the 2027 session prohibiting the state from issuing tax exemptions for three years, allowing time for the department to track the annual cost, disclose the facilities that hold certificates for exemptions and report on compliance and revocations, which she said the department either currently cannot or will not provide.
State law allows data centers to buy computer-related equipment, repair services and equipment to back up power infrastructure without paying sales taxes, in addition to purchasing electricity at a reduced 1.5% tax rate when they invest at least $100 million over a three-year period and create 15 full-time jobs. Behn’s office obtained information from the Department of Revenue showing the state has 25 exemptions, but the state declined to identify the companies receiving them, citing tax privacy laws.
Data centers are eligible for tax credits and FastTrack grants from the Economic and Community Development, but none have received FastTrack grant funds and tax credits are confidential, according to spokesperson Chris O’Brien.
Department of Revenue spokesperson Kelly Cortesi also said Tuesday the state can’t disclose the names or certificates of companies that own data centers because of taxpayer confidentiality laws. She added that the information isn’t reported to the department.
Lawmakers considered multiple bills this year dealing with data centers amid statewide proliferation and the subsequent demand for electricity that could detrimentally impact ratepayers. The legislature passed only one bill, sponsored by Republican Sen. Brent Taylor of Shelby County and GOP Rep. Ed Butler of Rickman, which allows data centers to produce their own power using gas-powered turbines or other methods or buy power from independent power producers that operate separately from utilities.
The measure is designed to protect customers from paying for infrastructure upgrades that benefit only data centers, but it contains exemptions if improvements benefit other ratepayers as well.
The legislature previously decreased the eligibility threshold for data centers to receive tax breaks from $250 million to $100 million and the hiring requirement from 25 to 15, according to Behn.
“We’re handing multi-million-dollar corporations an exemption our Department of Revenue can’t quantify due to inaction from the legislature, while working people in this state are struggling to pay for groceries,” Behn said in a statement.
In support of her proposed bill, Behn said Arizona, which has a Republican supermajority, adopted a three-year hold to put new reporting requirements in place for its Department of Revenue.
The state has 60 data centers operating or under construction, including 25 in Nashville and 13 in Memphis where xAI’s supercomputer facilities, Colossus and Colossus 2, operate. Power for those centers is derived from an xAI-owned energy plant that has numerous gas turbines in Southaven, Mississippi.
Citizen groups in the Memphis area have been raising concerns about the impact of the facilities on their environment and health. The NAACP filed a lawsuit against the company, claiming the turbines that power centers behind its AI chatbot Grok violate the Clean Air Act.
In Davidson County, residents have been opposing a data center proposed to go next to the Nashville Zoo. Nashville’s Metro Council opted to use the power of eminent domain to keep DC Blox from building a data center there.
_ Sam Stockard
