Sen. Josh Hawley, R-Mo., is preparing to introduce legislation that would prohibit data centers from accessing tax benefits under the Opportunity Zones program. The move highlights a growing divide within the Republican Party over how to handle the rapid expansion of artificial intelligence infrastructure and the tax incentives that support it.
Hawley argues that the tax breaks, originally established in the 2017 Tax Cuts and Jobs Act to spur investment in low-income areas, are being exploited by wealthy technology companies. He described the current application of these zones to data centers as a form of 'corporate welfare' that benefits corporations that do not need financial assistance.
What the Left Is Saying
While the primary initiative is coming from a Republican senator, Democratic leaders have expressed long-standing concerns about the lack of federal regulation for AI development. Senate Minority Leader Chuck Schumer, D-N.Y., previously convened panels with tech CEOs, including Elon Musk and Mark Zuckerberg, to discuss legislative frameworks for AI.
Critics from the progressive wing of the party, as well as some labor advocates, have raised alarms about the environmental and social impacts of data centers, particularly regarding their massive appetite for power and water. Hawley’s argument that tech CEOs have funded political campaigns to avoid strict regulations echoes sentiments often voiced by Democratic critics who argue that industry influence has stalled meaningful oversight.
Hawley noted that despite Schumer’s earlier efforts, little legislative action has occurred. He suggested that tech leaders have sought antitrust exemptions to collaborate on self-regulation, a stance that aligns with broader criticisms from the left regarding the concentration of power in the tech sector.
What the Right Is Saying
Hawley’s proposal places him at odds with the traditional pro-business wing of the GOP, which generally supports tax cuts and deregulation for the tech industry. He stated that Opportunity Zones were intended for 'low-income areas, low-income housing, low-income businesses or businesses in low-income areas,' not for massive corporate facilities.
'These data centers have figured out a way that they think that they can access all of this money,' Hawley said in an interview with Fox News Digital. '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.'
The senator expressed skepticism about the AI industry's recent calls for regulation, noting that major players have asked to slow development after reports from Anthropic engineers suggested a roughly 10% chance that AI could pose an existential threat within a decade. Hawley argued that Congress must put guardrails on AI, including allowing citizens to sue tech companies if their personal data is used without consent.
What the Numbers Show
According to the Department of Housing and Urban Development, there are currently 8,746 Opportunity Zones in the United States. Just under half of these zones are located in rural areas, which have become prime targets for data center construction due to available land and lower costs.
Data from the National Community Reinvestment Coalition indicates that 14% of all existing data centers are located within Opportunity Zones. Furthermore, just over 17% of all data center projects that are permitted, approved, or currently under construction are situated in these zones.
The tax breaks in question allow companies to defer, reduce, or eliminate capital gains taxes on investments made in these designated areas. These provisions were made permanent last year through additional legislation, despite not being explicitly designed for data center development.
The Bottom Line
Hawley’s bill would explicitly exclude data centers from accessing Opportunity Zone tax cuts, adding a new federal barrier to the rapid expansion of AI infrastructure. This development marks a significant shift in the GOP’s approach to the tech sector, which has become a major political wedge issue.
President Donald Trump has previously characterized concerns about AI development as a 'hoax,' but the internal party debate continues to evolve. With Congress returning to session, the push for legislation on AI regulation and tax policy is likely to intensify, pitting arguments for economic competitiveness against calls for social and environmental accountability.