Senator Josh Hawley, R-Mo., plans to introduce legislation that would explicitly exclude data centers from accessing Opportunity Zone tax benefits, a provision originally established by the Tax Cuts and Jobs Act of 2017. Hawley argues that technology companies are exploiting this loophole to defer, reduce, or eliminate corporate gains taxes, describing the resulting subsidies as "corporate welfare" for wealthy corporations.
The Opportunity Zones program was designed to spur investment in low-income areas. However, since the tax breaks were made permanent last year through the "big, beautiful bill," data centers have increasingly utilized the zones. According to the Department of Housing and Urban Development, 8,746 Opportunity Zones exist in the U.S., with just under half located in rural areas. A report from the National Community Reinvestment Coalition indicates that 14% of all data centers are located in these zones, while over 17% of permitted, approved, and under-construction data center projects are situated there.
What the Left Is Saying
Senator Chuck Schumer, D-N.Y., previously convened panels with tech CEOs, including Elon Musk and Mark Zuckerberg, to discuss AI legislation. While there has been little legislative action since those summits, the broader progressive critique of the tech industry has intensified. Hawley, though a Republican, aligns with some populist sentiments often voiced by the left regarding corporate power. He noted that three years ago, after Schumer's AI summits, "tech CEOs then promptly gave Schumer and the Democrats gobs and gobs money, and they decided that, you know what, maybe this industry is going fine." This suggests a view held by some on the left that Democratic leadership has been too lenient on the tech sector due to campaign contributions.
What the Right Is Saying
Senator Hawley, R-Mo., is leading the charge to close the tax loophole, framing the issue as one of fiscal responsibility and fairness. "These data centers have figured out a way that they think that they can access all of this money," Hawley stated. "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." Hawley also expressed skepticism about the tech industry's recent calls for self-regulation. He argued that CEOs are now seeking antitrust exemptions to coordinate regulations themselves, stating, "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." President Donald Trump has previously dismissed concerns about AI development as a "hoax," creating tension within the GOP as the party navigates this issue.
What the Numbers Show
The Tax Cuts and Jobs Act of 2017 established Opportunity Zones to encourage investment in lower-income areas. These tax breaks were made permanent in the previous year's legislation. Data from the Department of Housing and Urban Development confirms the existence of 8,746 Opportunity Zones nationwide, with approximately 50% located in rural areas. The National Community Reinvestment Coalition reports that 14% of existing data centers are located within these zones. Furthermore, 17% of data center projects that are permitted, approved, or under construction are situated in Opportunity Zones. These figures illustrate the significant penetration of the data center industry into areas designated for low-income economic development.
The Bottom Line
Hawley's proposed legislation aims to slow the rapid development of data centers by removing their access to federal tax incentives. This move comes amid growing political scrutiny of AI development, fueled by recent warnings from industry engineers about potential risks, including a reported 10% chance of AI eliminating humanity within a decade according to Anthropic. The GOP faces internal division on how to handle the AI and data center sector, with some members, like Hawley, advocating for guardrails and tax restrictions, while others, including President Trump, have downplayed regulatory concerns. The outcome of this legislative push will depend on whether Congress can find common ground on balancing economic incentives with concerns over corporate tax avoidance and AI safety.