The Alabama Senate unanimously passed legislation to shorten the period in which data centers may receive tax abatements on Thursday.
Senate Bill 265, sponsored by Senator Andrew Jones, R-Centre, would limit the maximum exemption period for abatements available to data processing centers to 20 years beginning January 1, 2027.
Under current Alabama law, the largest data centers are eligible for abatements for up to 30 years.
Current abatements open to data centers are set to expire in 2028. SB265 would extend the sunset date for the tax incentives until 2032.
The bill would also mandate that large-scale data centers, which use 100 megawatts or more of electricity, start paying state sales and use taxes on their purchases, to go toward the state’s general fund. Under SB265, the governor would be able to waive tax requirements for data centers in economically struggling counties.
“Alabama’s incentives for data centers are about, we think, 15th in the nation, a little too sweet for my taste,” Jones said. “These data centers, they suck up a lot of energy, use a lot of power.”
The bill’s sponsor argued that reining in tax incentives for data center projects is an important step to help curb energy prices for Alabamians.
“Data centers are a huge piece of the puzzle—they’re only gonna become, increasingly, a larger share of the energy market moving forward,” said Jones.
Alabama is currently home to more than 20 data center facilities operating or in development.
The state’s emergence in recent years as a hub for the facilities, driven by tech companies’ desire to expand their use of artificial intelligence technology, has sparked anxieties among local communities regarding the data centers’ energy use and their environmental impacts.
Senator Merika Coleman, D-Birmingham, voiced support for the legislation, highlighting concerns surrounding a proposed data center in her district, located in Bessemer. Coleman, however, went on to express hopes that future legislation or federal grants will be able to do more to tackle environmental concerns surrounding data sites.
“The fear that people have is an increased utility cost—huge issue—in addition to water runoff and other things,” she said. “But I just want to make sure that moving forward, that we do some things to also protect the environment.”
“I really hope we deep dive into this. So, if they’re gonna continue to come into our state, we know that there are some pros and some cons,” she continued. “If we already have brownfield areas that are already, quote, unquote, dirty, let’s look at those pieces of property. There are federal grants. There’s a way to clean that up instead of having these whole other areas also, where people have fear that the environment is being impacted in addition to their utility costs.”
Meanwhile, Senator Rodger Smitherman, D-Birmingham, and Senate Minority Leader Bobby Singleton, D-Greensboro, both emphasized the importance of ensuring data center developments financially benefit surrounding communities.
“[Data centers] don’t employ a whole lot of people,” Smitherman said. “But they use up a lot of utilities, they use up, and I think that everybody looks at electricity, but they use a lot of water also.”
“Cities and counties can make a lot of money off their commercial water uses by—through this bill by making sure that they are paying their fair shares of it,” he added.
Singleton emphasized that while he would support a data center investment in his district, he believes legislators should work to “maximize” the benefits they provide communities.
“They have a lot of value to them, because they make a lot of money. Don’t get me wrong,” he said. “To pay the money that they will pay us, it’s nothing comparative to what they’re making through this data process, storing this data.”
An amendment to the legislation was adopted to ensure that existing contractual obligations with data centers are honored.
The Senate also voted 4-24 not to adopt an amendment sponsored by Senate Majority Leader Steve Livingston, R-Scottsboro, to keep the current 30-year abatement period in place.
Livingston highlighted that a data center in his district, located in Jackson County, currently employs 225 to 230 workers, pushing back against Smitherman’s assertion that the centers employ a maximum of 90 workers.
“They’re in the process of trying to make an expansion up there,” he said. “And, you know, I just hate for us to go back on a deal we’ve cut with them before and change this and go back.”
“If this amendment were to get on, I would have to just, you know, do away with this bill because [this] literally is the opposite of what we’re trying to do here,” Jones responded.
If signed into law, SB265 will take effect on June 1, 2026.
The Senate’s vote on SB265 came alongside votes in favor of legislation to restructure the Alabama Public Service Commission and impose new guidelines on PSC oversight regarding data center proposals.
Alongside a bill to significantly reconfigure the board’s composition, on Thursday, the Senate also passed SB270, sponsored by Senator Lance Bell, R-Pell City, which would require the commission to review certain contracts with large-scale data centers in order to ensure they are “in the public interest.”
The three pieces of legislation, which lawmakers have argued will help reduce energy costs, will now advance to votes from their respective Alabama House committees.
