HARRISBURG \u2014 As Democratic Gov. Josh Shapiro attempts to thread a needle between attracting data center projects to Pennsylvania and satisfying their critics, members of his own party \u2014 and many Republicans \u2014\u00a0are backing a more aggressive regulatory approach.<\/p>\n
The split between the governor and other lawmakers could be seen this week in a pair of conflicting bills the Democratic-controlled state House passed.<\/p>\n
One was Shapiro\u2019s own marquee data center proposal<\/a>, which aims to incentivize developers to, among other things, be more transparent and reduce environmental impacts by putting conditions on a major state tax break. It passed 134-63 on Wednesday, with all but one Democrat in support, and 33 Republicans also in favor.<\/p>\n The other was a measure<\/a> that would completely repeal that sales tax break, which applies to major purchases related to data center development and is expected to cost the commonwealth over $2 billion by mid-2031<\/a>. It passed even more decisively on Thursday, with support from all but four Republicans and one Democrat.<\/p>\n The sponsor of the latter bill, longtime environmentalist state Rep. Greg Vitali (D., Delaware), had initially planned to propose the tax credit repeal as an amendment to Shapiro\u2019s bill. House Democratic leaders, he told Spotlight PA, seemed sufficiently concerned that the amendments would pass and reshape the bill that they approached Vitali and promised to run his repeal bill separately if he withdrew them.<\/p>\n \u201cIt shows the sales tax exemption has fallen upon disfavor among both Democrats and Republicans,\u201d Vitali said after his bill passed through committee unanimously on Monday.<\/p>\n \u201cHopefully it’ll send a signal to the governor to switch gears on this issue and call for an end of the sales tax exemption,\u201d he said. Vitali lost his primary this spring and will leave the legislature at the end of the year.<\/p>\n The dueling bills reflect a larger debate as to what \u2014 if any \u2014 incentives the commonwealth should provide to data center developers. They come as the facilities proliferate rapidly across the state and country, inspiring hopes of economic development among politicians and public officials, but also spurring fear about skyrocketing electricity costs, grid instability, high water use, and environmental consequences.<\/p>\n Proponents of Pennsylvania\u2019s tax exemption have said it is essential for maintaining economic competitiveness, while opponents have said that it is unnecessary given the number of data center projects already underway across the state.<\/p>\n Still, state House Majority Leader Matt Bradford (D., Montgomery) told Spotlight PA that moving many bills, and particularly the two conflicting bills over the data center tax credit, should not be interpreted as a sign of Democratic disunity over Shapiro\u2019s approach.<\/p>\n Bradford said he is \u201csupportive\u201d of both tax strategies.<\/p>\n \u201cOne is to incentivize, and one is to end the credit entirely. I think there are pros and cons to both,\u201d he said, adding that \u201ceither one of those options provides a path forward.\u201d<\/p>\n Rosie Lapowsky, a spokesperson for the governor, wrote in an email that the Shapiro administration is \u201cworking closely with the House Democrats on an appropriate package of data center legislation that will protect Pennsylvanians.\u201d<\/p>\n Shapiro and Vitali\u2019s data center proposals aren\u2019t the only ones lawmakers are kicking around as state budget talks intensify before the June 30 deadline.<\/p>\n Lawmakers on both sides of the aisle have introduced a flurry of bills, including a measure<\/a> that would allow municipalities to implement a 180-day pause on the consideration of a data center application. It passed the state House with only one opposing vote.<\/p>\n State Rep. Kyle Mullins (D., Lackawanna) said his constituents have \u201cevery\u201d reason to be \u201coutraged and object to being ground zero for data center speculation.\u201d His district includes the borough of Archbald, which has seen some of the highest rates of data center proposals in the state<\/a>.<\/p>\n \u201cAmong the things that they have demanded is a repeal of the sales tax exemption for an industry that now clearly needs no help,\u201d he added.<\/p>\n Shapiro promoted<\/a> the state House passage of his bill on X Wednesday, describing it as \u201cstrict standards to hold data center developers accountable and protect Pennsylvania communities\u201d and saying developers \u201cwill be required\u201d to do things like generate their own power and commit to environmental standards.<\/p>\n He did not mention that, under his proposal, following these standards would get data center developers a tax break and faster permitting. (A news release the administration put out at the same time included more detail, saying the standards would apply to \u201cdata center developers seeking state tax benefits.\u201d)<\/p>\n Both tax bills now head to the Republican-controlled state Senate, joining several other data center regulation bills that have been passed by the House and now sit in Senate committees.<\/p>\n \u201cThere are concerns about that [data center sales] tax provision,\u201d Majority Leader Joe Pittman (R., Indiana) told Spotlight PA<\/a> earlier this month. \u201cIt\u2019s certainly possible that discussion on what the right approach is will unfold in the weeks ahead.\u201d<\/p>\n A spokesperson for the Senate Republicans did not specify which, if either, tax approach the caucus preferred.<\/p>\n \u201cI am head scratching about why the Senate has completely left the field on this issue and why individual Senate members come out and say they support these things and then their leadership couldn\u2019t be more Shermanesque<\/a> and clear about their unwillingness to do anything,\u201d Bradford said.<\/p>\n There is at least some bipartisan support in the state Senate for more aggressive regulation of data centers.<\/p>\n One bill<\/a>, introduced by Sen. Katie Muth (D., Montgomery) would place a moratorium on new development, and has as a co-sponsor Sen. Rosemary Brown (R., Monroe). Three Senate Republicans have also sponsored a bill<\/a> that would repeal the data center sales tax break and direct new revenue towards reducing the state\u2019s gas tax.<\/p>\n That lawmakers are navigating how to regulate data centers amid ongoing budget negotiations adds an element of financial pressure to data center talks. The state is projected<\/a> to spend more next year than it will bring in, and members are struggling to find revenue to cover that gap.<\/p>\n \u201cI’ll continue to advocate with my leadership to include the elimination of these tax breaks in the budget deal, perhaps in terms of an amendment to our tax code,\u201d Vitali said.<\/p>\n Vitali said that he doesn\u2019t see his approach and the governor\u2019s as \u201cmutually exclusive.\u201d<\/p>\n \u201cI think that the better approach is to both eliminate the tax breaks and put stricter requirements on how data centers act,\u201d he added.<\/p>\n While You\u2019re Here<\/p>\n Spotlight PA\u2019s nonprofit reporting is a free public service, but it depends on your support. Give now to ensure it can continue.<\/p>\n First passed in 2016, Pennsylvania\u2019s data center tax break was initially in the form of a tax refund capped<\/a> at $5 million annually. In 2021, lawmakers amended the tax code to allow qualifying businesses to receive an uncapped sales tax exemption on data center equipment.<\/p>\n It exempts developers that generate a certain dollar value of new investment from the state sales tax rate of 6% for data center equipment, including<\/a> costs to construct buildings.<\/p>\n Twelve data center projects currently receive the exemption, according to a February report<\/a> from the Pennsylvania Department of Revenue.<\/p>\n