Ohio, one of the nation\u2019s data center destination hot spots, is suspending a tax break that has been critical to its competition with other states to attract the massive new facilities that power and train artificial intelligence chatbots.<\/p>\n
The move Wednesday by Republican Gov. Mike DeWine comes as tax breaks for energy-hungry AI data centers are increasingly playing a role<\/a> in state budgets and the industry is under pressure to pay the full costs of the vast network of its computing warehouses needed to power AI<\/a>.<\/p>\n The size of Ohio\u2019s tax break skyrocketed, dwarfing previous projections, as opposition to data centers<\/a> is sweeping through cities, suburbs and towns there and prompting lawmakers to form a committee to study the impact.<\/p>\n In the meantime, residents are trying to bypass the GOP-controlled Legislature and get a referendum on November\u2019s midterm election ballot that\u2019s designed to permanently ban hyperscale data centers, likely the strictest such statewide ban under consideration in the U.S.<\/p>\n DeWine\u2019s office cited the rising utilization of the tax break and the state Legislature\u2019s new research undertaking to declare a \u201cpause\u201d in granting it to new applicants.<\/p>\n \u201cThe governor felt it was the right time to let the citizens know, let businesses know that we\u2019re going to pause on new offers of this tax incentive while that process plays out,\u201d DeWine\u2019s spokesperson, Dan Tierney, said Thursday.<\/p>\n DeWine stressed that he supports data centers \u2014 calling them a critical component in today\u2019s economy \u2014 and that the roughly $37 billion in data center-related investment in 2024 and 2025 in Ohio has been worthwhile. Meanwhile, business groups \u2014 including the state Chamber of Commerce \u2014 and labor unions warned that pausing the tax break put Ohio at risk of losing tech-sector investments to other states. <\/p>\n The state, in 2024, had used previous history in projecting that the exemption would total $136 million in fiscal 2025 and $142 million in fiscal 2026. It was $554 million in 2024 and nearly $1.6 billion in 2025, the state reported. <\/p>\n The resumption of Ohio\u2019s tax break \u2014 should it resume \u2014 could happen under a new governor: DeWine is term-limited and the race is on<\/a> to replace him. The Republican nominee, Republican Vivek Ramaswamy \u2014 an Ivy League-educated biotech billionaire \u2014 likes to talk about turning the Ohio River Valley into the next Silicon Valley. <\/p>\n However, Ramaswamy and Democratic nominee Amy Acton could share the midterm ballot in November with the citizen-led drive to ban the new construction of large data centers across Ohio. It faces a July 1 deadline to gather more than 400,000 voter signatures.<\/p>\n State tax breaks for the massive data center industry are facing growing criticism by governors and lawmakers. <\/p>\n The cost is likely rising as data center and AI-related investments drive higher consumer spending in the U.S. and tech giants keep boosting their spending commitment to hyperscale data centers.<\/p>\n In Virginia, budget negotiations have been hung up for months on a bid by Senate Democrats to eliminate the roughly $1.6 billion annual tax break.<\/p>\n Thirty-eight states have some form of a sales tax break for data centers, according to the National Conference of State Legislatures.<\/p>\n Many were approved when data centers were a small, but growing part of the economy, and well before the late 2022 debut of OpenAI\u2019s ChatGPT launched an intensifying buildout of increasingly large data centers.<\/p>\n Ohio\u2019s exemption is fairly broad, applying not only to construction materials, but to the expensive equipment \u2014 such as server racks and cooling systems \u2014 used in data centers. Operators might buy new server racks every couple of years as the technology improves.<\/p>\n DeWine\u2019s order was a surprise.<\/p>\n Dorsey Hager, executive secretary-treasurer of the Columbus\/Central Ohio Building and Construction Trades Council, where union members spend much of their time on data center projects, said he was upset with DeWine and trying to understand the governor\u2019s reasons.<\/p>\n He worried, he said, that developers that were in the midst of trying to finalize plans or permits for a project might have second thoughts.<\/p>\n Lawmakers acknowledged the opposition in announcing their joint data center committee on May 13, and said their mission was to ensure that Ohioans have accurate information about the economic, environmental and security impact of data center development.<\/p>\n \u201cWe\u2019re well aware of initiatives to limit Ohio data center development during this critical point in America\u2019s history,\u201d state Rep. Adam Holmes told a news conference. \u201cThis public concern has become a priority issue for us and could have dramatic impact on Ohio and American\u2019s future.\u201d<\/p>\n ___<\/p>\n Follow Marc Levy at http:\/\/twitter.com\/timelywriter<\/a><\/p>\n