(The Center Square) – Louisiana’s revenue department says it cannot estimate how much taxpayer money may be returned to companies developing data centers under a state tax incentive.
In a statement to The Center Square, the department said that the incentive had no historical data from which to estimate future losses.
The same tax exemption budget does, however, estimate the amount of state sales tax revenue lost through the data center equipment exemption. According to the report, the department projects the exemption will cost the state another $1.68 billion in fiscal year 2026 and $1.71 billion in fiscal year 2027.
If the 2027 projection holds, Louisiana’s annual sales tax loss from the data center exemption will have grown by about $383.5 million since fiscal year 2023, the year prior to the data center incentive.
As a means of growing the state’s economy, Louisiana continues to court large data center projects, including major announced developments tied to artificial intelligence, cloud computing and high-performance computing.
Louisiana Economic Development says the Legislature passed the data center statute with “broad bipartisan support” to “create competitive advantages for Louisiana in the national data center site selection sweepstakes.”
Since then, several large scale data centers have begun construction across the state.
Data centers are essentially enormous warehouses with rows of computer servers inside dedicated to storing, processing and moving digital information. Accordingly, these warehouses need tons of electricity to power them and tons of water to make sure they are kept cool, which have aroused great concerns among many locals.
In West Feliciana Parish, local officials say they tried to address those concerns before supporting Hut 8’s planned data center. The company has committed $16 million for upgrades to the parish water infrastructure. Hut 8 is also designing a closed loop cooling system intended to keep the project from straining the parish water system, along with electric infrastructure needed for the first phase.
Parish President Kenny Havard said the water commitment was essential.
“Around the country, that’s the war cry – that these things take all our water,” Havard told The Center Square in a previous interview. “We tried to do it right. We knew the water was a big issue. I have to commend Hut 8 for working with us. Without them doing the closed system, this project would have never happened.”
The incentive did not begin as a data center tax break. As originally enacted, it authorized a rebate of state and local sales and use taxes paid by winning bidders on fiber-optic cable equipment used for broadband networks in unserved areas of Louisiana.
The rebate applied to companies awarded census blocks through the Rural Digital Opportunity Fund Auction and covered 50% of the sales and use tax paid on qualifying equipment, including telecommunications fiber, wires, poles, supports, lashing cable, conduit, communication handholes and customer premise equipment.
That changed in 2024, when the provision was expanded to include certain data center facility equipment. A data center certified by Louisiana Economic Development became eligible for a rebate of sales and use taxes paid on certain equipment, along with sales taxes paid for development, expansion and renovation of a qualified data center.