This amendment limits tax breaks for data processing centers in Alabama to a maximum of 20 years starting January 1, 2027, and requires these large facilities to pay sales taxes on building materials and power equipment.
Alabama2026Enacted
HB399
Changes to Tax Breaks for Data Centers in Alabama
Last scannedAug 24, 2026, 9:06 AM
In one sentence
This law limits how long data centers can receive tax breaks, requires them to pay certain taxes on construction items after they start operating, and extends the deadline for these incentives.
What it does
- Limits the maximum time a data center can get a tax break to 20 years starting in 2027.
- Allows an extra 10-year extension if the company agrees in writing to keep investing locally and state agencies approve it.
- Stops tax breaks on non-education property taxes once the data center begins operating, but allows education-related taxes to continue being abated.
- Requires companies to pay sales taxes on building materials and power equipment after the facility opens.
- Sends money collected from these construction taxes into the State General Fund instead of other accounts.
- Extends the expiration date for this tax incentive program from July 31, 2028 to July 31, 2032.
Who it affects
- Companies building or expanding data processing centers in Alabama
- Local governments that grant tax abatements under the Tax Incentive Reform Act
- The Department of Revenue and the Department of Commerce
Limits and unknowns
- The law only applies to tax breaks granted on or after January 1, 2027.
- It is unclear how many companies will qualify for the extra 10-year extension since it requires written agreements and state approval.
Plain language
Terms to know
- Tax Abatement
- A reduction or elimination of a taxpayer's bill for taxes.
- Data Processing Center
- An establishment with at least 20 new jobs paying an average of $40,000 per year that handles data storage and processing services.
- Construction Related Transaction Taxes
- Sales taxes paid on building materials, equipment, and power systems used to build a facility.
Official record
Sources
Official summary
This act amends Sections 40-9B-3, 40-9B-4, 40-9B-4.1, and 40-23-35, Code of Alabama 1975, regarding tax abatements granted on or after January 1, 2027, under the Tax Incentive Reform Act, to: (1) limit the maximum exemption period for tax abatements granted to data processing centers to 20 years, subject to an additional 10 years of abatement if the private user agrees in writing to continue providing qualified local investments to the benefited community and the Departments of Revenue and Commerce approve; (2) prohibit an abatement of state noneducational ad valorem taxes extending beyond the date that certain data processing centers are placed into service; (3) provide that construction related transaction taxes on equipment necessary for the operation of certain data centers are eligible for abatement so long as an abatement does not extend beyond the date that the data processing center is placed into service; (4) require the proceeds collected on construction related transaction taxes for data processing centers be paid into the State General Fund; and (5) extend the statutory sunset date for incentives under the Tax Incentive Reform Act from July 31, 2028 to July 31, 2032.
Official activity
Bill history
- EnactedHouse
- Hulsey Motion to Concur In and Adopt Senate Amendment - Adopted Roll Call 1357 (Yeas 102, Nays 0)House
- Motion to Read a Third Time and Pass as Amended - Adopted Roll Call 1315 (Yeas 32, Nays 0)Senate
- Jones motion to Adopt - Adopted Roll Call 1314 (Yeas 31, Nays 0)Senate
- Delivered to GovernorHouse
- Signature RequestedSenate
- Signature RequestedSenate
- Signature RequestedSenate
- EnrolledHouse
- Ready to EnrollHouse
- Ready to EnrollHouse
- Jones 1st Amendment OfferedSenate
- Jones motion to Table - Adopted Voice VoteSenate
- Fiscal Responsibility and Economic Development 1st Amendment OfferedSenate
- Read for the Second Time and placed on the CalendarSenate
- Reported Out of Committee Second HouseSenate
- Fiscal Responsibility and Economic Development 1st AmendmentSenate
- Pending Committee Action in Second HouseSenate
- Read for the first time and referred to the Senate Committee on Fiscal Responsibility and Economic DevelopmentSenate
- Motion to Read a Third Time and Pass as Amended - Adopted Roll Call 832 (Yeas 103, Nays 0)House
Changes
Amendments
4 stored
This amendment limits tax breaks for very large data centers built after January 1, 2027, by ending property tax exemptions once the facility opens while still allowing sales tax breaks on specific equipment.
This amendment allows data processing centers to extend their tax breaks by up to 10 years if they agree to spend money on local community projects like roads, internet, water systems, or schools.
This amendment allows data processing centers to extend their tax break from 20 years to a maximum of 30 years if they agree to invest in local community projects like roads, water systems, or schools.