New federal tax breaks could help rural data centers starting Jan. 1

In short: A new federal tax break starting January 1 could make it cheaper to build many data centers in rural areas, but the benefits for local communities are unclear.

What happened

A provision in the One Big Beautiful Bill Act expands the federal “opportunity zone” program, which gives tax benefits to companies that invest in certain low-income areas. Starting next year, more rural land areas will qualify.

Data centers, which are large buildings filled with computers that store and process online data (like a warehouse for the internet), could be major beneficiaries. The Searchlight Institute, a public policy think tank, compared rural areas that qualify with known data center projects and found more than 100 data centers in development that could be eligible. Searchlight says that number is likely higher because other datasets show far more data centers being planned or built in the US.

This comes as more data centers are being planned in rural locations. Pew Research has reported that about 13 percent of operating data centers are in rural areas, but around 67 percent of planned facilities are.

Some big tech companies appear cautious about being linked to another tax break story. WIRED contacted Meta, Amazon, Microsoft, and Google. Microsoft, Meta, and Amazon said they do not use the opportunity zone program for their data center construction, and Amazon said it has not claimed the tax benefit. Google did not respond.

Why it matters

Supporters say tax breaks can attract investment to places that need jobs and business activity. Critics say this program mainly rewards spending money, not creating jobs, and data centers often need far fewer long-term workers than factories. Lawmakers are also debating whether these tax breaks should apply to data centers at all, including a recent proposal from Senator Josh Hawley to block them.

Source: Wired