Texas Lawmakers Target $3.3B Data Center Tax Break

What the $3.3 billion figure means

The figure is an estimate of state sales tax revenue that would otherwise be collected, rather than a payment made directly to developers or the value of a construction program. In her November 9 announcement, Huffman said the exemption cost about $14.6 million in its first biennium after introduction in 2013, compared with the Comptroller’s estimate of roughly $3.3 billion for the coming biennium.

For developers, the relevant exposure depends on the qualifying purchases made by each certified facility. The statewide estimate cannot be applied to an individual campus as its tax bill, and it does not establish how much any particular construction contract would increase.

Which purchases receive the exemption

The program covers the 6.25% state sales and use tax on eligible purchases essential to operating a certified data center. The Comptroller lists electricity, servers and storage hardware, electrical and cooling systems, emergency generators, network equipment, software and qualifying mechanical, electrical and plumbing systems.

It is not a blanket exemption for all construction spending. The Comptroller lists exclusions, including office supplies, certain real-property improvements and repair or remodeling activities. Eligibility depends on the item, purchaser and program requirements.

Local taxes require a separate distinction. Under the regular qualifying-data-center program, applicable local sales and use taxes remain payable. Qualifying large data center projects have a separate local-tax provision; they should not be assumed to have identical treatment. The headline 6.25% refers to the state rate.

SB 293 would reach existing exemptions

Huffman’s announcement says SB 293 would repeal Tax Code Sections 151.359 and 151.3595. Existing exemptions would end on the bill’s effective date, and applications still pending with the Comptroller on that date would be denied. The proposal therefore reaches beyond developers applying for future projects.

An operator already certified under the program could lose the benefit on later qualifying purchases. That is different from saying all previously exempt transactions would automatically be taxed retroactively. The effective-date and transition provisions of any enacted law would determine the treatment; filing a repeal proposal alone changes neither current eligibility nor past purchases.

Zaffirini’s five bills address different development issues

Zaffirini’s November 9 Senate release describes five measures:

SB 32 — A statewide construction permit for large data centers, developed by the Public Utility Commission in coordination with the Texas Commission on Environmental Quality.

SB 33 — A separate transmission rate class for large computational loads, so the costs of serving them are allocated to those customers rather than residential customers.

SB 34 — County authority over qualifying developments, including water-use requirements, buffers, electricity-use reviews, permits and impact studies.

SB 35 — ERCOT sharing large-load interconnection information with the Texas Water Development Board for water planning. It does not, as previously described in this article, directly require every large data center to report its water use.

SB 36 — Changes to incentive eligibility, including restrictions on combining specified state sales tax exemptions with local abatements or incentives for the same facilities. It should not be described as immediately cancelling every existing local agreement. Treatment of new agreements, renewals and existing commitments depends on the legislation’s precise terms.

What developers and contractors would need to consider

Removing a purchase-tax exemption could raise the after-tax cost of eligible equipment and electricity. A developer’s budget review would need to distinguish server and process-equipment purchases from the building contract, and determine which party buys the equipment. A 6.25% change on qualifying purchases is not a 6.25% increase in the entire campus construction budget.

A state construction permit could add an approval step before work starts, while county rules could affect site layouts, buffers, water planning and the supporting studies required for an application. Those requirements would depend on the bills’ final scope and implementation, if adopted.

A separate transmission rate class could change how large computing customers pay for the network serving them. It is distinct from a construction tax and from the cost of a developer’s own substation, generating equipment or on-site electrical distribution.

These are potential implications for financing, procurement and development schedules. The filings do not establish that any named Texas campus has been delayed, cancelled or repriced. Developers considering future phases would need to revisit their assumptions once the effective dates, eligibility rules and any transition protections become clear.

Political support and scrutiny of the existing program

Huffman’s office confirmed that a majority of senators joined as joint authors; reporting put support at 23 of the 31 senators and senators-elect. That support is not a legislative vote or final passage. Rep. Vince Perez, D-El Paso, separately filed HB 851 seeking repeal of the data center sales tax exemption.

A July review found that six of 20 sampled data centers had failed to meet qualification requirements, adding scrutiny to the program. The earlier report also identified 138 participating facilities and 59 certifications in the current fiscal year. Those figures describe the reported audit and certification period, rather than a live count of construction sites.

The policy debate weighs revenue for public services against the role of incentives in attracting investment. Repeal supporters argue that technology projects should contribute more tax revenue. The competing economic question is how changes would affect investment decisions, employment and the future tax base. Neither argument establishes the outcome for an individual project.

The legislative timeline and next decisions

November 9, 2026 — The proposals were pre-filed for the 90th Legislature.

January 12, 2027 — The regular session convenes. Committee referrals, hearings and fiscal analysis will indicate which proposals advance.

March 12, 2027 — The general 60-day bill-filing deadline, subject to legislative exceptions.

May 31, 2027 — The regular session is scheduled to end. Bills must complete the legislative process before becoming law; a filing date is not an effective date.

The next records to watch are committee substitutes, fiscal notes, implementation dates and any provisions protecting or changing existing agreements. The current status remains proposed legislation, not an enacted restriction on Texas data center construction.