Rhode Island Data Center Tax Plan Faces Cost Warning Business & Economy· September 5, 2026· 4 min read # Data Center Tax Break Estimate More Than Doubles Pennsylvania’s projected FY 2026-27 revenue loss from a data center sales-tax exemption rose from $88.6 million to $188.4 million.
upriseri.com · Naomi D'Avenza · September 5, 2026
Pennsylvania’s projected FY 2026-27 revenue loss from a data center sales-tax exemption rose from $88.6 million to $188.4 million. Rhode Island considered its own incentives and cost controls this year.
Rhode Island lawmakers considered substantial data center tax exemptions without enacting them, while separate proposals addressed grid and water costs. Pennsylvania’s changing projections show how the price of such programs can grow after adoption.
Pennsylvania’s projected annual revenue loss from a data center sales-tax exemption has more than doubled to $188.4 million for fiscal year 2026-27 from an earlier $88.6 million estimate, a widening cost that gives Rhode Island lawmakers a concrete comparison after they considered tax incentives and utility rules for large facilities this year.
Good Jobs First, an economic-development watchdog, drew attention yesterday to the $99.8 million difference between Pennsylvania’s 2022-23 budget book and the state Department of Revenue’s February tax-expenditure report . The newer projection is about 113% higher for the same fiscal year.
The Pennsylvania report projects that the exemption’s annual revenue impact will continue rising, reaching $260.3 million in FY 2027-28, $345.9 million in FY 2028-29, $431.6 million in FY 2029-30 and $517.2 million in FY 2030-31.
Those figures are tax-expenditure estimates rather than final audited revenue losses, and the department describes them as measures of the exemption’s approximate magnitude rather than the exact revenue that could be recovered by repealing it.
Pennsylvania’s current exemption took effect on January 1, 2022, allowing qualifying computer data center equipment purchased, used or consumed in a certified facility to avoid state sales and use taxes. It followed a program first authorized in 2016 and revised by Act 25 of 2021.
Certification can remain valid for 25 full calendar years after the year in which a company applies, provided the facility continues meeting program requirements. The state may recapture benefits if those requirements are not met.
Facilities in Pennsylvania counties with populations of 250,000 or fewer must invest at least $75 million and create 25 jobs. In larger counties, the minimums rise to $100 million and 45 jobs.
Pennsylvania’s latest tax-expenditure report estimates that approximately 12 data centers currently benefit from the exemption. The state does not publish the amount received by each company because purchases made with exemption certificates are not individually reported to the Department of Revenue.
The rising projections carry direct relevance for Rhode Island, where senators this year proposed a broader package of tax benefits for qualifying data centers while other lawmakers sought to allocate electric-system costs to the facilities and require disclosures about water use.
Senate Bill 2346 would have created exemptions from property, tangible-property, and sales and use taxes for qualifying data centers. Projects would have needed to invest at least $200 million in a designated enterprise zone or $400 million elsewhere.
The Rhode Island Business Coalition supported S2346 in a March 10 letter, arguing that Rhode Island should remain competitive for large data center investments. The coalition also supported a separate Senate proposal addressing electric-system costs.
Unlike Pennsylvania’s existing sales-tax program, Rhode Island’s proposed incentive included multiple categories of taxation and used higher investment thresholds. The proposal did not become Rhode Island law during the 2026 legislative session.
Separate House and Senate bills sought to regulate facilities with projected or actual electric demand of at least 50 megawatts. That level of demand served as the threshold for determining which data centers would bear certain infrastructure costs attributable to serving them.
Rep. Brian Patrick Kennedy introduced H7331 on January 28, proposing that covered data centers pay electric-system costs reasonably attributable to their service. The bill also called for annual reporting on water withdrawals, cooling technology and water-reuse practices, along with water-efficiency plans and financial assurance for site restoration.
Sen. Louis DiPalma introduced S2776 on March 4 with a similar approach to electric costs. It would have assigned covered data centers the costs of electric infrastructure reasonably attributable to serving their facilities rather than spreading those expenses more broadly.
RIPIRG escalated the debate on Tuesday by calling for a two-year moratorium on construction of new data centers drawing at least 50 megawatts, including combined developments that reach that threshold. The request is an advocacy proposal, not an enacted moratorium.
The organization framed the pause as time for governments to establish safeguards around large facilities. It also acknowledged potential uses for artificial intelligence in medicine, pollution monitoring and electric-grid analysis.
Good Jobs First’s June national analysis found that rapidly growing data center subsidies extend beyond Pennsylvania, reporting that at least four states had annual sales and use tax exemptions exceeding $1 billion. The organization also identified 14 states with such exemptions that did not publish comprehensive annual revenue-loss figures in a timely way.
Official reports from Virginia and Georgia provide separate measures of the scale. Virginia data center operators reported approximately $1.94 billion in state and local tax benefits for FY 2025, while Georgia projected $625 million in state tax expenditure and $530 million in local tax expenditure for its high-tech data center exemption in 2026.
Virginia operators also reported $48.6 billion in investment and 1,610 net new jobs for FY 2025. The state said those figures were self-reported and had not been independently validated by the Virginia Economic Development Partnership or Department of Taxation.
Pennsylvania officials have responded to the growing projected cost with competing policy proposals. Gov. Josh Shapiro’s administration has proposed tying future benefits to energy, environmental, workforce, transparency and community standards, with recapture provisions when requirements are not met.
Pennsylvania Rep. Greg Vitali took a different position in a January co-sponsorship memo, seeking repeal of the sales and use tax exemption. Vitali argued that Pennsylvania had already attracted data centers and no longer needed the incentive.
Rhode Island’s 2026 proposals similarly split the policy response between attracting investment and assigning costs. S2346 offered tax exemptions at the $200 million and $400 million investment levels, while H7331 and S2776 applied electric-cost rules to facilities reaching the 50-megawatt threshold.
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Creates a thirty-year sales tax exemption for large data centers that invest significantly in local facilities, labor, and renewable energy.
This bill requires large data centers to pay for their own electrical infrastructure upgrades and report water usage to the state.
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Good Jobs First found that data centers receive extensive property-tax breaks despite creating relatively few permanent jobs. Rhode Island considered, but did not enact, two data-center bills this year.