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Sen. Ron Wyden, D-Ore., the top Democrat on the Senate Finance Committee, which holds jurisdiction over tax policy, has published a proposal (PDF - 112.50KB) for a new excise tax on data centers.
The Aug. 6 white paper proposes a gross receipts excise tax on data center operators in the U.S., at an as-yet unspecified “low single-digit rate,” with additional details on targeting and tax avoidance prevention to come. The proposal narrowly defines data centers eligible for the tax to exclude internet infrastructure, corporate IT departments, and small local data center operators, as long as they are not providing support services to artificial intelligence (AI) hyperscalers.
The white paper makes clear that the excise tax would focus on AI data center operators, rather than use data center ownership as a strict eligibility criterion. Location of operation is also a matter that warrants “further consideration,” according to the white paper.
“A system designed to prevent taxpayers from avoiding the excise tax should include an understanding of the U.S.’s lead in advanced data center infrastructure and the extent to which non-tax barriers will independently prevent this avoidance,” it says.
Data centers in space — an investment several companies have publicly toyed with — also would be subject to the tax.
In addition to the gross receipts excise tax, the Wyden white paper also proposes exempting new AI data centers and data center construction from existing tax benefits related to opportunity zones and bonus depreciation, and excluding rent paid by those new data centers to real estate investment trusts (REITs) from the REIT tax regime.
Though unlikely to become law in the near future, the latest Democratic tax proposal around data centers and AI represents a significant policy marker. Wyden is the senior Democrat on the committee of jurisdiction for taxation and has a history of being at the forefront of technology policymaking.
The proposal garnered immediate attention from tax policy experts and could receive significant feedback during a public comment solicitation period that ends Aug. 31. While unlikely to become law in what remains of this Congress or during the next one, due to political dynamics, it could help shape debate around data center policy during the 2028 Democratic primary and influence policymaking if Democrats return to the White House in 2029.
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