US Rural Data Centers Set for New Federal Tax Break
Starting January 1, a new federal tax benefit tied to an expanded opportunity zone program could help over 100 rural US data center projects. Experts caution the gains for local communities may be limited since the program has no job-creation requirement.
Beginning next year, companies building data centers in designated rural areas across the United States will become eligible for corporate tax benefits under an expanded federal program created by last year's One Big Beautiful Bill Act. The changes build on the existing opportunity zone program, originally launched as a bipartisan initiative during the first Trump administration to spur investment in low-income census tracts.
House Ways and Means Committee chair Jason Smith has said the updated rules could lower barriers for large, capital-intensive projects, particularly hyperscale data centers. However, Emily Kraschel, a tax policy analyst at the Searchlight Institute, warns that the only requirement to access the benefits is capital investment — not job creation or a guaranteed local economic boost, unlike traditional factories that require large workforces.
Research compiled by Searchlight and reviewed by Wired identified more than 100 data center projects in rural areas that could qualify for the new benefits, based on a conservative dataset of fewer than 700 known projects nationwide; other estimates put the true number of data centers in development closer to 1,500. Separate research from Pew found that while only 13 percent of currently operating data centers are in rural locations, roughly 67 percent of planned facilities are headed to rural areas.
The expansion arrives amid growing backlash against data center development, including from rural and Republican voters, with tax breaks for major tech companies becoming a central point of contention. Senator Josh Hawley has introduced legislation that would strip data centers of eligibility for opportunity zone funding.
Microsoft, Meta, and Amazon all told Wired they do not use the program to finance their data centers, while Google did not respond to inquiries. Still, University of Texas at Austin professor Nathan Jensen said he would be surprised if some companies weren't factoring the option into their site-selection decisions, calling it essentially free money. The federal government estimates the rural expansion of the program will cost roughly $40.9 billion over the next decade.
