PHOENIX — In the two‑week window from June 15 to June 30, the Arizona Commerce Authority received 113 applications for sales‑tax exemptions for data‑center projects, approving 107 before the state halted new requests under a three‑year pause announced by Governor Katie Hobbs.
Why the sudden surge?
The deadline created by the pause appears to have driven companies to submit a flurry of requests before the cutoff. The 113 applications represent nearly as many submissions in a single fortnight as the agency received in the program’s entire 13‑year history.
Program background and costs
Established in 2013, the tax‑incentive program was designed to attract high‑tech firms to Arizona by exempting sales tax on equipment for qualifying data‑center projects. Companies that invest at least $50 million receive a ten‑year exemption, while those investing $200 million earn a twenty‑year exemption.
The Arizona Commerce Authority reported that the program cost the state $38.5 million in 2025, an increase of almost $19 million from the previous year.
Critics question the value
Joseph Palomino, director of the Arizona Center for Economic Progress, warned that the surge could cost Arizona more money than anticipated. “Those savings that we were thinking potentially receiving during this three‑year period, now there are concerns,” Palomino said.
Palomino also asked whether the projects would proceed without the tax incentive, noting, “Would this investment be taking place? Would this construction be taking place without this tax incentive? And I think given the demand we’ve seen for data centers, that is yes.”
Industry perspective
Kasia Tarczynska, senior research analyst with Good Jobs First, a nonprofit that studies corporate tax breaks, argued that the data‑center industry is already financially robust and does not need public subsidies. “The data‑center industry does not need any public financial support. It’s an industry that is quite rich,” she said, adding that the moratorium’s delayed start was “unfortunate.”
What the approvals mean
The Commerce Authority clarified that the 107 approvals do not guarantee the construction of 107 new facilities. Some applications pertain to expansions of existing centers or future phases of ongoing projects.
Since the program’s inception, the agency has received a total of 124 applications and approved incentives for 83 data‑center projects.
Looking ahead
Governor Hobbs’ budget bill, signed in June, reflects growing concern among some Arizonans about the energy and water consumption associated with data‑center operations. By pausing new exemptions for three years, the administration aims to reassess the fiscal impact and environmental footprint of these large‑scale facilities.
Stakeholders will continue to monitor how the pause influences future investment decisions and whether alternative incentives might better balance economic growth with responsible resource use.
Original reporting: azfamily KTVK/KPHO Phoenix (news) — read the source article.
