HR-10448-119
Referred to the House Committee on Ways and Means.
Sponsored by Kristen McDonald Rivet (D-MI)
What it does
This bill would exclude property used in, or dedicated to, "covered data centers" (facilities over 50 megawatts of power capacity that house data processing or artificial intelligence equipment) from bonus depreciation, which lets businesses deduct a large share of an asset's cost in the first year. It would also bar those data centers from counting as qualified Opportunity Zone business property. The changes would apply to property placed in service, or acquired, in taxable years beginning after enactment.
Who benefits
Federal revenue, since faster deductions and Opportunity Zone deferrals would be unavailable for these projects. Local residents and ratepayers who raise concerns about data center energy and water use may benefit if fewer facilities are built. Opportunity Zone communities seeking other types of investment, such as housing or small business development, may see less competition for capital. Smaller data center operators below the 50 MW threshold and companies in other industries that keep bonus depreciation would hold a relative tax advantage.
Who is hurt
Owners and developers of large data centers, including cloud providers and AI companies, who would face higher after-tax costs on servers, cooling, and power equipment. Construction trades, equipment suppliers, and utilities that serve data center projects may see reduced demand if projects are delayed or cancelled. Investors in Opportunity Zone funds holding data center projects would lose expected tax benefits. Businesses and consumers that rely on cloud and AI services may eventually face higher prices, and localities hoping for data center investment may see less of it.
Supporters argue
Supporters argue that data centers with over 50 megawatts of load are highly profitable and capital-intensive, and do not need accelerated deductions to attract investment. They contend that these facilities strain local electricity grids and water supplies while employing relatively few permanent workers, and that Opportunity Zone benefits were meant for distressed communities, not hyperscale computing projects. They say removing the subsidies would raise revenue and redirect incentives to other uses.
Opponents argue
Opponents argue that bonus depreciation is a general investment incentive available to most industries, and singling out data centers creates an industry-specific penalty that raises the cost of domestic computing capacity. They contend that data centers underpin the economy and AI competitiveness, and that higher costs could push investment to other countries or states. They also say the facilities bring construction jobs and local tax revenue, including to Opportunity Zones that seek investment.
Constitutional context
Congress's authority to define deductions and tax incentives rests on the Taxing and Spending Clause (Art. I, §8, cl. 1), and as a revenue measure the bill must originate in the House under the Origination Clause, which it did. Because it changes deductions rather than imposing a direct tax, no apportionment issue arises, and the prospective effective date avoids the Due Process retroactivity concerns that courts weigh in tax cases. Courts have generally upheld industry-specific tax distinctions as within congressional discretion.
Checks and balances
Congress would change the tax code and the Treasury and IRS would implement it, with the President able to sign or veto; the bill expands no executive discretion beyond routine administration, and taxpayers may challenge applications in court.
Historical precedent
Congress has repeatedly adjusted bonus depreciation, most recently expanding it in the 2017 Tax Cuts and Jobs Act and 2025 legislation, and has previously carved out specific property types (such as certain real property) from bonus depreciation eligibility.