The clearest signal out of a nine-hour Texas House hearing on data centers Aug. 19 was not about a power line or a permit. It was about a tax break. Members of the House Committee on State Affairs indicated they intend to repeal the sales tax exemption Texas grants large data centers — and the Fort Worth Republican who wrote the bigger of the state’s two exemptions said he expects to carry the repeal bill himself.
“It’s a huge number,” Rep. Charlie Geren, R-Fort Worth, said of what the break now costs. “I passed the bill to get it done. I’m going to probably carry the one to repeal it. Realistically, that’s going to go away.”
The Comptroller’s Office valued the exemption at an estimated $5.4 million in 2014, its first year. For 2026 the office estimates the state is forgoing $1.3 billion in sales taxes it would otherwise collect, according to figures presented at the hearing and reported by The Texas Tribune. Texas levies no personal income tax, and the sales tax is the state’s single largest source of revenue, so a break that size is money the state does not have to spend on anything else.
Two separate exemptions sit in the tax code, and they are not the same size. The first, created by House Bill 1223 in 2013, covers a data center of at least 100,000 square feet used by a single occupant. To qualify, the operation must create at least 20 permanent jobs paying at least 120 percent of the average weekly wage in its county and put at least $200 million of capital into that specific building over five years. The exemption then runs 10 years, or 15 if the investment reaches $250 million.
The second is Geren’s. House Bill 2712, which he authored and took effect in June 2015. It created a separate break for what the statute calls a “large data center project” — at least 250,000 square feet, at least 40 qualifying jobs and a capital investment of at least $500 million. That one lasts 20 years. Both exempt the servers, cooling systems and electrical gear inside the building rather than the building itself, which is where most of the money in a modern data center goes.
ERCOT, the agency that runs the electric grid for most of Texas, told the committee that roughly 90 percent of the projects waiting in line to connect to the grid are data centers. Chief Executive Pablo Vegas said the audit Gov. Greg Abbott ordered of those projects should be finished around December, and acknowledged that some of the roughly 250 projects eligible for the first round of connection approvals may drop out because of the delay.
The fairness argument at the hearing was about who pays for what. “Well, it seems like the citizens don’t have a choice in this,” said Rep. Senfronia Thompson, D-Houston. “Data centers are being pushed upon them, and they don’t have a choice to say no. But they’ve got to pay. I think that’s unfair. It’s undemocratic.”
Industry witnesses at the same hearing, speaking mainly to the separate fight over new high-voltage transmission lines, urged lawmakers not to treat the buildout as a data center problem alone. “This is not about data centers,” said Katie Coleman, representing the Texas Association of Manufacturers. “It is about our planning process systematically under-planning for industrial growth for more than 10 years.” Walt Baum, president of the trade group Powering Texans, warned that stopping transmission projects “will not only affect oil and gas operations, but it’s going to affect new generation currently being built and threaten many planned projects.”
No repeal bill has been filed, and the committee has not issued its interim report. How a repeal would treat data centers the comptroller has already certified is unresolved: both statutes tie each exemption to a fixed term that begins on the certification date, not to a fixed calendar year. The Dispatch reported in July that the Senate Finance Committee took up the same exemption at a July 27 interim hearing.
Rep. Rafael Anchía, D-Dallas, renewed his call for Abbott to convene a special session so lawmakers would not have to wait. Abbott has not called one. Absent that, the earliest a repeal can pass is after the Legislature convenes Jan. 12, 2027 — roughly a year in which the comptroller’s estimate keeps running.