Many US states and local authorities are violating generally accepted accounting principles (GAAP) by failing to disclose revenue lost to datacenter tax subsidy schemes, according to Good Jobs First.
The accountability nonprofit has a bee in its bonnet about tax abatement programs for datacenters, which it says are costing states billions in lost revenue, yet few bother to report this.
In a new report, “Data Center Tax Abatements: Why States and Localities Must Disclose These Soaring Revenue Losses,” it names 14 states that are failing to disclose their tax shortfall due to server farms, and claims scores of local authorities are doing the same.
Good Jobs First says this has been required under GAAP since 2017, citing Governmental Accounting Standards Board (GASB) Statement No. 77 on Tax Abatement Disclosures.
Only three states – Washington State, Texas, and Virginia – properly disclose these losses in their Annual Comprehensive Financial Reports (ACFRs). Instead, many states report the losses in Tax Expenditure Reports (TERs).
ACFRs are audited annual financial reports, while TERs report or estimate current and/or future revenue losses and are unregulated, the report states.
The issue is that tax abatement laws were written when datacenters were much smaller, according to Good Jobs First. With the arrival of the current AI fad, kicked off by the development of large language models, facilities have ballooned into multi-gigawatt monsters consuming as much energy and water as a whole town and often taking up as much space. Meta’s Hyperion datacenter cluster being built in Louisiana would cover most of Manhattan if sited in New York, for example.
These behemoths are costing governments a fortune in lost revenue, thanks to the tax incentives intended to entice their owners and operators to set up shop in a particular locality.
Three states are losing $1 billion or more per year, the report finds. Georgia stands at $2.5 billion, Virginia at $1.94 billion, and Texas at $1 billion.
- Oracle taps Bloom for 2.8 GW of fuel cells to keep datacenter binge going
- Amazon would rather shareholders did not look too closely at carbon footprint
- OpenAI puts Stargate UK on ice, blames energy costs and red tape
- AI server farms heat up the neighborhood for miles around, paper finds
“No form of state spending is more out of control today than datacenter tax abatements,” said Good Jobs First executive director Greg LeRoy. “Hyperscale datacenters are not only extractive of electricity, water, and land