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As artificial intelligence seeps into every facet of modern life, data centers are feverishly rising to meet the ever-increasing demand.
The facilities are the physical backbone of the internet, housing the infrastructure needed to store and process data, and to power AI tools and cloud-based software. Thousands of data centers have sprung up throughout the United States, including approximately 56 in Colorado. But some state legislators want more.
For at least the fourth year in a row, Colorado lawmakers have introduced a bill to provide financial incentives for data centers to set up shop in the state. The latest effort, House Bill 26-1030, seeks to exempt certified data center developers from paying state sales and use taxes for twenty years.
“It is an investment in our state, our workers and the future of our communities,” says Democratic Majority Leader Monica Duran, who is co-sponsoring the bill. “House Bill 1030 is about making sure we don’t fall behind…and that Colorado workers and communities are the ones who reap the returns.”
Colorado is one of only fourteen states that do not offer tax incentives for data centers, according to a survey by the Husch Blackwell law firm.
Advocates say this is causing Colorado to miss out on the jobs and grid investments that data centers bring. Proponents of HB 1030 estimate that each new data center in the state could generate 1,500 construction jobs, up to 100 long-term positions and millions of dollars in property tax revenue.
But critics argue that the facilities pose more risks to Colorado communities than benefits.
A single AI-focused hyperscale data center consumes enough energy to power 100,000 households, according to Pew Research Center. That has led electricity costs to skyrocket in some areas near data centers, increasing by up to 267 percent in five years, according to a Bloomberg News analysis. Plus, a data center’s cooling system requires a large amount of water, consuming tens of billions of gallons nationwide each year.
“Without proper protections, Coloradans could end up subsidizing Big Tech’s data center operations while breathing dirtier air and depleting critical water resources,” says Jamie Valdez, Colorado transportation and energy policy program advocate with GreenLatinos.
Under the bill, data center developers would only be eligible for the tax exemption if they meet certain requirements. These include making commitments to invest at least $250 million in data center infrastructure, to obtain energy efficiency certification and to implement optimized water management strategies.
The proposed tax break comes as Colorado is facing a roughly $800 million budget deficit this year. The state’s previous data center incentive bills all failed during the committee phase, with none receiving approval from the Appropriations Committee, which is responsible for allocating funding to bills.
However, proponents argue that HB 1030 will pay off in the long term — and they say now is the time to make the investment.
“Colorado is falling behind,” says Dan Diorio, vice president of state policy for the Data Center Coalition. “The state is not yet a strong data center market. …These are facilities that bring significant economic benefits to communities, all while strengthening the technology ecosystem, creating strong business ecosystems and helping drive the 21st-century economy.”
Meanwhile, opponents to HB 1030 are backing a competing measure expected to be introduced in the coming weeks.
The competing bill will not provide any tax incentives for data centers and instead would require developers to match their energy demand with clean electricity sources, according to supporters.
“Colorado has the opportunity to lead in ensuring that data centers develop without harm to our residents,” says Megan Kemp, state legislative representative with Earthjustice’s Rocky Mountain Office, a supporter of the alternative bill. “Now is the time to advance legislation that truly puts Coloradans’ health, well-being, and wallets first.”
House BIll 1030 was assigned to the House Energy & Environment Committee. It has not yet been scheduled for a hearing.
