Tag: Data Centers

Energy Policy Update: Permitting Reform, Data Center Growth and Tax Proposals

Posted on by abigail_grenadier

A bipartisan group of former senior administration officials is urging Congress to advance permitting reform legislation, citing growing energy demand, infrastructure delays, and threats to U.S. economic competitiveness. The push comes as new research highlights the economic impact of data center development and Senate Democrats introduce proposals to reshape federal energy and data center tax incentives. (The Hill | Axios, Oct. 21)

Permitting Reform

  • Nineteen former economic and national security officials from five presidential administrations urged congressional leaders to pass bipartisan permitting reform legislation, warning that lengthy approval processes are hindering infrastructure development, economic growth, and national security. (The Hill, Oct. 21)
  • Signatories included former Treasury Secretaries Janet Yellen, Steven Mnuchin, Timothy Geithner, Henry Paulson Jr. and Robert Rubin, along with former Secretary of State Mike Pompeo and seven former chairs of the Council of Economic Advisers.
  • The officials endorsed the bipartisan American Affordability and Jobs Act, introduced Sept. 30 by Sens. Shelley Moore Capito (R-WV), Mike Lee (R-UT), Martin Heinrich (D-NM) and Sheldon Whitehouse (D-RI), which would reform federal environmental review and permitting processes. (Roundtable Weekly, Oct. 2)
  • The officials warned that permitting delays are particularly concerning as artificial intelligence and data center development drive electricity demand. Faster infrastructure approvals could expand electricity supply, reduce reliance on costly on-site generation and help lower consumer energy costs.

RER Advocacy

  • The Real Estate Roundtable (RER) has consistently supported bipartisan permitting reform to strengthen grid reliability, lower energy costs, and accelerate infrastructure investment.
  • In a December 2025 letter to congressional leadership, RER urged passage of the bipartisan SPEED Act (H.R. 4776), emphasizing that duplicative federal reviews delay the delivery of affordable, reliable electricity to homes and commercial buildings. (RER Letter, Dec. 8 | Roundtable Weekly, Dec. 12)

Data Center Economic Impact

  • A new U.S. Chamber of Commerce study found that data centers generate substantial economic activity, employment, and local tax revenue, underscoring their role in supporting communities and infrastructure investment. (U.S. Chamber of Commerce, Oct. 15)
  • By the Numbers: According to the Chamber’s analysis, economic impacts generated by a typical 50-megawatt data center include:
  • 5,200 jobs annually supported statewide during a two-year construction phase, generating approximately $680 million in economic activity.
  • $114 million in local tax revenue projected over five years in Prince William County, Virginia, with similar benefits estimated for communities in Texas, Georgia, and Ohio.
  • The findings come as lawmakers debate how to accommodate growing data center electricity demand while protecting consumers from higher infrastructure costs.
  • RER has also urged the North American Electric Reliability Corporation (NERC) to develop clear, workable grid reliability standards that reflect the distinct responsibilities of data center owners, operators, and tenants. (Roundtable Weekly, Sept. 18)
  • Meanwhile, congressional Democrats plan to ramp up oversight of the Trump Administration’s efforts to avoid federal environmental standards for data centers if they take control of the House and/or Senate after the midterms. (PoliticoPro, Oct. 22)

Data Center Tax Proposals

Sen. Ron Wyden (D-OR)
  • Senate Finance Committee Ranking Member Ron Wyden (D-OR) released draft legislation Friday that would impose an excise tax on data center operators and eliminate several federal tax incentives for data center investment, including bonus depreciation, Opportunity Zone benefits and research and development tax credits. (Press Release | Senate Finance Committee Summary | Draft Legislation, Oct. 23)
  • The proposal builds on Wyden’s August white paper, which also called for restrictions on certain data center investments through real estate investment trusts (REITs). (Roundtable Weekly, Aug. 7)
  • The proposed changes would create tax penalties specifically targeting data centers by excluding them from longstanding incentives available to other capital investments. (Roundtable Weekly, Aug. 7)

Clean Energy Tax Incentives

  • Sen. Wyden (D-OR) also outlined plans to restore wind and solar tax credits and expand the Inflation Reduction Act’s Direct Pay Program if Democrats regain control of the Senate. (Politico, Oct. 22)
  • A new Senate Finance Committee Democratic staff report found that nearly $2.5 billion in direct payments went to tax-exempt entities during the program’s first two years, supporting renewable energy and other clean energy investments. (Sen. Wyden Press Release, Oct. 22)

The November elections will shape prospects for permitting reform, data center regulation and federal energy tax policy, with several proposals potentially returning to the agenda during the lame-duck session or the next Congress.

Tax Policy Roundup: Lame-Duck Outlook, Opportunity Zones and Data Center Proposals

Posted on by abigail_grenadier

The November elections will shape the prospects for year-end tax legislation, with a crowded lame-duck agenda leaving limited room for a bipartisan package. Treasury and the IRS are also advancing guidance affecting real estate investment, while lawmakers continue to pursue new limits on data center tax incentives.

Lame-Duck Outlook

  • Lawmakers will return to Washington with just 24 legislative days to address government funding beyond Dec. 11, the annual defense policy bill and other expiring programs. Those negotiations could provide a vehicle for a limited tax package. (Politico, Oct. 13)
  • Potential provisions could include renewing the Work Opportunity Tax Credit, improving IRS administration, and making targeted corrections to the 2025 tax law. A narrow bipartisan agreement appears more achievable than a broader tax bargain, with cost and competing party priorities remaining obstacles. (WilmerHale, Oct. 14)
  • Control of the next Congress will influence whether lawmakers negotiate a year-end agreement or defer major decisions until 2027. Another Republican reconciliation bill remains uncertain, with Senate Majority Leader John Thune (R-SD) acknowledging the difficulty of securing sufficient votes. (Politico, Oct. 13 | Thomson Reuters, Oct. 15)
  • Senate Minority Leader Chuck Schumer (DNY) stated in a recent interview, “The lame duck will be quite different if we win the Senate,” he said. “Same thing if they win the House, and same thing if we win both or neither.” (Politico, Oct. 13)

Opportunity Zones and Tax Guidance

  • OZ deadlines: State nominations for new OZ maps have been extended and are now due Oct. 28, while comments on proposed reporting rules and broader program implementation are due Oct. 26 and Nov. 23, respectively. (Roundtable Weekly, Sept. 25 | Federal Register, Sept. 28 | IRS, Sept. 22)
  • RER advocacy: RER’s Opportunity Zone Working Group met with Treasury and IRS officials in August and has urged clear transition rules that allow existing projects to continue under the permanent program. (Roundtable Weekly, Sept. 25)
  • Treasury and the IRS recently released their 2026–2027 Priority Guidance Plan, outlining 121 tax guidance projects, including rules on Opportunity Zones, business interest deductibility, bonus depreciation and the Section 199A pass-through deduction. (Treasury–IRS Priority Guidance Plan, Sept. 29)
  • These administrative decisions will help determine how provisions of the 2025 tax law operate regardless of congressional action.

Data Center Tax Proposals

  • Sen. Peter Welch (D-VT) urged the IRS to examine whether major technology companies are improperly claiming research and experimentation tax credits for AI data center development. His Oct. 7 letter requests information on claims, enforcement, and potential guidance changes. (Sen. Welch Press Release, Oct. 8)
  • Sen. Welch’s inquiry follows proposals from Senate Finance Committee Ranking Member Ron Wyden (D-OR), Sen. Josh Hawley (R-MO) and House Democrats targeting data center tax treatment. (PoliticoPro, Oct. 14)
  • The proposals include restrictions on OZ eligibility and bonus depreciation; Wyden’s framework also targets certain REIT rents and proposes an operator excise tax. (Roundtable Weekly, Aug. 7 | Roundtable Weekly, Sept. 25 | Axios, Oct. 8)
  • A separate report led by Sen. Elizabeth Warren (D-MA) criticized data center companies’ energy-cost commitments and pursuit of state and local tax incentives. (Sen. Warren Press Release, Oct. 9)

Roundtable on the Road

  • In his prepared remarks, DeBoer highlighted that “[r]eal estate development is not just about buildings; it is a macro-economic engine that provides funding for local and national budgets, creates millions of jobs and structurally supports the long-term retirement goals of everyday Americans through pension funds and institutional portfolios.”

DeBoer also called for policies that reward capital investment, lower housing production costs, accelerate commercial-to-residential conversions, remove regulatory barriers, and expand private investment in housing and community redevelopment.

Data Centers, Permitting Reform Await Action Post-Midterms

Posted on by Julian Anderson

With affordability of energy prices top of mind for voters heading into the midterms, the Senate failed this week to advance legislation addressing data center growth and broader permitting reform. Both measures could see action during the post-election lame-duck session or the next session of Congress that starts in January, while House Democrats have outlined energy priorities they could pursue if they win the majority in November.

Regulations Versus Voluntary Agreements 

  • The Ratepayer Protection Act (H.R. 9340) stalled in the Senate on Sept. 30, even though it passed the House earlier this month by a wide bipartisan margin (417-3). (Roll Call, Sept. 30) The legislation would pressure state utility regulators to consider, but not compel adoption of, federal standards ensuring 100-MW data centers pay the full cost of grid upgrades needed to serve them. (House Energy Committee Press Release, Sept. 16)
  • Senate Majority Leader John Thune (R-SD) called the bill a “common sense” measure to codify portions of President Trump’s voluntary “Ratepayer Protection Pledge” with utilities and hyperscalers operating global data center networks. (Roll Call, Sept. 30)
  • Senate Minority Leader Charles Schumer (D-NY), meanwhile, criticized the bill as “toothless,” lacking “real guardrails on AI and data centers,” and called for legislation “to make it mandatory for data centers to cover their own costs.” (The Hill, Sept. 29)
  • Also this week, the White House issued an executive order and fact sheet (Sept. 29) “Inaugurating the Era of Super Intelligence.” Amid calls for regulations, frontier companies agreed to a voluntary pact to maintain internal controls, report safety and security incidents, and conduct third-party audits as they develop advanced AI models and agentic systems at the cutting edge of technology. (New York Times, Sept. 29)    

Permitting Reform

  • The package would streamline permitting for energy and infrastructure projects, including transmission, while requiring data centers to pay their associated transmission costs. The Senate is not expected to vote until after the midterm elections, leaving the measure for possible lame-duck action. (Bill Summary, Sept. 30 | Senate EPW Committee, Sept. 30)
  • RER supports permitting reform to improve energy affordability and meet growing electricity demand. Its letter backing the bipartisan SPEED Act (H.R. 4776) urged certainty for approved projects and warned that redundant federal reviews delay affordable, reliable power to homes and commercial buildings. (Letter, Dec. 8, 2025 | Roundtable Weekly, Dec. 12, 2025)

House Democrats’ Energy Blueprint

  • On Sept. 15, House Democrats led by Rep. Kathy Castor (D-FL) released the Thriving Economy Project (TEP), a menu of more than 800 recommendations that could shape the energy agenda if Democrats win the House in November. Democratic leadership has not formally endorsed the proposals. (TEP Report, Sept. 15 | Politico via SEEC, Sept. 16)
  • Building-related recommendations include energy benchmarking for commercial and residential buildings and disclosure of energy costs in sales and leases, as well as high-performance building standards tied to federal housing, infrastructure, disaster recovery, and mortgage programs. (TEP Report, Sept. 15)
  • Data center proposals include energy and water disclosure requirements, siting and efficiency standards, responsibility for associated grid infrastructure costs, and new DOE efficiency metrics, such as an ENERGY STAR-equivalent program for AI tools. (TEP Report, Sept. 15)

RER will continue tracking these developments and advocating for policies that support affordable and reliable electricity and timely energy infrastructure investment.

Opportunity Zone Rules and Maps Take Shape as Congress Weighs Data Center Limits

Posted on by abigail_grenadier

As states finalize the next Opportunity Zone maps, Treasury and the IRS are seeking input on program rules while lawmakers weigh whether data centers should qualify for OZ tax benefits.

Treasury Seeks Input on OZ Rules

  • In a Sept. 22 notice, Treasury and the IRS requested comments on how to implement the permanent OZ program, specifically regarding housing investment, working capital rules, operating businesses and the tax treatment of long-held investments. Comments are due Nov. 23. (Tax Notes, Sept. 22 | Bloomberg Law, Sept. 23)
  • The request follows proposed regulations issued Sept. 11 on reporting requirements for Qualified Opportunity Funds (QOFs) and OZ businesses, as well as fund certification and decertification. Comments on that separate proposal are due Oct. 16. (PoliticoPro, Sept. 10)

RER Advocacy

  • RER’s Opportunity Zone Working Group has urged Treasury and the IRS to adopt clear, workable rules that allow existing projects to continue through the transition to the permanent program.  The Group also recently met with Treasury and IRS staff in August to discuss guidance for projects spanning the original and permanent OZ programs.
  • The new maps and forthcoming rules will shape where and how OZ capital can support housing, redevelopment and other projects in low-income communities.

New Opportunity Zones Maps

  • Governors are finalizing nominations for the next generation of OZs ahead of a Sept. 28 deadline, with a 30-day extension available upon request. Treasury will certify the new designations, which take effect Jan. 1, 2027 and remain in place for 10 years.
  • The tighter eligibility rules are expected to significantly reduce the number of designated OZs. Roughly, 6,500 zones could be selected nationwide, nearly 26% fewer than the 8,764 designated under the original program. (Bisnow, Sept. 15)
  • The designation process will help determine where new OZ-supported investment can occur beginning in 2027. While the original program attracted significant multifamily investment, developers are now pursuing designations for a broader range of real estate projects, including mall redevelopments and data centers. (Bisnow, Sept. 15)

Data Center OZ Legislation

RER will continue working with Congress, Treasury, and the IRS to secure and improve  OZ rules to ensure the incentives support economic development and job growth, new sources of local tax revenue,  and expanded housing supply.

Tax Policy Roundup: Foreign Investment, Demolition Expenses, Data Centers, and Partnership Taxes

Posted on by abigail_grenadier
FIRPTA

The Real Estate Roundtable (RER) submitted recommendations this week aimed at removing barriers to foreign investment in US real estate and reforming the tax treatment of demolition costs, as lawmakers introduced data center tax legislation and a federal appeals court ruled on the self-employment tax treatment of limited partners.

FIRPTA: RER Requests Repeal of IRS Notice

  • This week, RER submitted a letter to Treasury Secretary Scott Bessent requesting revocation of IRS Notice 2007-55, citing its negative impact on foreign investment in U.S. commercial real estate. (Letter, Sept. 15)
  • The IRS Notice took the position that REIT distributions are not exempt from tax under the tax exemption for foreign governments (section 892). It also treats REIT liquidating distributions as sales of real property subject to tax under the Foreign Investment in Real Property Tax Act (FIRPTA).
  • The letter notes that nearly 20 years have passed without regulations implementing the Notice. Since that time, statutory changes to FIRPTA have eliminated much of its original rationale, and foreign capital’s importance to U.S. real estate investment and jobs has only increased. (Letter, Sept. 15)
  • RER contends that the Notice creates unnecessary transaction costs, limits investment flexibility, and discourages otherwise productive transactions. (Letter, Sept. 15)
  • “[S]ound legal reasoning, good governance, and favorable economic policy strongly support an administrative action to revoke Notice 2007-55,” wrote RER President and CEO Jeffrey DeBoer. “Repeal of the Notice would align squarely with the Administration’s stated priority of ‘unleashing prosperity through deregulation.’”

Property Redevelopment and Demolition Costs: Coalition Seeks Tax Reforms

  • On Wednesday, RER and 13 other national real estate organizations sent Congress a letter encouraging changes to the tax treatment of demolished buildings and demolition expenses.  (Letter, Sept. 15)
  • Current treatment: Section 280B generally requires both demolition expenses and a demolished building’s remaining tax basis to be added to the basis of nondepreciable land. Owners typically cannot recover those amounts for tax purposes until the land is sold, potentially years or decades later.
  • “This treatment can delay or deter redevelopment projects that would otherwise support increased housing supply and commercial activity, particularly in high-cost areas and downtown corridors facing elevated vacancy rates,” the 14 organizations wrote. (Letter, Sept. 15)
  • Proposed changes: The coalition recommends allowing taxpayers to deduct as a loss any remaining tax basis of a demolished building and allowing taxpayers to deduct the actual demolition expenses. The reforms should be paired with reasonable guardrails to protect historic buildings and ensure timely redevelopment of the property.

  • The issue was recently highlighted in an op-ed written by RER Tax Policy Advisory Committee Chairman Joshua Parker and published in The Hill. (The Hill, Aug. 30 | Roundtable Weekly, Sept. 11)
  • Future legislation in this area could also restore the deductibility of environmental remediation expenses.
  • The recently enacted, bipartisan ROAD to Housing Act removed many barriers to creating new housing. The organizations’ proposal would continue building on these efforts by promoting productive real estate investment.

Data Centers: House Democrats Propose Tax Restrictions

  • Reps. Kristen McDonald Rivet (D-MI) and Don Davis (D-NC) introduced the Reverse Big Ugly Tax Breaks for Data Centers Act on Sept. 16, seeking to exclude covered data centers from investment incentives expanded in the 2025 tax law. (Politico |  Rep. Rivet Press Release, Sept. 16)
  • The bill would deny 100% bonus depreciation and Opportunity Zone eligibility to covered data-center property. Its definition covers facilities exceeding 50 megawatts of maximum rated power capacity or total peak power load, including property dedicated to their operation. (Bill text)
  • The legislation follows an August white paper from Senate Finance Committee Ranking Member Ron Wyden (D-OR) addressing bonus depreciation, Opportunity Zones and REIT treatment for data centers, along with a proposed excise tax on operators. (Senate Finance proposal, Aug. 6 | Roundtable Weekly, Aug. 7)

Partnership Taxes: Second Circuit Rules in Soroban

  • The U.S. Court of Appeals for the Second Circuit on Sept. 17 affirmed the Tax Court’s decision in Soroban Capital Partners LP v. Commissioner, holding that three principals did not qualify for the limited partner exception from self-employment tax because they exercised managerial control over the firm. (Opinion, Sept. 17)
  • The court focused on the partners’ actual responsibilities, including managing investments, serving on governing committees, and directing personnel decisions. It clarified that partners may provide some services and still qualify for the exception if those activities do not involve controlling, managing or running the business. (Bloomberg Law, Sept. 17)
  • The opinion appears to align, at least in significant part, with the Fifth Circuit’s revised approach in K Alain, formerly Sirius Solutions. (Court Opinion | JD Supra, Aug. 12)
  • RER filed an amicus brief supporting the taxpayer in Soroban as part of its broader challenge to the IRS’s restrictive interpretation of the limited partner exception from self-employment tax. RER also filed briefs supporting taxpayers in Sirius Solutions in the Fifth Circuit and Denham Capital in the First Circuit. (Roundtable Weekly, Jan. 30 | Feb. 13 | Sept. 11)

RER will continue working with Congress, Treasury and the IRS to advance tax policies that expand access to capital, encourage redevelopment and support long-term economic growth.

RER Recommends Clear, Workable Standards for Data Centers and Grid Reliability

Posted on by abigail_grenadier

The Real Estate Roundtable (RER) submitted comments on Thursday to the North American Electric Reliability Corporation (NERC) supporting efforts to address the grid impacts of large computational loads, while urging the organization for clear, workable standards to reflect how data centers are actually owned, leased and operated. (Letter, Sept. 17)

State of Play

  • NERC’s Project 2026-02 would establish new definitions, registration criteria and mandatory reliability standards for certain data centers called, “large computational loads,” connected to the U.S. electric grid.
  • The proposal would require Computational Load Owners (CLOs) and Computational Load Operators (CLOPs) to register with NERC when a site has at least 50 megawatts of total connected load and meets a separate 100-kilovolt connection criterion.
  • The proposed standards address data-center interconnections, grid-impact studies and modeling, operational communications, information sharing, and monitoring of how facilities respond to grid disturbances.

RER Recommendations

  • RER’s comments call for clear responsibilities based on which entity owns or controls the property, equipment, operations, and information covered by each requirement. (Letter, Sept. 17)
  • Distinguish owners from operators. At many leased and colocation facilities, the entity that owns the land and buildings is separate from the tenant that controls the servers, computing equipment, and associated electricity load. NERC’s definitions should account for these distinct roles and assign compliance responsibilities accordingly.
  • Clearly define covered sites. RER recommended that NERC limit the definition of a “Computational Load Site” to properties primarily used by information technology infrastructure to process, store, transmit or manipulate digital information—including cloud services, artificial intelligence and cryptocurrency mining.
  • Clarify the 50-MW threshold. “Total Connected Load” should include computational load as well as electricity used for HVAC, lighting, elevators, security, fire-safety equipment, and other building systems. NERC should also provide examples showing how the threshold applies across different leasing arrangements.
  • Define a “single location.” Objective criteria are needed to determine when electricity use from separate buildings or leased spaces must be combined for registration purposes, particularly at multi-building data-center campuses.
  • Identify the voltage measurement point. RER asked NERC to clarify where the proposal’s 100-kV threshold should be measured, using a point reasonably attributable to the site’s electricity use rather than a remote point farther upstream on the grid.
  • Require two-way information sharing. NERC should establish reciprocal obligations for owners and operators to confidentially and timely exchange the data each needs to comply with the proposed standards.

Why It Matters

  • Data centers often operate under complex ownership and leasing arrangements. A building owner may be responsible for the property and its connection to the grid while having limited control over the tenant-owned equipment and operating decisions that drive computational demand.
  • RER raised concerns about assigning a compliance obligation to one entity when another party controls the information, equipment or operational capability needed to satisfy it.
  • Clear definitions and appropriately assigned responsibilities can support grid reliability while giving data-center owners, operators and tenants a workable framework for compliance.

Data Center Policy Developments

  • The House passed the bipartisan Ratepayer Protection Act (H.R. 9340) on Wednesday by a vote of 417–3, marking Congress’ first major legislative action addressing the potential energy costs associated with the rapid expansion of AI and data centers.
  • The bill would require states to consider standards preventing data centers and other large power users from shifting infrastructure costs onto existing customers. (Utility Dive, Sept. 17)
  • On Thursday, Sen. Martin Heinrich (D-NM) blocked Sen. Jon Husted’s (R-OH) effort to pass companion legislation by unanimous consent, preventing immediate Senate passage. (The Hill, Sept. 17)

House Democrats Release Energy Policy Framework

  • House Democrats and the Sustainable Energy and Environment Coalition (SEEC) Institute released the Thriving Economy Project, a collection of more than 800 energy, environmental and economic policy proposals that may be considered in the next session of Congress. (Report, Sept. 15)
  • The recommendations include an ENERGY STAR-equivalent program for AI tools, data-center energy and water reporting, energy benchmarking for commercial and residential buildings, and disclosure of energy costs in sales and leases. (Roll Call, Sept. 15)
  • Other proposals include high-performance building standards tied to federal housing and infrastructure programs, along with stronger federal siting, design, and efficiency standards for data centers.
  • Data center recommendations also include mandatory NERC reliability standards, requirements to cover the infrastructure costs their electricity demand creates, and waste heat reuse to support heating and cooling nearby buildings.

What’s Next

RER will continue working with NERC and other stakeholders to support reliability standards that protect the electric grid, provide clear regulatory accountability, and reflect the operational realities of data-center ownership and leasing.

Data Centers, Grid Reliability and Building Standards Draw Increased Attention Ahead of Midterms

Posted on by abigail_grenadier

Energy issues are front and center in Washington, D.C., and the states in the weeks leading up to the midterm elections. Rising electricity costs, rapid data center development, and evolving AI technologies are fueling debates over grid reliability, infrastructure investment, tax policy, and job impacts.

State of Play

  • The House is expected to vote next week on the bipartisan Ratepayer Protection Act, which would require technology companies to cover energy infrastructure costs associated with their data centers rather than pass them on to consumers. (Axios | Politico, Sept. 10)
  • The North American Electric Reliability Corporation (NERC) is developing reliability standards for large “computational loads,” including data centers and cryptocurrency facilities. (NERC Project 2026-02)
  • The proposed standards address data-center interconnections, grid-impact studies and modeling, information sharing and records of disturbances such as sudden load losses or voltage drops. (Roundtable Weekly, July 17 | 24 | Aug. 7)

Why It Matters

  • As federal policies evolve, regulators must distinguish between data-center ownership and operations. Requirements should track which parties control facility operations, possess relevant data, and are responsible for managing grid impacts due to intensive “computational loads” from activities like cloud computing, AI modeling, and crypto mining.
  • NERC’s imminent data center owner and operator rules should also respect leasing arrangements at these facilities. Hyperscalers and other AI tenants in leased spaces should have affirmative obligations to share relevant data, such as their electricity usage and water consumption, with facility owners that may have reporting obligations.

Data Center Tax Proposals

  • Senate Finance Committee Ranking Member Ron Wyden (D-OR) recently released a framework that restricts Opportunity Zone (OZ) investments and bonus depreciation for new data centers, changes the treatment of certain data-center rents under the REIT rules, and establishes a federal excise tax on operators’ gross receipts. (Senate Finance Committee, Aug. 6 | Roundtable Weekly, Aug. 7 | GlobeSt. Sept. 8)
  • A recent Bipartisan Policy Center analysis outlined significant questions surrounding proposals to tax AI, including which activities should be taxed, who would ultimately bear the cost, and whether new taxes could discourage investment or innovation. (Bipartisan Policy Center, Aug. 24)
  • A separate Cato Institute analysis warned that an excise tax based on revenue rather than profits could impose especially high effective tax rates on lower-margin data-center operators and discourage new development. (Cato Institute, Sept. 3)
  • RER Advocacy: RER’s Tax Policy Advisory Committee is preparing comments on the Wyden framework. Maintaining the owner-operator distinction is critical to preventing provisions aimed at hyperscalers from penalizing real estate owners that do not control facility operations.

Data Centers & CRE By the Numbers

  • A new National Association of Realtors report found that 50% of surveyed agents with a data center in their market reported higher nearby commercial property values, while 42% cited increased demand for commercial space. Industrial properties saw the strongest gains in interest at 58%. (CoStar | Housing Wire, Sept. 9)
  • Recent reports from JLL and CBRE found that North American data-center demand reached record levels in the first half of 2026, doubling from the previous year and increasing fivefold from the same period in 2024. (BisNow, Sept. 3)

California Building Performance Standards (BPS)

  • On Aug. 18, RER submitted comments to the California Energy Commission on its strategy for developing future statewide building performance standards. (RER Letter, Aug. 18)
  • RER also coordinated with the California Business Properties Association and California Building Industry Association to align its recommendations with a broader coalition letter joined by AHLA, BOMA International, CREDA, ICSC and Nareit. (Coalition Letter, Aug. 18)

What’s Next

RER will continue working with policymakers and industry partners to advance reliable and affordable energy supplies, efficient buildings, and clear rules that recognize the distinct responsibilities of data-center owners and operators.

Senate Proposal Would Impose Tax Penalties on Data Centers

Posted on by abigail_grenadier

Senate Finance Committee Ranking Member Ron Wyden (D-OR) on Thursday unveiled a white paper that proposes the elimination of several federal incentives for new data center investment and a new excise tax on data center operations. (Senate Finance Committee Press Release| Politico, Aug. 6)

Data Center Tax Proposal

  • Sen. Wyden’s proposal would prohibit Opportunity Zone funds from investing in new data centers, subject capital assets used to build and supply data centers to longer cost recovery periods than assets used for other purposes, and effectively deny investors’ ability to participate in new data center investment through REITs. (White Paper, Aug. 6)
  • The proposal would also impose a gross receipts excise tax on U.S. data center operators. (White Paper, Aug. 6)
  • The white paper cites the current construction boom as evidence that the changes are justified, while stating the proposal “will not end data center development or put at risk the U.S. maintaining its status as the global leader in AI and other innovative technologies.” (PoliticoPro, Aug. 7)
  • While Sen. Wyden’s statement describes the tax provisions as removing “existing investment incentives,” in actuality the changes would create discriminatory tax penalties that expressly exclude data centers from general, long-standing rules that apply broadly to other forms of capital investment.
  • U.S. data center construction has quadrupled over the past four years, according to the white paper, which also cites roughly $700 billion in projected spending this year. Revenue from the proposed tax changes would be directed toward workers and communities affected by AI-driven economic disruption (White Paper | NOTUS, Aug. 6)
  • Sen. Wyden is seeking comments on the framework through Aug. 31 and expects to release legislative discussion draft language this fall. (AI Weekly, Aug. 7)

Why It Matters

  • Data center development is increasingly connected to a broader infrastructure ecosystem. A recent Academy Securities report identifies the federal Enhanced Use Lease (EUL) program as an emerging catalyst for digital infrastructure and domestic supply chains, noting that the Army, Air Force, and Department of Energy have increasingly used the program to facilitate data center development on underutilized government land. (July 29)
  • The model also leverages private capital for infrastructure development. The private-sector lessees under EUL arrangements bear the costs of financing, designing, building, operating, and securing facilities—illustrating the role private investment can play in meeting growing infrastructure needs.
  • With energy demand surging, real estate is an important partner in supporting energy investment, increasing efficiency, and delivering energy savings across the economy.
  • Meanwhile, in mid-August, the North American Electric Reliability Corp. (NERC) is expected to issue federal registration requirements and grid reliability standards for owners and operators of data centers. NERC’s imminent proposed standards could result in the first federal-level regulations on data centers. (Roundtable Weekly, July 17 | 24)

Permitting Reform

  • Bipartisan Senate permitting negotiations will continue beyond the August recess, with Sens. Shelley Moore Capito (R-WV), Sheldon Whitehouse (D-RI), Mike Lee (R-UT), and Martin Heinrich (D-NM) now targeting September for a potential agreement. Negotiators report progress, though significant issues remain over transmission, renewable energy projects, and historic preservation reviews. (E&E News, Aug. 5)

The House and Senate are scheduled to return to Washington on Sept. 14, leaving a narrow legislative window to advance permitting reform and other priorities before the midterm elections.

Affordability, Ratepayer Protections Drive Data Center Policies on Capitol Hill

Posted on by abigail_grenadier

Congress and federal regulators focused this week on how to meet rapidly growing electricity demand from data centers and AI while protecting consumers, strengthening grid reliability, and accelerating new energy infrastructure.

State of Play

  • All five Federal Energy Regulatory Commission (FERC) commissioners testified Wednesday before the Senate Energy and Natural Resources Committee, where lawmakers from both parties focused heavily on ensuring that the costs of serving new data centers and other large loads are not shifted to existing ratepayers. (E&E News, July 23 | Bloomberg Government, July 22)
  • “FERC now sits at the center of some of the most important questions facing our country: reliable electricity, affordable energy, data centers, manufacturing, national security,” said committee chair Sen. Mike Lee (R-UT). “Every one of these issues, in its own way, now runs directly through FERC.” (PoliticoPro, July 22)
  • Commissioners and senators discussed broader strategies to expand grid capacity, including grid-enhancing technologies that can increase the capacity of existing transmission infrastructure, and permitting reform. (Daily Energy Insider, July 22 | New York Times, July 23)
  • FERC is also moving to address the reliability risks associated with large computational loads, directing the North American Electric Reliability Corp. (NERC) to finalize new reliability standards and registration requirements for certain computational loads by the end of 2026. (Roundtable Weekly, July 17)

Data Center Legislation

  • On Tuesday, the House Energy and Commerce Committee unanimously approved the bipartisan Ratepayer Protection Act (H.R. 9340) by a 52-0 vote. The bill would require state utility regulators to consider standards to ensure data centers cover the incremental costs of the energy infrastructure needed to serve them, rather than shifting those costs to other customers. (Energy& Commerce Committee Press Release, July 21)
  • The framework includes the Data Center Tax Accountability and Disclosure Act, which would require large AI data centers to disclose information about energy and water use, emissions, backup generation, and other operational impacts, while conditioning federal bonus depreciation on meeting “LEED Gold” rating standards. (Sen. Warner Press Release, July 21)
  • State policymakers are also reassessing data center development and tax incentives. New York Gov. Kathy Hochul recently imposed a one-year moratorium on new large-scale data centers and said she will pursue legislation to eliminate certain tax incentives for the facilities. (Fortune, July 14 | PoliticoPro, July 20)
  • Arizona has paused new data center sales tax incentives for three years, while leaders in other states are also examining changes to incentive structures. (Fortune, July 14 | PoliticoPro, July 20)

AI and the Regulatory Process

  • The IRS is considering whether AI could help analyze comments while still meeting Administrative Procedure Act requirements, though GAO found the agency does not currently have such tools. (Politico, July 24)
  • For The Real Estate Roundtable (RER), which regularly submits substantive comments to Treasury, the IRS, and other agencies, the potential use of AI in regulatory review could significantly change how stakeholder input is processed and underscores the importance of ensuring meaningful consideration of technical advocacy.

Permitting Push

  • As Senate negotiators work toward a broader permitting reform deal, House Energy and Commerce Committee Chairman Brett Guthrie (R-KY) moved to stake out House priorities by releasing a discussion draft of the Permitting Our Way to an Energy Resurgence (POWER) Act, a 19-bill package aimed at accelerating pipelines, power generation, transmission, and industrial projects. (E&E News | E&C Press Release | Bill Text, July 22)

With energy demand surging, real estate is an important partner in supporting energy investment, increasing efficiency, and delivering energy savings across the economy. The Real Estate Roundtable (RER) and its Sustainability Policy Advisory Committee (SPAC) continue to monitor federal and state actions affecting grid capacity, energy costs, infrastructure permitting, and data center development.

Federal Oversight of Data Centers Ramps Up

Posted on by abigail_grenadier

The North American Electric Reliability Corporation (NERC) issued its highest-level grid alert this week, warning that data centers, crypto mining operations, and other large “computational loads” are creating new reliability risks as electricity demand accelerates across the country.  (NERC, May 4)

Why It Matters

  • NERC is the international regulatory “grid watchdog” that ensures reliability and security of North America’s bulk electricity system.
  • NERC’s Level 3 Essential Action Alert directs grid operators, transmission planners, and utilities to address risks from large loads that can unexpectedly disconnect from the grid or create significant power swings within seconds. (NERC, May 4)
  • The alert follows incidents involving data centers across the East Coast and Texas, where large loads unexpectedly dropped off the grid, raising concerns about frequency, voltage, and overall power system reliability. (Utility Dive, May 5)
  • A Union of Concerned Scientists representative called the alert a “big deal,” noting it is only the third Level 3 alert in NERC’s history. (PoliticoPro, May 4)
  • The alert signals a broader shift toward future data center regulations that could require such large power users to register with NERC, just as entities that own and operate the electric grid must currently do. (PoliticoPro, May 4). Entities that register with NERC must comply with its grid reliability standards.
  • NERC also released voluntary risk-mitigation guidelines while it develops formal reliability standards for data centers and other large loads. (E&E News May 4)
  • Meanwhile, the alert outlines “essential actions” for current NERC registrants, such as stronger modeling of computational loads, more frequent stability studies, and installation of fault-recording equipment to better understand how data centers behave during grid disturbances. Grid planners are asked to respond by Aug. 3. (NERC, May 4)
  • Separately, the Federal Energy Regulatory Commission (FERC) is drafting a proposal that could provide more federal oversight on how large data centers must connect to the power grid. (Latitude Media | E&E News, May 4)

Data Centers & Electricity Demand Growth

  • NERC’s warning comes as data centers face growing scrutiny over their energy use, infrastructure impacts, and effects on electricity costs. (NYT, April 27)
  • Eleven states have proposed legislation since late 2025 to restrict or ban data center development, while Sen. Bernie Sanders (I-VT) and Rep. Alexandria Ocasio-Cortez (D-NY) have introduced legislation to pause new data center construction nationwide. (Axios, April 5)
  • At a House Energy subcommittee hearing last week, witnesses argued that large-load customers such as data centers should cover the full incremental costs of the generation, transmission, and distribution upgrades needed to serve them. (Politico | Hearing, April 30)
  • Separately, the U.S. Green Building Council (USBGC) and eight partner organizations launched the Greening AI Data Centers Coalition to coordinate on non-governmental sustainability standards for AI data centers, including performance criteria for energy, carbon, water, waste, biodiversity, and community impact. (USGBC, April 22)
  • Data centers are not the only source of rising power demand, but they are accelerating a broader challenge: the nation needs more generation, more transmission, faster permitting, and better grid planning to support economic growth, housing development, and U.S. technological leadership. (NYT, April 27)

Electricity Costs & Infrastructure

  • The Chamber noted that rising demand alone does not determine electricity costs. States with major data center hubs, including Virginia, Texas, and North Carolina, continue to have electricity rates below the national average, underscoring the importance of generation mix, infrastructure capacity, and state-level policy decisions. (Chamber of Commerce, May 5)
  • Infrastructure bottlenecks are adding to the challenge. Wood Mackenzie estimates the U.S. electrical equipment market tied to data centers could more than triple from $20 billion to $65 billion by 2030, while shortages of transformers and other equipment have stretched lead times to 18 to 36 months and pushed prices up as much as 20 percent. (Wood Mackenzie, April 28)

Roundtable View

  • The Real Estate Roundtable (RER) has consistently emphasized that grid reliability is essential to expanding the nation’s housing supply, spurring new real estate development, supporting economic growth, and advancing U.S. technological leadership.
  • RER supports a national “all of the above” energy strategy that invests in building efficiency, grid modernization, faster permitting, and innovation across all energy sources. (RER’s Spring Policy Priorities-Energy)

Policymakers should continue advancing permitting reforms to accelerate construction of transmission lines, pipelines, and generation plants—helping reduce delays, expand