Bills to watch as the battle over data center tax credits heats up

Ohio lawmakers are grappling with the state’s data center sales and use tax exemption program after the Ohio Tax Credit Authority approved a $4.6 million incentive for Ark Data Centers LLC.

The announcement follows Gov. DeWine’s line-item veto of legislative efforts that would have halted such tax abatement initiatives, and highlights an ongoing battle between the two Ohio branches of government.

How Ohio Made it Here

On March 2, 2026, OTCA pushed through Ark’s 50% tax exemption for the next 10 years. The estimated $4.6 million tax credit will help support the Iowa-based IT provider’s $136.1 million data center facilities being built in Akron and Independence, expected to create 10 high-paying jobs.

Adding to the complexity, Indiana and Illinois have been identified as the other states vying for the Ark project. While tax exemptions are part of Ohio’s long-standing effort to attract economic development, the costs of data centers specifically have increasingly drawn criticism.

The panel contends that the credit would ensure the proposed facilities move forward in Ohio, a similar line of thinking that the DeWine Administration expressed during the line-item veto. Yet, lawmakers remain adamantly opposed to passing on data center costs to Ohio residents as they strain electricity grids, water resources, and local communities.

In the wake of that veto, the Ohio legislature is now contemplating three main legislative proposals to tackle tax exemptions—currently estimated at $141 million or more annually in foregone revenue.

Another Override?

The Ohio General Assembly is considering another override of Gov. Mike DeWine’s 67 line-item vetoes from last summer in the biennial budget bill, HB 96. The vetoed provision would have barred the Tax Credit Authority from entering into new “computer data center sales and use tax exemption agreements starting October 1, 2025.”

However, an override requires a three-fifths supermajority in both chambers — 60 votes in the House and 20 in the Senate before the end of the year. While House Speaker Matt Huffman and Senate President Rob McColley have voiced interest in overturning the governor’s veto, calling it a “very strong possibility,” a recently introduced proposal offers a more targeted approach.

On Feb. 17, a bipartisan measure, House Bill 706, was introduced by Reps. Tristan Rader, D-Lakewood, and David Thomas, R-Jefferson, that seeks to protect ratepayers by specifically requiring large data centers to sign long-term (at least 12-year) contracts with utilities. The bill sets standards for minimum billing, exit fees, and financial assurances and prohibits shifting infrastructure costs to energy customers.

House Bill 646, introduced by State Reps. Gary Click, R-Vickery, and Kellie Deeter, R-Norwalk, would establish a Data Center Study Commission to examine economic, environmental, energy, and community impacts, with recommendations due within six months of enactment.

While the measure does not address tax credits specifically, the new commission would conduct a holistic and systemic study of data center impacts that will inform future policies, including tax credits. The commission would also prioritize future development on brownfields rather than agricultural land, mitigating broader residential costs not currently accounted for.

A Nuclear Option?

Senate Democrats, led by Sen. Kent Smith, D-Euclid, have pushed something of a nuclear option going into the midterms. The broader multifaceted package of standalone bills, announced during a February press conference, would position the state as hostile toward data centers specifically, but also economic development in general.

While framed as making data centers “pay their fair share,” proposals would far exceed tax reforms. In addition to repealing tax exemptions, Democrats are pushing quid pro quo proposals, including a mandate for prior community investments before data centers could connect to the grid. Another proposal would require annual water usage reporting, capping average daily consumptive use, and requiring payments for local water infrastructure upgrades.

Heading into election season, partisan rhetoric tends to flare toward the dramatic. Yet, if Republican lawmakers fail to override the outgoing governor or deliver moderate reforms, things could get very interesting heading into the primary and beyond.