Congressional Democrats Target Equipment Expensing Rules for Data Centers
Democratic lawmakers have introduced multiple bills to eliminate bonus depreciation for data center equipment, a tax provision that allows developers to immediately expense server racks, GPUs, and other capital costs rather than deduct them over the equipment’s lifetime. Sen. Mark Warner of Virginia introduced the Data Center Tax Accountability and Disclosure Act in July, which would raise nearly $30 billion over 10 years by barring full expensing for data center owners. Senate Finance Ranking Member Ron Wyden of Oregon proposed going further, blocking data centers from Opportunity Zone incentives and REIT benefits in addition to bonus depreciation. Rep. Chris Pappas of New Hampshire, who won election to the Senate this week, has also introduced legislation targeting the same tax treatment.
Democrats gained control of Congress in the recent midterm elections, though any legislation must still pass President Trump. Tax policy experts at the Tax Foundation and BDO note that while full expensing under Section 168(k) has enjoyed bipartisan support for manufacturers and other industries, the proposals targeting data centers reflect a broader political backlash against the sector. Andrew Lautz of the Tax Foundation said the energy behind these bills is directed specifically at data centers, not at equipment expensing more broadly. The proposals may set the agenda for future tax legislation if Democrats regain the presidency.
Opposition to data centers has grown sharply over the past year, with 47 local ballot measures limiting AI data center development passing in the midterm elections. Permit approval rates for data centers fell to 34% in the third quarter from 54% in 2025, according to Spark. Polling from Heatmap shows 75% of Americans now oppose data centers near their homes, up from 42% in August 2025. Developers face more restrictive zoning, permitting requirements, and demands for community benefits even as over $1 trillion in capital flows into data center construction nationwide.
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