House Bill Would Put Federal Electricity Tax On Data Centers

A new House bill, H.R. 10102, introduced by Rep. Andrea Salinas, D-Ore., would impose a 1-cent-per-kilowatt-hour federal excise tax on electricity used by data centers with more than 1 megawatt of power capacity, raising an estimated $1.76 billion annually for housing, conservation, infrastructure and energy technology. The Data Center Community Reinvestment Act of 2026, referred to the House Ways and Means Committee, would divide revenue among five federal programs, including the Land and Water Conservation Fund and the Housing Trust Fund, and follows Virginia's adoption of a similar state-level tax in 2025.

House Bill Would Put Federal Electricity Tax On Data Centers H.R. 10102 would tax data center electricity at 1 cent per kWh, raising an estimated $1.76 billion annually for housing, conservation and infrastructure. A new House bill would impose a federal excise tax on electricity consumed by data centers, targeting facilities with more than 1 megawatt of power capacity and directing the resulting revenue toward conservation, housing, infrastructure and energy technology. Rep. Andrea Salinas, D-Ore., has introduced the Data Center Community Reinvestment Act of 2026 https://www.congress.gov/bill/119th-congress/house-bill/10102 . The bill would amend the Internal Revenue Code to impose a 1-cent-per-kilowatt-hour tax on electricity used by qualifying data centers. It was referred to the House Ways and Means Committee, with additional referrals to Energy and Commerce and Science, Space and Technology. The proposal comes as rapidly expanding AI and cloud computing workloads are driving large increases in electricity demand and intensifying debates over who should pay for the infrastructure and community impacts associated with data center growth. Salinas said that the bill is intended to ensure communities are not left bearing the costs of rising data center demand while giving them a share of the benefits generated by that growth. “Every community deserves to drive a hard bargain with data center developers, and at the end of the day, every community deserves to share in the benefits from data center growth,” she said in the statement. The proposal would build on a state-level approach Virginia adopted /regulations/virginia-approves-first-ever-data-center-power-tax earlier this year. Virginia became the first state to impose a tax directly on data center electricity consumption, setting the rate at 1.1 cents per kilowatt-hour beginning July 1 and applying it to electricity supplied by utilities and retail providers as well as self-generated power, including behind-the-meter generation. State budget documents projected about $600 million in annual revenue for the general fund. The federal bill would set a slightly lower rate but apply it nationwide. Unlike Virginia's tax, however, Salinas' proposal would divide the revenue among five federal programs rather than sending it to a general fund. The Tax Hits Large Loads Neil Osnato, founder of Persistence Analytics Group, said the tax could be significant for large data center operators, but its broader implications depend on whether electricity consumption is an appropriate proxy for the costs individual facilities impose on the grid. At continuous full load, a 100 MW data center would incur about $8.76 million annually under the proposed tax, while a 500 MW facility would face about $43.8 million and a 1 GW facility about $87.6 million. At a 90% annual load factor, those figures would fall to roughly $7.9 million, $39.4 million and $78.8 million, respectively. The tax could affect data center siting and power procurement at the margin, particularly when operators compare jurisdictions with otherwise similar power economics, Osnato said. For the largest AI and hyperscale projects, however, access to executable megawatts, transmission availability, interconnection timing, generation supply and development certainty may matter more than the tax alone. If a facility's underlying electricity cost were 5 cents/kWh, the proposed tax would add 20% to the energy component. At 10 cents/kWh, it would add 10%, Osnato said. The bill defines a data center as a facility that primarily contains electronic equipment used to process, store or transmit digital information and has a maximum rated power capacity or total peak power load exceeding 1 MW. Revenue Would Fund Priorities The legislation would direct amounts equivalent to one-fifth of the tax receipts to the Land and Water Conservation Fund and another one-fifth to the Housing Trust Fund. Another one-fifth would go toward the Hazardous Substance Superfund, while one-fifth would be allocated to the Highway Trust Fund. The remaining one-fifth would establish an Energy Technology Trust Fund. Salinas' office projects the tax would raise about $1.76 billion annually based on current nationwide data center electricity use, putting roughly $352 million a year into each of the five destinations. The release says the Energy Technology Trust Fund would support federal loan guarantees for clean energy, advanced nuclear and grid infrastructure projects. The proposal therefore frames data center electricity consumption as a potential source of federal funding for both infrastructure and public-benefit programs, rather than taxing construction spending, corporate income or computing equipment. But Osnato said the proposal should not be confused with a mechanism for assigning electricity-system costs to the customers that cause them. “The bigger issue is cost causation,” Osnato said. Two 500 MW data centers could consume the same amount of electricity while imposing very different costs on the electric system, depending on where they locate, how their demand coincides with system peaks, what transmission and substation upgrades they require, whether new generation must be procured and how flexible their operations are, he said. “A flat federal consumption tax does not distinguish among any of those conditions,” Osnato said. Data centers already pay through multiple layers of the electricity system, including energy, transmission, distribution and capacity costs, as well as customer-specific interconnection or construction charges /energy-power-supply/amazon-pushes-virginia-to-let-ai-data-centers-fund-their-own-grid-upgrades in some cases, Osnato said. The relevant policy question is whether those existing mechanisms capture the full electrical consequences of new large loads, he said. “A federal tax does not substitute for that analysis,” Osnato said. Tax Would Apply Broadly The bill does not specify a separate rate for AI data centers. Instead, the tax would apply based on electricity consumption by facilities meeting the bill's 1 MW threshold. That threshold means the proposal reaches well beyond the largest hyperscale AI campuses. It could also apply to smaller colocation, enterprise and institutional data centers with more than 1 MW of maximum rated capacity or peak load. The legislation also covers electricity generated onsite, according to Salinas' office. Osnato said policymakers should distinguish between electricity consumption and the consequences of that consumption for the grid. “The questions that matter are: Is the projected load real? When will it actually materialize? How durable will it be? What generation, transmission and local infrastructure does it cause?” Osnato said. He also said policymakers should determine which costs are customer-specific versus genuinely regional and whether a facility's operating characteristics increase or reduce system burden. “Megawatts are not interchangeable,” Osnato said. Tax Is Not Cost Allocation Osnato said customer-specific costs should follow the customer that causes them, while genuinely shared system costs should be shared to the extent that the benefits are systemwide. The bill instead uses electricity consumption as a proxy for the costs and impacts associated with data center growth, while directing the revenue to five federal programs that are not specifically tied to the electricity infrastructure serving the facilities. Only the proposed Energy Technology Trust Fund has a direct energy connection, and its proceeds would support federal loan guarantees rather than specifically funding the local or regional grid infrastructure created by the taxed facility. “Policymakers could collect money from the right industry while still allocating the underlying grid costs incorrectly,” Osnato said. If enacted, the bill's amendments would apply to electricity used and taxes received after the date of enactment. The proposal remains at the introduced-bill stage after its Aug. 13 referral to the three House committees.