ai data center depreciation and reporting

Summary#

This bill would do two main things: stop AI data centers from taking bonus depreciation tax breaks, and require large data centers to report detailed information about their water and electricity use. The goal is to reduce a tax incentive for some AI-focused facilities and to make energy, water, and backup-power use by large data centers more visible to government and the public.

Key changes:

• Tax change: Property used in an “AI data center” would be excluded from bonus depreciation (the accelerated tax deduction that lets firms write off much of certain capital costs immediately).
• Definition: An “AI data center” is a permanent or semi-permanent structure (or group) that houses IT/network equipment including at least one graphics processing unit, and where at least 20% of the facility is used for developing or running artificial intelligence.
• LEED exclusion: Facilities that earn LEED Gold or Platinum (high green-building ratings) — or an equivalent standard set by Energy and EPA — are not treated as “AI data centers” for the tax rule.
• Reporting rule: Any data center with a power demand of 25 megawatts or more (a “covered data center”) must submit initial and yearly reports on water and electricity use, backup power, emissions, and property setback rules.
• Federal facilities: Dedicated federal data centers are mostly excluded from the disclosure rules; dual-use centers (serving both government and private customers) are handled under separate standards to protect national security.
• Enforcement and transparency: Nondisclosure agreements cannot stop required disclosures. Civil penalties can apply for failing to file or for false reports. DOE and EPA must publish annual compilations of the data.

What it means for you#

• Data center operators

  • Must file an initial disclosure 180 days before starting operations, or within 180 days after enactment if already operating.
  • Must submit an annual report by December 31 each year with monthly and annual data on water use, electricity use and peak demand, backup power capacity and hours used, emissions from backup power, and relevant contracts and permits.
  • Could lose the ability to claim bonus depreciation on property used in qualifying AI data centers.
  • Face civil penalties for noncompliance (see Expenses).

• Electric utilities and water authorities

  • May receive requests for information from DOE/EPA or from electing States to help verify or supply the data required from data center operators.
  • Protected from liability for disclosures made under this law.

• State and local governments

  • States may choose to be “electing States” to receive and manage disclosures and reports from data centers within their borders.
  • Electing States must compile and forward reports annually to DOE and EPA for public posting.
  • Local governments and affected communities will gain easier access to data on local water and energy use by large data centers.

• Federal government and national security

  • Dedicated federal data centers are largely exempt from the disclosure rules.
  • OMB must set standards for how dual-use centers report while balancing transparency and national security. Some information may be exempted from public release.

• Residents in communities near large data centers

  • Could get more public information about how much water and electricity nearby data centers use, and about backup generators and stored fuel.

Expenses#

No publicly available information on a formal cost estimate or fiscal note is provided in the bill text.

Possible costs and financial effects the bill could cause:

• The federal government (DOE, EPA, and OMB) would likely incur administrative and IT costs to make rules, receive and review reports, and publish compilations.
• States that elect to receive disclosures may incur costs to receive, store, and forward data to DOE and EPA.
• Data center operators will face compliance costs to measure, compile, and report monthly electricity and water figures, emissions estimates, backup-power operation hours, and contract details.
• Removing bonus depreciation for AI data centers could change federal tax receipts and reduce a tax benefit for builders of qualifying facilities. The bill text does not include revenue estimates.
• Civil penalties create a potential financial risk for operators who fail to comply: up to $50,000 per day for negligent failures and up to $100,000 per day for knowing failures or false reports.

Proponents' View#

The bill appears intended to do the following:

• Reduce a tax incentive for AI-focused facilities by removing bonus depreciation for property used in AI data centers, which could be seen as tightening tax rules for certain types of data center investments.
• Increase transparency about large data centers’ energy and water use so government, local officials, and the public can better understand local resource impacts.
• Provide information that could help communities and utilities plan for electricity and water demand and for environmental impacts from backup generators.
• Prevent confidentiality agreements from blocking legally required disclosures, ensuring that required public data is not hidden by private contracts.
• Allow flexibility to protect national security by letting OMB and other agencies set standards and exemptions for dual-use or sensitive federal data centers.

Opponents' View#

The bill could raise several concerns or trade-offs based on its design:

• One concern is increased compliance and administrative costs for data center operators, states, and federal agencies. The bill does not provide cost estimates.
• The tax change could reduce investment incentives for AI-related data centers by removing bonus depreciation, which supporters of that tax break may view as harmful to industry growth.
• It is unclear how OMB will balance transparency with national security for dual-use and federal data centers; the standards and exemptions are not spelled out in detail.
• The definition of “AI data center” (20% AI use and at least one GPU) and the 25-megawatt threshold for covered centers may create borderline cases and compliance questions.
• Large per-day penalties for reporting failures (up to $100,000 per day) could be seen as harsh if reporting requirements are unclear or if errors are technical rather than intentional.
• The bill may overlap with existing reporting or permitting requirements at state or local level, creating duplication without clear coordination rules.