HB 2655
In CommitteeHouse
Data center sales tax ex.
Providing a retail sales and use tax exemption for the construction and equipping of new data centers located in a county east of the Cascades that borders another state and has a population of at least 500,000.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill provides a sales and use tax exemption for new data centers in specific eastern Washington counties, requiring job creation, sustainability standards, and long-term energy commitments in return. It applies only to facilities beginning construction between July 1, 2026, and July 1, 2035, and expires in 2048.
- Grants a sales and use tax exemption for eligible server equipment and power infrastructure installed in new data centers in counties east of the Cascades that border another state and have at least 500,000 residents (e.g., Yakima, Spokane counties).
- Requires data center developers or tenants to obtain an exemption certificate from the Department of Revenue, including proof of job creation, sustainability certification, and long-term energy contracts.
- Mandates creation of at least 35 family wage jobs (or 3 per 20,000 sq ft of server space) within 6 years of certificate issuance, with ongoing maintenance of those jobs to avoid tax recapture.
- Requires data centers to achieve sustainability certifications (e.g., LEED, Energy Star, ISO 50001) within 3 years of operation or face tax recapture plus a 10% penalty.
- Sets a sunset date of July 1, 2048 for the exemptions and prohibits new exemption certificates after July 1, 2036.
- Requires data centers with 20+ megawatts of energy demand to sign 10-year energy supply contracts with utilities or demonstrate alternative supply.
Who is affected
- Data center developers and owners (qualifying businesses) — Data center developers and owners who build new facilities in eligible counties must apply for exemption certificates and meet job creation, sustainability, and energy commitment requirements to retain tax exemptions.
- Data center tenants (qualifying tenants) — Companies that lease space in data centers (e.g., cloud providers, tech firms) must also apply for exemption certificates and meet job creation and sustainability requirements for the space they occupy.
- Construction contractors and subcontractors — Construction firms building data centers must follow community workforce or project labor agreements and pay prevailing wages if they want the tax exemption to apply to their work.
- Residents and local governments in eligible counties — Residents and local governments in eligible counties (e.g., Yakima, Kittitas, Spokane) may benefit from new high-wage jobs and economic development, but also face scrutiny over environmental and water use impacts.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
The requirement for 35+ family-wage jobs (or 3 per 20,000 sq ft) with employer-provided health insurance creates a meaningful pathway to higher-wage, stable employment in eastern Washington counties—particularly valuable in regions with fewer high-paying private-sector jobs—though the wage floor may still be below median in some counties.
Business & EmploymentPeopleRef: Sec. 1(3)(a)(i), (c)(i)(A); Sec. 1(3)(c)(i)(B)Mandating 10-year energy contracts for facilities ≥20 MW and encouraging water conservation, renewable procurement, and industrial symbiosis creates structural incentives for long-term sustainability planning—reducing strain on local water and power grids and supporting climate resilience in drought-prone eastern Washington.
EnvironmentPeopleRef: Sec. 1(5), (6); Sec. 1(8)(a)The bill’s family-wage job requirement—tied to county-specific income thresholds and health insurance—targets job quality, not just quantity, helping lift workers into economic stability and reducing long-term reliance on public assistance programs in eastern Washington counties with higher poverty rates.
Business & EmploymentPeopleRef: Sec. 1(3)(a)(i), (c)(i)(A); Sec. 1(3)(c)(i)(B)By requiring 10-year energy contracts and limiting exemptions to new, profit-driven businesses (excluding government and affiliated lessees replacing existing equipment), the bill reduces speculative or shell development and encourages long-term operational commitment—increasing the likelihood that promised jobs and infrastructure will materialize.
Business & EmploymentLean peopleRef: Sec. 1(8)(a); Sec. 1(9)(m)Allowing existing data center employees to count toward the job-creation requirement—provided they meet wage and health-benefit thresholds—helps formalize and improve working conditions in existing facilities, potentially upgrading informal or contract labor into full-time, benefits-eligible roles in eastern Washington.
Business & EmploymentPeopleRef: Sec. 1(3)(a)(ii)(C); Sec. 1(3)(c)(i)(A)
Potential Concerns (5)
The bill creates a new regulatory burden on state agencies (DOR, L&I) to monitor compliance with job creation, sustainability, and energy commitments—including auditing employment records, verifying certifications, and enforcing recapture and penalties—diverting limited enforcement resources from other high-priority public safety and consumer protection priorities.
Public SafetyRef: Sec. 1(3)(a)(i), (d)(i); Sec. 1(4)(c)(i)The job creation requirement (35 family-wage jobs or 3 per 20,000 sq ft of server space) may be met by counting existing positions in retrofitted facilities (Sec. 1(3)(a)(ii)(C)), allowing operators to claim credit for jobs that would have existed anyway—undermining the bill’s stated job-creation goal and inflating reported benefits without new net employment.
Business & EmploymentRef: Sec. 1(3)(a)(i), (d)(i); Sec. 1(4)(c)(i)While the bill mandates sustainability certifications (e.g., LEED, Energy Star) and encourages water/energy conservation, it does not cap greenhouse gas emissions, water use, or waste generation—leaving the environmental footprint of large-scale data centers unregulated beyond voluntary or third-party standards that vary in rigor and enforcement.
EnvironmentRef: Sec. 1(4)(a), (c)(i); Sec. 1(5)The definition of “family wage employment” requires wages ≥125% of county per capita personal income *and* employer-provided health insurance—conditions that may exclude many service and maintenance roles (e.g., security, janitorial, HVAC) that are essential to data center operations but paid below that threshold, limiting the true “family wage” job count despite the label.
Business & EmploymentRef: Sec. 1(3)(a)(i), (c)(i)(A); Sec. 1(3)(c)(i)(A)The recapture mechanism for failing job or sustainability requirements is administratively complex and retroactive, creating financial risk for operators but offering only discretionary extensions for “circumstances beyond control”—a high bar that may not cover slower economic cycles or supply-chain disruptions, potentially triggering unexpected tax liabilities and project cancellations.
Business & EmploymentRef: Sec. 1(3)(d)(i), (v); Sec. 1(4)(c)(i)
Who Is Most Affected
Large data center operators (e.g., Amazon, Microsoft, Google, Equinix) stand to benefit most from the tax exemption—especially those building ≥20 MW facilities, which qualify for the full exemption and long-term energy contracts. While the bill frames them as “qualifying businesses,” the structure (e.g., exemption thresholds, job-counting rules, transferability) is optimized for large-scale, capital-intensive operations.
Local governments in Yakima, Spokane, and other eligible counties may gain new property tax revenue and sales tax from construction and operations—but also face increased costs for infrastructure, water, and emergency services. The bill does not require direct compensation or mitigation fees, leaving counties vulnerable to unfunded mandates.
Construction workers and electricians may benefit from prevailing wage and PLA/CAA requirements, but only if they are hired by contractors who sign such agreements—some subcontractors may be excluded or pressured to accept lower wages. The requirement for 35+ jobs per facility is modest relative to the scale of construction, limiting broad labor impact.
Low- and middle-income residents in eastern Washington may benefit from new high-wage jobs and local investment, but could face rising housing costs, water scarcity, and environmental degradation if data center growth outpaces infrastructure planning. The bill does not include housing or water-use caps.
Tech tenants leasing space (e.g., cloud users, SaaS providers) benefit indirectly via lower infrastructure costs and reliability—but are subject to the same job/sustainability compliance burdens as owners, potentially limiting participation by smaller firms that lack legal/compliance staff.