HB 2708
In CommitteeHouse
Data center equipment/taxes
Removing a tax exemption for the replacement of equipment for data centers.
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 ends new tax exemptions for sales and use taxes on server equipment and power infrastructure for data centers, starting in 2026. It also tightens eligibility, adds job and sustainability requirements, and sets firm expiration dates to increase state revenue for essential services.
- Ends new tax exemptions for data center equipment and power infrastructure starting July 1, 2026 for refurbished data centers and July 1, 2028 for new data centers under the newer program (RCW 82.08.9861).
- Sets final expiration dates for all existing exemptions: July 1, 2038 for the newer program (RCW 82.08.9861) and July 1, 2048 for the older program (RCW 82.08.986).
- Requires qualifying businesses to meet job creation and wage requirements (e.g., 3–35 full-time 'family wage' jobs with health insurance) and sustainability certifications (e.g., LEED, Energy Star) to retain exemptions — failure results in back taxes and penalties.
- Limits new exemption certificates: six per year for refurbished data centers (until 2026), and six per year for new data centers (2026–2031) under the newer program.
- Adds stricter eligibility rules: data centers must be in counties with populations over 800,000 (e.g., King, Pierce, Snohomish) and have at least 1.5 megawatts of available power for new certificates under RCW 82.08.9861.
Who is affected
- Data center operators — Data center operators (businesses that own facilities housing servers) who previously qualified for sales and use tax exemptions on server equipment and power infrastructure — this bill removes those exemptions for new certificates after certain dates.
- Data center tenants — Companies that lease space in data centers (tenants) and use the space to house servers — they lose access to tax exemptions after the new deadlines, unless they reapply under new rules.
- State and local governments — Local governments and the state — the bill increases state revenue by ending tax exemptions, which helps fund essential services.
- Construction and tech service providers — Construction and technology firms that build or equip data centers — they may see reduced demand for new projects after exemption deadlines pass.
Pro/Con Analysis
Potential Benefits (5)
Ending tax exemptions generates new state revenue (estimated $100M+ over 10 years) to fund essential services—including public safety, emergency response, and infrastructure resilience—reducing reliance on regressive taxes and strengthening community-wide safety nets.
Public SafetyPeopleRef: Sec. 1 (findings); Sec. 2(1)(d); Sec. 3(1)(d)Capping new exemption certificates at six per year (through 2031) prevents unchecked data center sprawl, reducing strain on local power grids, water resources, and zoning systems—giving municipalities time to plan infrastructure upgrades and avoid overburdening schools, roads, and emergency services.
Local GovernmentPeopleRef: Sec. 2(1)(e)(i); Sec. 3(2)(c)(i)Mandating sustainability certifications and encouraging water/energy conservation reduces long-term environmental externalities (e.g., carbon emissions, water stress) that otherwise burden public health systems and natural resources—benefiting communities near data center clusters.
EnvironmentPeopleRef: Sec. 2(5); Sec. 3(5)Requiring family-wage jobs with health insurance raises labor standards in the data center sector, increasing take-home pay and benefits for lower- and middle-income workers—especially beneficial in high-cost regions like King County where 125% of per capita income still falls short of a family-sustaining wage.
Business & EmploymentPeopleRef: Sec. 2(3)(c)(i)(B); Sec. 3(3)(c)(i)(A)Sunsetting old exemptions (2048 for RCW 82.08.986, 2038 for RCW 82.08.9861) creates a level playing field by preventing perpetual tax preferences for legacy operators, encouraging fair competition and preventing market distortion from grandfathered deals.
Business & EmploymentPeopleRef: Sec. 2(9); Sec. 3(9)
Potential Concerns (5)
Ending new tax exemptions for data center equipment and infrastructure after 2026/2028 reduces the financial incentive for new data center development, potentially slowing job creation in the tech infrastructure sector—especially for construction, engineering, and IT support roles that depend on new projects.
Business & EmploymentRef: Sec. 2(1)(e)(ii); Sec. 3(1)(c)The job creation requirements (e.g., 3–35 family-wage jobs per 20,000 sq ft) are stringent and tied to *net* employment growth, meaning existing or rehired workers may not count—this disproportionately burdens small operators and tenants who lack scale to meet thresholds, potentially forcing consolidation or exit from the market.
Business & EmploymentPeopleRef: Sec. 2(3)(a)(i); Sec. 3(3)(a)(i)Mandatory sustainability certifications (e.g., LEED, Energy Star) impose upfront costs and compliance burdens on small-to-mid-sized operators, especially those operating older facilities or with limited capital reserves—these firms may be priced out of the market, accelerating consolidation in favor of large, well-capitalized players.
EnvironmentPeopleRef: Sec. 2(4); Sec. 3(4)Back-tax liability for failure to meet job or sustainability requirements—triggered even for partial or temporary noncompliance—creates severe financial risk for operators with thin margins or unpredictable growth trajectories, increasing the likelihood of closures or layoffs.
Business & EmploymentPeopleRef: Sec. 2(3)(d)(i); Sec. 3(3)(d)(i)Restricting new certificates to counties with populations over 800,000 (King, Pierce, Snohomish) excludes rural and mid-sized urban areas from economic participation in the data center boom, limiting local tax revenue and high-wage job opportunities outside the Puget Sound core.
Local GovernmentPeopleRef: Sec. 3(2)(a)(i); Sec. 2(2)(a)(i)
Who Is Most Affected
Large data center operators (e.g., Microsoft, Amazon, Equinix) benefit from the phase-in timeline and existing exemptions but face new compliance costs; overall impact is mixed but net negative due to back-tax liability risk and capped growth.
Small-to-mid-sized operators and startups lack the capital to meet job/wage/sustainability thresholds, increasing risk of exclusion or failure—negative impact, especially for those operating refurbished or marginal sites.
Tech tenants (e.g., SaaS firms, cloud users) lose access to tax-exempt infrastructure, raising their operational costs—negative impact, especially for price-sensitive small businesses.
State and local governments gain new revenue and avoid future revenue erosion; rural counties lose potential development opportunities—net positive for state, negative for excluded localities.
Construction and IT service firms see reduced demand for new builds after 2026/2028, especially for small projects—negative impact on small contractors, mixed for large firms with diversified portfolios.