Texas Certified Tax Exemption Requests From 59 Data Centers So Far This Year. The Next Cost Estimate Gets Drafted in August.

The Senate Finance Committee spent five and a half hours on July 27 taking the state's first real accounting of the data center sales tax exemption. The interim charge put $3.3 billion in front of the members. The number that moved the room was 59.

That's how many data center exemption requests the Comptroller has certified in fiscal 2026 to date, against a published exemption study that assumed 12 over six years. Cumulative certifications now stand at 138, with 5 applications pending. Ten of those 138 were certified in the program's first seven years.

Brad Reynolds, Chief Revenue Estimator at the Comptroller of Public Accounts, won't put a new dollar figure on it yet. The next exemption study gets drafted in August, reviewed in the fall, and approved by a new Comptroller. Asked whether the projection rises, he said it's "reasonable to expect significantly higher numbers."

August is the operative date for anyone holding or seeking a certification. The 2027 bill gets written against a number that gets built in the next five weeks, and Reynolds said on the record he's willing to discuss the estimation model with the Data Center Coalition or anyone else who thinks it's unreasonable, because his goal is "a fair representation." The model is open right now. It closes when the study goes to executive review in the fall.

The Chair pre-announced the bill

Chairwoman Joan Huffman opened by telling the room where this ends. "I have publicly committed to filing legislation on this issue during the next legislative session." She noted she voted for the original exemption in 2013, as did most of the Legislature, and that "the information we were given, which you'll hear about today, has completely changed."

She set the boundary in the same breath: "No tax exemption should operate on autopilot. Pursuing smart reforms does not mean being unfriendly to business."

That framing held for all five and a half hours. This is oversight from inside the coalition that built the program, run by a member who has already committed to a bill and hasn't committed to its contents. Every provision in that bill is still a drafting question, which is the entire reason the August window matters.

Electricity is the largest lever short of repeal

Reynolds gave the committee a peer-state comparison that reads as a roadmap. Thirty-eight other states offer some form of data center tax exemption. Thirty-six of those are sales tax exemptions. Of those 36, only 14 include electricity.

Texas is in the minority by exempting power.

Now look at what electricity does inside the Comptroller's own model. The model runs on cost per megawatt. Equipment purchases spike during construction and again at refresh. Electricity gets billed every month for the life of the facility, and the model treats it as 100% taxable. For a 25 MW enterprise facility at $11.3 million per megawatt, foregone revenue runs $7.6 million in year one, $15 million in year two, and $22.7 million in year three. For a 400 MW hyperscale campus at $27.5 million per megawatt, the same model produces $107 million, $175 million, and $246 million. Several 400 MW-plus facilities are underway in Texas, and at least two have been announced at a gigawatt or more.

Narrowing or removing the electricity component is the single largest change available short of repeal, and it's the easiest one to defend politically, because 22 of the 36 sales-tax states already exclude it. A developer modeling exemption value on a twenty-year horizon should price the electricity line separately from the equipment line, because those two components now carry different political risk.

The second lever is the threshold pair. Reynolds testified that peer states generally set lower capital investment requirements and higher job creation requirements than Texas does. Texas asks $200 million in capital and 20 permanent jobs for the ten-year tier. That trade is the most likely template for how the thresholds get rewritten.

The compliance record is the industry's strongest evidence and it went underused

The Comptroller's audit division has started compliance audits on certificate holders past their five-year mark, a process Jenny Burleson, the agency's Director of Tax Policy, walked the committee through in detail. Twenty are complete or in process. Six came back compliant on both capital investment and job creation, six came back non-compliant, and eight remain open. The other 118 certifications become auditable as each hits its own five-year date, which means the audit population grows every quarter from here.

One of the six non-compliant holders asked to have its certification reversed voluntarily after ERCOT canceled its power contract and it couldn't build to its capital commitment. One missed the 100,000-square-foot threshold. The rest missed the 20-job requirement.

On the nine facilities where capital investment verification is complete, the statute required $2.7 billion in aggregate commitment. Verified actual investment came in above $9.1 billion, 3.4 times the minimum.

Reynolds editorialized exactly once, on the projects that missed the jobs threshold, saying that being unable to justify "employment of even 20 people on a permanent basis at one of these things tells you how little employment is really stemming from this, at least in terms of direct employment." The audit findings don't say that. Reynolds does, in his own characterization, on the same afternoon he put the 3.4x capital number into the record. Only one of those two lines is likely to travel.

Recapture is running now, and the first payment is due August 31

When a certificate holder is found non-compliant, the state assesses sales tax on every exemption claim it made during the certified period. The holder that surrendered its certification after losing its power agreement owes almost $5.6 million, and the Comptroller expects payment by August 31. Because it self-reported, it entered the voluntary disclosure program and its penalty is waived. Holders caught through audit are assessed penalty and interest like any other audit, and revocation carries an additional penalty of up to 5%.

Members pressed on what happens if a certified facility goes bankrupt. Collections would run through the Attorney General's office, and these tax debts generally survive bankruptcy. Huffman: "I want to try to do everything we can to make certain taxpayers don't be left holding the bag."

Read that as security or bonding language in the filed bill. A developer whose capital stack assumes exemption benefits from day one should model what a posted bond or a first-position state claim does to that stack, because the committee asked for one on the record.

The sourcing fix is the sleeper

Several members pushed on a mechanic most coverage skipped. Local sales tax is generally sourced to the seller's location rather than the delivery address, so a rural host county typically captures little or none of the local sales tax on hundreds of millions of dollars of equipment installed inside its boundaries. Huffman asked directly whether anything in statute would prevent a provision sourcing it to the delivery county instead.

Nobody had a reason. That's the cleanest and most bipartisan fix surfaced all day, and it's the one provision in the eventual bill that moves money toward the communities hosting these projects rather than away from them.

Three structural facts stayed underexplained in the room and are worth carrying into every county conversation. The exemption covers the state's 6.25% sales tax on qualifying equipment, while property tax, franchise tax, and local sales tax get paid, with a single carve-out for the 250,000-square-foot tier under §151.3595. Only single-user facilities qualify, so co-location and multi-tenant data centers, of which Texas has more, receive no state sales tax exemption at all. Data centers don't qualify for the former Chapter 313 school agreements or for JETI.

Kolkhorst named the complaints in order

Senator Lois Kolkhorst told the industry witness what her office actually hears, and she put the list in order: water usage, electrical usage, and then, most important in her telling, noise and light pollution. She described asking an operator whether it could get below a city's 82-decibel limit toward 50 decibels and being told it probably could.

Her assessment of the industry's community work was direct. "Your coalition has done a horrible job on working with local communities and on marketing, and particularly working with neighboring property owners." She added that failing to fix it means "you're gonna get a fight in every community you go to," and that she's never seen this level of pushback against a single industry, including from people who normally back business.

Noise and light are cheap at design stage and expensive to retrofit after a county turns. An operator that volunteers a 50-decibel commitment and publishes its water numbers before anyone compels it is demonstrating what kind of neighbor it intends to be, and that demonstration is now the thing senior members are grading.

The Data Center Coalition brought the PricewaterhouseCoopers economic impact study to the second panel: $65.8 billion contributed to Texas GDP in 2024, more than 428,000 jobs including indirect and induced effects, more than 103,000 supported directly. Vice Chairman Juan Hinojosa answered it directly. "I don't think we have data on that. Certainly the Comptroller's office didn't have it. It'd be interesting to provide that and verify the information you're testifying to." Industry figures the state can't check independently will carry less weight every session. Site-level numbers the Comptroller can verify against its own certification file will carry more.

The deadline is August

The Legislature doesn't convene until January 2027. The number that bill gets written against gets drafted in five weeks, by an agency that has already said its current figure is stale and low, from a model whose author invited anyone to challenge its assumptions.

Certification files are the state's evidence. The audit cohort grows every quarter. Who's bringing verified site-level numbers to the Comptroller in August?

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Source

The Senate Committee on Finance took this charge first on July 27, 2026, and spent roughly five and a half hours on it before moving to the rest of the day's agenda. Full video of the data center portion is posted on James Dickey's YouTube channel, and the hearing is archived on the Texas Senate site as video 22654. The charge covers Tax Code §151.359 and §151.3595.

The Comptroller of Public Accounts was represented by Brad Reynolds, Chief Revenue Estimator, and Jenny Burleson, Director of Tax Policy. Dan Diorio, Executive Vice President of State Policy and Government Affairs, testified for the Data Center Coalition. Donna Howard, who registered on behalf of Matagorda Against Data Centers and is not the former state representative of the same name, testified as the local counterpart. The Legislature has since published the full witness list, which runs to dozens of registrants across testifying, non-testifying, and written-testimony categories.