Amazon plans to invest at least $20 billion in cloud-computing and AI infrastructure across Pennsylvania, beginning with sites in Salem Township and Falls Township. The tax break at the center of the debate is not an Amazon-only incentive, but the Pennsylvania Department of Revenue told Capital & Main that Amazon has already received it for two data-center locations.
The same statewide program is projected to cost Pennsylvania close to $2 billion in foregone revenue by 2031, including $188.4 million in fiscal year 2026-27 and $517.2 million in fiscal year 2030-31. Those figures describe the projected cost of the exemption program as a whole, not the amount Amazon itself is expected to save.
Tension: The exemption’s projected cost has expanded far beyond the program’s original scale, while lawmakers from both parties have backed repeal language.
Noise: The question is often framed as a choice between attracting AI investment and regulating data centers, or as a dispute over Shapiro’s executive action.
Direct Message: Pennsylvania has not repealed the exemption. Separate House and Senate measures carried repeal language in June, but neither completed the full legislative process before the final budget was signed on July 12.
What the exemption actually does
Pennsylvania imposes a 6% state sales and use tax, and qualifying data centers can avoid that tax on eligible computer equipment such as servers and storage systems. Capital & Main reports that the incentive began in 2016 with a $5 million appropriation and was converted from a refund program to an exemption in 2021.
That change also made the benefit harder to track operator by operator. The state can estimate the program’s overall revenue effect, but it cannot simply total individual refund checks to determine exactly how much each participating company has avoided in tax.
The projected cost has risen sharply. Shapiro’s 2026 budget proposal put the exemption’s cost at $188.4 million for fiscal year 2026-27 and $517.2 million for 2030-31, with the cumulative program cost approaching $2 billion by 2031.
Amazon’s own benefit cannot be derived from its $20 billion investment announcement. Not all of that spending will be on equipment covered by the exemption, and the Department of Revenue has not published an Amazon-specific revenue-loss figure.
Capital & Main also documented a wider Amazon footprint beyond the two initially announced communities, including planned or prospective projects connected to Homer City, Hazle Township, Kline Township and Montour County. Those locations matter because they show how quickly the potential scale of eligible investment could grow, even though not every proposed project will necessarily be built or qualify for the exemption.
Both chambers backed repeal, but through different bills
The House and Senate did not pass one identical repeal bill. On June 25, the House passed House Bill 2198, a standalone measure repealing the Computer Data Center Equipment Incentive Program, by 197-5 and sent it to the Senate.
That same day, the Senate passed an amended version of House Bill 1667 by 44-6. The Senate version of that broader tax-code bill also contained language repealing the data-center incentive program, but the House later dealt with the amended measure through concurrence proceedings and it did not become law.
That distinction is important. It is accurate to say that lawmakers in both chambers voted for repeal language, but Pennsylvania never completed passage of a single repeal measure through both chambers and sent it to Shapiro.
Representative Greg Vitali, the Democratic chair of the House Environmental & Natural Resource Protection Committee and the lead sponsor of HB 2198, argued that repeal would preserve state revenue. Capital & Main also reported that Senate Majority Leader Joe Pittman criticized subsequent House changes to the Senate-backed tax package and said lawmakers would return to the issue in the fall.
The final July budget did include a different data-center provision. Senate Bill 146, which Shapiro signed as Act 21, created annual energy-and-water reporting requirements for data centers with peak electric demand of at least 10 megawatts.
The legislation that would have put Shapiro’s broader GRID standards into statute followed another path. House Bill 2650 passed the House 134-68 on June 24 and was referred to the Senate Finance Committee the following day, where it did not complete passage.
The August executive order changed the rules, not the statute
Shapiro responded on August 18 with Executive Order 2026-05. It directs state agencies to incorporate the administration’s GRID standards into permit reviews, removes data centers from the state’s fast-track permitting program, restricts the use of nondisclosure agreements and directs the Department of Revenue to update the tax-exemption program’s guidelines so applicants comply with GRID requirements.
The order also calls for developers making GRID commitments to enter legally enforceable consent agreements. WHYY’s August 19 coverage reported that developers would have to sign consent orders and could face penalties for failing to comply.
The executive order does not repeal the statutory tax exemption. Instead, the administration says companies that do not meet GRID requirements will not receive the existing exemption.
That is a notable shift from the legislative approach discussed earlier in the summer. Spotlight PA reported in June that the administration’s original proposal sought legislative changes that would attach GRID conditions to the tax break, and that rewriting the exemption itself would require action by the General Assembly.
Some environmental organizations continue to argue for repeal rather than conditions. Food & Water Watch Pennsylvania State Director Megan McDonough argued in May that developers should be barred from receiving state support rather than have access to it regulated through GRID.
Other states are changing their data-center incentives too
Pennsylvania is not the only state reassessing data-center tax policy. The approaches differ, but several states have recently limited incentives or imposed new costs rather than simply expanding existing programs.
Illinois stopped processing applications for its data-center incentive program as of July 1, 2026. Minnesota ended the electricity sales-tax exemption for qualified data centers beginning July 1, 2025, while retaining other equipment-related incentives.
Virginia took another route. Its 2026 budget imposed a temporary $0.011-per-kilowatt-hour electricity consumption tax on data-center operators beginning July 1, 2026.
Public opinion has also become part of the policy environment. Gallup’s March 2-18 survey found seven in 10 Americans opposed construction of an AI data center in their local area, including 48% who were strongly opposed.
The electricity-cost discussion needs similar precision. A March 2026 Dallas Fed working paper estimated that existing data centers had increased wholesale electricity prices by 3% to 5% on average nationwide, with larger estimated effects in major data-center corridors. That is a model-based estimate of wholesale-market effects, not a finding that every household electricity bill has risen by that percentage because of data centers.
The scale of electricity demand is nevertheless substantial. A U.S. Department of Energy report estimated that data centers consumed about 4.4% of total U.S. electricity in 2023 and projected their share could reach roughly 6.7% to 12% by 2028.
The number Pennsylvania still cannot put on Amazon
The statewide fiscal estimate is clear enough to support the headline: Pennsylvania’s data-center equipment exemption is projected to cost close to $2 billion by 2031. What remains unavailable is a reliable figure for how much of that amount belongs specifically to Amazon.
The Department of Revenue confirmed to Capital & Main that Amazon has received the incentive for two locations, but the exemption structure does not produce a public operator-by-operator ledger of foregone revenue. Amazon’s $20 billion investment pledge also includes spending that is not necessarily eligible computer equipment, so applying Pennsylvania’s 6% sales-tax rate to the entire pledge would overstate the company’s benefit.
Jeffrey Johnson, communications director for the Pennsylvania Department of Revenue, told Capital & Main that the program’s revenue implications were among the reasons Shapiro moved to attach stricter standards. The administration’s August order now makes those standards part of how state agencies handle permitting and exemption eligibility, while leaving the underlying exemption on the books.
As of September 17, the legislative question remains open. The House reconvened September 8, the Senate is scheduled to return September 28, and Capital & Main reported that each chamber has 11 scheduled session days remaining this year.
That leaves three separate questions for lawmakers: whether repeal language returns, whether the same measure can clear both chambers, and what Shapiro would do if a repeal bill reaches his desk. For now, the record is narrower and more concrete: both chambers have voted for repeal language, no repeal has been enacted, Amazon is already participating in the program, and Pennsylvania’s projected cost for the exemption continues to rise.