Repealing the exemption, which could cost the state billions, has failed repeatedly despite bipartisan support.
By Audrey Carleton for Capital & Main
After vowing to spend $20 billion on data centers across Pennsylvania, Amazon is now quietly reaping the rewards of a controversial, yet lucrative state tax exemption, records show.
Exactly how much Pennsylvania could be forgoing from the tech behemoth is unclear, even as it expands its footprint across the state. In 2025, Amazon announced it would funnel its first investments into two data centers to support artificial intelligence in Salem Township, in northeastern Pennsylvania, and in Falls Township, just north of Philadelphia.
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Since then, the company’s portfolio across the state has grown. It recently applied for a local permit to build 36 data centers at a gas powered, 4.5-gigawatt data center campus where a legacy coal plant in Homer City once stood in southwestern Pennsylvania. On the northeastern side of the state, LehighValleyLive recently confirmed Amazon is involved in a 1,300-acre site in Hazle Township, permission for which was denied locally last year, a decision the developer appealed. Nearby, it is also awaiting local permits for another data center site in Kline Township. And after much resident sleuthing, it was confirmed to be a prospective end user for a controversial data center site in Montour County, the rezoning request for which was denied locally in February.
The company has received the tax incentive for two data center locations so far, the Pennsylvania Department of Revenue told Capital & Main.
Yet, as Amazon positions itself as one of the state’s largest data center customers, aided by a discount on the 6% sales and use tax on equipment it has pledged to buy, store or use in Pennsylvania, advocates and legislators on both sides of the aisle are pushing to repeal that subsidy altogether.
In late June, as negotiations around the state’s annual budget advanced, both the Democratic-controlled House and the Republican-controlled Senate passed versions of bills repealing the tax exemption, which is projected to cost Pennsylvania close to $2 billion in revenue by 2031 — $188.4 million of that in fiscal year 2026-27 alone. Though they advanced in both chambers, neither measure made it to Democratic Gov. Josh Shapiro’s desk before he signed the final budget July 12.
A repeal of the tax credit was also not included in Shapiro’s sweeping executive order on data centers that he signed Aug. 18. That order prohibits state officials from signing nondisclosure agreements with data center operators and requires operators to secure local community support, while incentivizing them to meet environmental standards and provide their own energy to avert a strain on the power grid. Operators that claim the tax exemption must now sign a consent order vowing to adhere to those standards.
“I want to be clear: These are not voluntary standards — these are legally binding requirements in order to operate here in the Commonwealth,” Shapiro said at the signing ceremony for the order.
Critics, however, say nothing short of a full tax exemption repeal will slow the state’s burgeoning data center industry.
“Shapiro is Pennsylvania’s governor, not Amazon’s, not Meta’s, not Microsoft’s,” said Megan McDonough, Pennsylvania state director at Food & Water Watch, a progressive environmental nonprofit, in a statement when Shapiro first introduced the principles behind the executive order, known as GRID, in May. “He shouldn’t be regulating data center access to state support — he should prohibit data center developers from receiving that support in the first place.”
Over the last two years, Pennsylvania has rapidly become a hot spot for the data center boom, and state officials identified more than 100 projects with varying degrees of certainty across the state. Popping up largely to serve the growing artificial intelligence and cloud computing boom, such sites consume vast amounts of energy — about 4.4% of total U.S. electricity use in 2023, a number that could roughly triple by 2030 — and threaten to spike demand for the state’s rich reserves of planet-warming natural gas.
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The House reconvened for the fall on Sept. 8 and the Senate will do so on Sept. 28. Each chamber is scheduled to meet for 11 more days this year. Environmental groups, many of which stopped short of a full-throated endorsement of Shapiro’s executive order, have urged the state Legislature to use what’s left of the 2025-2026 legislative session to pass additional legislation on data centers.
Whether that will happen, and whether it will include repealing the state’s lucrative data center subsidy, remains an open question.
“We don’t like to play pundit or predict outcomes in Harrisburg,” said Jocelyn Steinberg, director of Northeast campaigns at the Natural Resources Defense Council. “The outlook for repeal in fall doesn’t look promising. I’d bet on the Phillies in October before I’d bet on this.”
Internal correspondence between Amazon and the the governor’s office, obtained by a Pennsylvania resident and first published by the environmental news site Heatmap in April, shows the tech giant was shown a “feedback draft” of the plan at the center of Shapiro’s executive order on March 18, more than two months before the governor released it to the public as a proposal in May.
Earlier that month, a Pennsylvania real estate developer told Benjamin Kirshner, Shapiro’s chief transformation and opportunity officer, by email that Amazon was threatening to withdraw from the state “until they get certainty that the projects they have invested in can move forward,” Heatmap reported. “In conversations, they have pointed out to us that they have been appealed in EVERY project at EVERY turn,” the developer said in the email.
By that point, the governor’s office had already offered Amazon “exclusive early access” to fasttracked permitting, “subject to a non-disclosure agreement” — a benefit Shapiro’s executive order now forbids — Heatmap reported. The news outlet found that when Shapiro made his annual budget address in February, which first referenced the data center guardrail proposal that now constitutes the bulk of the “legally binding” executive order, the secretary of the state’s Department of Community and Economic Development, Rick Siger, assured an Amazon representative by email that the plan was “intended to be voluntary.”
The state’s sales and use tax amounts to 6% of what a company spends to buy, store or use data center equipment in Pennsylvania — though not all of Amazon’s $20 billion spend will go toward equipment. The discount Amazon is getting could represent hundreds of millions of dollars in state funds, as legislators continually face calls from critics to shore up money for government services like public transit.
Epoch AI, a nonprofit thinktank focused on AI research, estimates that computer servers constitute almost 60% of the cost of owning a one-gigawatt data center. The remaining budget is largely spent on facilities, network infrastructure and energy, with a little more for taxes, maintenance, labor, land and water.
“The revenue implications of this tax benefit program are one reason why Governor Shapiro recently took action to establish strict standards that data center proposals must adhere to,” said Jeffrey Johnson, director of communications for the Pennsylvania Department of Revenue.
The state’s sales and use tax break has ballooned since it was passed in 2016, well before generative artificial intelligence or hyperscale data centers entered popular consciousness.
“This new program is designed to attract new investment from businesses that operate within facilities containing equipment such as servers or data storage equipment,” a 2016 summary on the measure, passed with a $5 million appropriation,