On April 9, 2026, the final day of the 2026 Regular Session, the Alabama Legislature gave final passage to House Bill 399, sponsored by Rep. Leigh Hulsey (R-Helena), capping tax abatements for data processing centers at 20 years unless operators commit to defined community investments. The Senate passed the amended bill unanimously, 32-0, and the House concurred 102-0 the same day. Gov. Kay Ivey, who publicly backed the package, signed the measure on April 16, 2026, enacting it as Act 2026-573. The act takes effect June 1, 2026, and its new limits apply to abatements granted on or after January 1, 2027. The change makes Alabama one of the most prominent states to pull back a data center incentive rather than expand it, recasting a 2012 recruiting tool as a ratepayer-protection measure.
Key Takeaways
| 01 | The default abatement term drops from 30 years to 20. The cap applies to abatements granted on or after January 1, 2027. Abatements granted before that date keep their existing terms. |
| 02 | The full 30 years can be earned back through community investment. A binding agreement approved by Revenue, Commerce, and the local governing body restores the 10-year extension, backed by a repayment-with-interest clawback if any material obligation lapses. |
| 03 | Facilities of 100 MW or more lose state construction-related abatements at placed-in-service. A 250 MW campus with roughly $1 billion in taxable construction purchases faces about $40 million in state sales and use tax that a pre-2027 abatement would have avoided. |
| 04 | Targeted-county siting preserves the full-period abatement. Centers of 100 MW or more in a targeted county under Ala. Code § 40-18-376.1 are excepted from the construction-tax carve-out. |
| 05 | Timing is the swing variable. Roughly eight months remain before the January 1, 2027 cutoff; the program's application sunset moves from July 31, 2028 to July 31, 2032. |
HB 399 scales back one of the most generous data center incentive frameworks in the country. Under the Alabama Data Processing Center Economic Incentive Enhancement Act of 2012 (Act 2012-210), a project that invests more than $400 million within 20 years and creates 20 jobs paying at least $40,000 annually can qualify for sales and use tax incentives alongside property tax abatements for up to 30 years, a combination only five states offer. With more than 20 data centers operating or in development statewide and AI-driven electricity demand feeding utility-cost concerns, lawmakers framed the rollback as an affordability measure. Gov. Ivey cast the package as protecting energy affordability for Alabamians while keeping the state competitive for economic development. The Data Center Coalition opposed the bill.
"Right now, we are too sweet. Our incentives are too good. We're trying to find that sweet spot. Ultimately, it's about affordability."
 |
Sen. Andrew Jones (R-Centre), sponsor of the companion Senate bill (SB 265) Source: Alabama Political Reporter, April 10, 2026. Photo: Alabama Senate Republican Caucus. |
Key Provisions
The default abatement ceiling drops from 30 years to 20 years. HB 399 amends Ala. Code §§ 40-9B-3, 40-9B-4, and 40-9B-4.1 to set a 20-year maximum exemption period for data processing center abatements granted on or after January 1, 2027. Abatements granted before that date keep their existing terms.
Operators can earn back the full 30 years by funding local investments. A private user may extend the maximum exemption period by 10 years, to a total of 30 years, by satisfying the capital investment thresholds in Section 40-9B-4 and entering a binding written agreement, approved by the Alabama Department of Revenue, the Department of Commerce, and the affected local governing body, committing to qualified local investments in four categories:
- Infrastructure improvements, including roads, bridges, or other public facilities that support local development
- Broadband improvements in an "unserved area" as defined in Ala. Code § 41-23-212
- Water or wastewater system upgrades
- Local education support, including capital improvements, equipment, or programmatic support for public K-12 schools, public charter schools, career technical centers, or community college programs
The extension carries a hard clawback. If the operator fails to satisfy any material obligation in the agreement, the additional 10-year abatement is revoked, the abatement reverts to the 20-year cap, and the operator must repay all state taxes abated during the extended period, with interest.
The guaranteed term falls to 20 years, and the last 10 are now earned rather than granted.
Maximum Data Center Abatement Term, Before and After HB 399, in Years
|
30 yrs
30
|
20 yrs
20
|
30 yrs
+10
20
|
| Act 2012-210 (prior law) |
HB 399 base (from Jan. 1, 2027) |
HB 399 with community- investment agreement |
Guaranteed term Conditional 10-year extension
Facilities drawing 100 MW or more lose state tax abatements on construction-related purchases once the facility is placed in service. For abatements granted on or after January 1, 2027 to a data processing center with a total peak demand of 100 megawatts or greater, abatements of state noneducational ad valorem taxes and state construction-related transaction (sales and use) taxes end on the date the property is placed in service. The state will collect sales and use tax on designated purchases (building materials, building fixtures, structural components, real property improvements, power infrastructure for the transformation, distribution, or management of electricity, backup power generation systems, and battery systems), with revenue directed to the state General Fund under amended Ala. Code § 40-23-35. Core IT assets (computers, servers, licensed software, and equipment supporting computing, networking, or data storage) remain abatable for the full exemption period, as do cooling systems. Centers of 100 MW or more located in a "targeted county" under Ala. Code § 40-18-376.1 are excepted and may still receive full-period abatements.
The program's application sunset moves from July 31, 2028 to July 31, 2032. No Act 2012-210 incentive is available to a company applying after that date, but projects granted incentives before the deadline keep them under their project agreements regardless of reauthorization.
From 2027, every new abatement gets a shorter term, a taxable construction bill above 100 MW, and four more years to apply.
HB 399 at a Glance: Before and After
| Provision | Before HB 399 | Abatements granted on or after Jan. 1, 2027 |
|---|---|---|
| Maximum abatement term | Up to 30 years | 20 years (30 years with an approved community-investment agreement) |
| 100 MW+ facilities | Abatements available for full term | State ad valorem and construction-related sales/use abatements end at placed-in-service, and designated purchases are taxed |
| Application deadline | July 31, 2028 | July 31, 2032 |
Sources: HB 399 (enrolled), Act 2026-573; Alabama Department of Revenue, Chapter 9B Abatements. Figures reverified July 2026.
Companion Measures
SB 155 channels federal coal royalties into coal-country economic development. The Renewing Coal-Impacted Communities Act, sponsored by Sen. Matt Woods (R-Jasper) with Rep. Bryan Brinyark (R-Samantha) as House sponsor, cleared both chambers unanimously (Senate 32-0, House 103-0) and was signed into law this spring. It creates the Coal-Impacted Communities Economic and Workforce Development Grant Program, directed by an advisory committee of representatives from coal-impacted areas, to finance workforce development, infrastructure, and economic diversification in counties such as Fayette, Walker, Jefferson, and Tuscaloosa, with a portion of federal coal lease revenue continuing to support the General Fund and the Port of Mobile.
SB 270 makes large data centers pay for the power they add. Sponsored by Sen. Lance Bell (R-Pell City), with Rep. Neil Rafferty (D-Birmingham) carrying the House companion (HB 403), the bill authorizes the Public Service Commission to account for the additional electricity costs large data centers create so those costs are not shifted onto other ratepayers. It passed the House 100-1 on April 9, with the Senate concurring 33-0.
"These are billion dollar companies, and they should pay their own way."
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Sen. Lance Bell (R-Pell City), sponsor of SB 270 Source: Alabama Daily News, March 2026. Photo: Alabama Senate Republican Caucus. |
What It Means for Pending Projects
The new rules are prospective. Any abatement granted before January 1, 2027 keeps its existing term, so certificate holders and projects already in the pipeline are not disturbed. Projects that reach a local abatement grant on or after that date fall under the 20-year cap and, if they clear 100 MW, the construction-tax carve-out.
The worked exposure for a large build is significant. Consider a hyperscale campus placed in service after January 1, 2027 with a 250 MW load and roughly $1 billion in taxable construction-related purchases (building materials, structural components, power-transformation infrastructure, backup generation, and battery systems). Because the facility exceeds 100 MW, its state construction-related sales and use tax abatement ends the day the property is placed in service. At Alabama's 4% state sales and use tax rate, that is roughly $40 million in state tax the operator would have avoided under a pre-2027 abatement, before county and municipal rates and before any state noneducational ad valorem exposure. Siting in a targeted county under Ala. Code § 40-18-376.1 preserves the full-period abatement and removes that exposure entirely.
Audit-ready documentation is now a defensive asset. Operators pursuing the 10-year extension take on a repayment-with-interest clawback if any material obligation lapses, so the community-investment agreement and its compliance record should be built to survive review by Revenue, Commerce, and the local governing body from day one. The swing variable to watch is timing: whether a project can secure its local abatement grant before the January 1, 2027 cutoff, and whether counties pursue targeted-county designation that would exempt qualifying 100 MW-plus projects.
Projects have until January 1, 2027 to lock in a 30-year term with no strings attached.
Timeline and Next Steps
| Date | Action |
|---|---|
| Apr. 9, 2026 | Final legislative passage (Senate 32-0; House concurrence 102-0) |
| Apr. 16, 2026 | Signed by Gov. Ivey, enacted as Act 2026-573 |
| June 1, 2026 | Act effective |
| Jan. 1, 2027 | 20-year cap and 100 MW rules apply to newly granted abatements |
| July 31, 2032 | Application sunset for Act 2012-210 incentives |
Sources: HB 399 (enrolled), Act 2026-573; LegiScan roll-call history.
What to do now: Roughly eight months remain before the January 1, 2027 cutoff that triggers the 20-year cap and the 100 MW construction-tax rules. Projects that want a full 30-year term without community-investment obligations must have their local abatement granted before that date, so sponsors should move siting decisions, board approvals, and abatement applications onto a compressed calendar now. Projects at or above 100 MW should re-model post-placed-in-service exposure on construction materials, power infrastructure, backup generation, and battery purchases, and weigh targeted-county siting under Ala. Code § 40-18-376.1. Operators pursuing the 10-year extension should scope community-investment packages early, secure sign-off from Revenue, Commerce, and the local governing body, and keep audit-ready records against the repayment-with-interest clawback.
References
- Alabama Legislature, House Bill 399 (2026 Regular Session), Enrolled, final passage Apr. 9, 2026.
- Alabama Department of Revenue, "Chapter 9B Abatements" (noting Act 2026-573 updates for abatements granted on or after Jan. 1, 2027).
- Bloomberg Tax, "Alabama Provides Data Processing Center Abatement Periods," reporting enactment Apr. 16, 2026.
- Alabama Political Reporter, "Alabama Senate sends bill to limit data center tax breaks to governor," Apr. 10, 2026.
- Alabama Reflector, "What passed in the Alabama Legislature: April 7-9, 2026," Apr. 10, 2026.
- Alabama Daily News, "Bills moving to rein in incentives for data centers, require them to pay for energy increases," Mar. 2026 (Sen. Bell quote).
- Sen. Matt Woods, "Investing in Alabama's coal communities is investing in our future," Alabama Political Reporter, Apr. 17, 2026.
- LegiScan, Alabama HB 399, 2026 Regular Session (roll-call history).
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