Alabama's 20-Year Data Center Abatement Cap

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 pulls back a 2012 recruiting tool and recasts it as a ratepayer-protection measure.

HB 399 scales back Alabama's data center incentive framework. 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.

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. Exhibit 1 compares the maximum terms before and after HB 399.

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. Exhibit 2 summarizes the changes.

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.

Effect on 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.

The 10-year extension carries compliance risk. Operators pursuing it take on a repayment-with-interest clawback if any material obligation lapses, and the agreement requires approval by Revenue, Commerce, and the local governing body. The open questions are 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. Exhibit 3 sets out the dates.

What to Do Now

This is for data center developers and operators weighing Alabama sites, especially projects at or above 100 MW. Abatements granted before January 1, 2027 keep the 30-year term and the prior construction-tax treatment, and targeted-county siting preserves the full-period abatement after that date. If you want a read on fit before the January 1, 2027 cutoff, reach out to our team.

References

1. Alabama Legislature, House Bill 399 (2026 Regular Session), Enrolled, final passage Apr. 9, 2026.
2. Alabama Department of Revenue, "Chapter 9B Abatements" (noting Act 2026-573 updates for abatements granted on or after Jan. 1, 2027).
3. Bloomberg Tax, "Alabama Provides Data Processing Center Abatement Periods," reporting enactment Apr. 16, 2026.
4. Alabama Political Reporter, "Alabama Senate sends bill to limit data center tax breaks to governor," Apr. 10, 2026.
5. Alabama Reflector, "What passed in the Alabama Legislature: April 7-9, 2026," Apr. 10, 2026.
6. Alabama Daily News, "Bills moving to rein in incentives for data centers, require them to pay for energy increases," Mar. 2026 (Sen. Bell quote).
7. Sen. Matt Woods, "Investing in Alabama's coal communities is investing in our future," Alabama Political Reporter, Apr. 17, 2026.
8. LegiScan, Alabama HB 399, 2026 Regular Session (roll-call history).

© Copyright 2026 TC Policy Group, LLC (d/b/a Crawford Partners). The views expressed herein are those of the author(s) and not necessarily the views of Crawford Partners, its management, its subsidiaries, its affiliates, or its other professionals. Crawford Partners is not a law firm and cannot provide legal advice.