Indiana Caps Local Data Center Payments at 1%

On March 12, 2026, Indiana Gov. Mike Braun (R) signed House Bill 1210 (Public Law 157), an omnibus local-government finance bill that, among dozens of provisions, creates Indiana's first mandatory host-community payment tied to the state's 7% data center sales-tax exemption. The payment applies only to data centers gaining local approval after June 30, 2026, and it is capped at "not more than" one penny on the dollar of the exemption's value. The same day, Braun signed House Bill 1406 (Public Law 162), which orders the Indiana Finance Authority (IFA), in collaboration with the Indiana Economic Development Corporation (IEDC), to deliver a full accounting of what data-center incentives cost the state and its localities by November 1, 2026.

Indiana created its multi-decade data center sales-tax exemption in 2019. With Meta's $10 billion Lebanon campus unveiled February 11, 2026 and roughly 20 large projects under construction or proposed, by the Citizens Action Coalition's count, the state has begun a limited review of what the exemption costs.

How the Payment Shrank From $5 Million to $350,000

The provision shrank at every step from introduction to enactment. Rep. Ed Soliday (R-Valparaiso), who sponsored the original 2019 exemption, floated the first version in January: 1% of sales-tax savings on equipment, worth about $3.5 million per refresh cycle on a Hammond project buying $5 billion of equipment every five years. The Senate went bigger, passing HB 1210 on February 24, 2026 with language requiring "at least" 1% of both equipment purchases and electricity costs. The final version, rewritten after private meetings between legislators and data-center lobbyists, went much smaller. Per the Indiana Capital Chronicle, the rewritten language was not publicly discussed before both chambers adopted it on February 27. The conference committee report passed the House 91-3 and the Senate 48-0.

Worked example. Take a hyperscale campus with a $500 million annual electricity bill, the example the Indiana Capital Chronicle used. Under the Senate-passed version, the host city or county would have received at least 1% of electricity costs, a $5.0 million annual minimum, before any equipment-based payments (Soliday put one project's potential at $70 million over a few years). Under the enacted law, the payment is capped at 1% of the exemption value: 1% × (7% × $500 million) = $350,000 per year, maximum. That is 0.07% of the facility's power spend, and it applies only if the project was locally approved after June 30, 2026.

Exhibit 1 compares the two versions clause by clause. Exhibit 2 puts the difference in dollars.

The November 1 Study Will Put a Number on the Exemption

Indiana has never published what the 2019 sales-tax exemption costs. The IEDC program, codified at Indiana Code § 6-2.5-15, exempts qualifying data center equipment and energy from sales and use tax for up to 25 years on investments under $750 million and up to 50 years above that threshold. Ben Inskeep, program director of the Citizens Action Coalition, says the exemption's cost "could be tens of billions of dollars over the next 50 years." The Data Center Coalition, the industry's national lobbying group, counters with a commissioned study finding that data center growth generated more than $327 million in state and local tax revenue in Indiana in 2023.

HB 1406 orders the first official cost study. Section 27 of the enrolled act directs the IFA, in collaboration with the IEDC, to study every property-tax incentive a local unit may grant to a data center, the state's adjusted gross income tax and gross retail and use tax incentives, and other tax incentives available to data centers; the impact of data centers on utility costs and water supply for local governments and consumers; and their local and regional environmental impacts. The IFA must submit the report to the interim study committee on fiscal policy no later than November 1, 2026. From this alert's August 15 publication, that is 78 days out. The 2027 General Assembly convenes in early January, meaning legislators will draft next year's data-center bills with, for the first time, an official cost number in hand.

In our view, the 1% cap is too small to change many county votes. Its value is mainly political. Local land-use politics is now the main constraint on Indiana data-center siting, and the November 1 study is the first official measure of what the program costs. If the IFA/IEDC report puts the exemption's annual cost anywhere near the nine-figure range, we expect 2027 legislation to propose converting the 1% ceiling into a floor. Companies that secured local approvals and exemption certificates before then would likely keep the current terms.

Land Assembly: The 100-Acre Notice Rule

The transparency guardrails from 2025 remain in force and matter for site work. Senate Enrolled Act 516 (Public Law 145-2025, signed May 1, 2025), a response to the IEDC's large land purchases for the Limitless Exploration/Advanced Pace (LEAP) Research and Innovation District in Boone County, requires the IEDC to give affected local governments at least 30 days' notice before closing a purchase of more than 100 acres in a county, and requires annual public reporting on each innovation development district, including its tax-increment financing. HB 1406 also requires that, within 30 days after closing any purchase or sale of land, regardless of acreage, the IEDC report the location, description, total price, and per-acre price to the State Budget Committee.

Large state-assisted land assemblages now become public at least 30 days before closing. The Decatur Township fight in Indianapolis, where a neighborhood organization and property owners sued in April to overturn the Metropolitan Development Commission's approval of Sabey's $4 billion, 130-acre project, shows that local opposition now organizes quickly once a site is known.

How the Payment Fits With Negotiated Local Deals

The statutory payment sits alongside negotiated local agreements. On our $500 million example, it tops out at $350,000 a year for projects approved locally after June 30, 2026. Data-center companies already routinely negotiate voluntary local payment agreements, and nothing in HB 1210 preempts them. Meta's Lebanon package, for instance, includes $1 million a year for 20 years in energy assistance through Boone REMC alongside its 35-year exemption.

States are taking different approaches to data-center incentives. Some attach conditions and others revisit the price. Minnesota paired its long-dated exemption with new obligations, and Indiana has scheduled a cost review. Exhibit 3 lays out the Indiana dates from the 2025 land rules through the 2027 session.

What to Do Now

If your company is planning or operating a data center in Indiana, especially a project still awaiting local approval, the new payment rule and the coming cost study are worth a close look. The study is due to the Legislature's interim study committee on fiscal policy by November 1. If you want a read on what it means for your project before then, reach out to our team.

References

1. Indiana General Assembly, House Bill 1210 (2026), bill details; LegiScan, IN HB 1210, Public Law 157, signed March 12, 2026; House Enrolled Act 1210.
2. Indiana General Assembly, House Bill 1406 (2026), bill details; LegiScan, IN HB 1406, Public Law 162, signed March 12, 2026; House Enrolled Act 1406, Section 27.
3. Indiana Capital Chronicle, "That 1% incentive to encourage data center approvals? Final deal watered it down," March 26, 2026.
4. Indiana Capital Chronicle, "Details on long-expected Meta data center campus unveiled," February 11, 2026.
5. Daily Journal, "Braun signs bills for data center payments, IEDC tax credits, rental caps," March 13, 2026.
6. LegiScan, IN SB 516 (2025), Public Law 145, signed May 1, 2025; Daily Journal, "Braun signs bill to create IEDC land-purchase guardrails, new state business office," May 5, 2025; Indianapolis Business Journal, "Bill calls for IEDC to inform local officials about big land purchases."
7. Indiana Economic Development Corporation, Data Center Sales Tax Exemption program overview.
8. Inside INdiana Business, "Data centers could pay Indiana municipalities 1% of equipment purchases, electric bill."
9. Indianapolis Business Journal, "Metropolitan Development Commission approves $4B data center plan over resident objections," March 18, 2026; WISH-TV, "Lawsuit aims to halt $4 billion data center project," April 21, 2026.
10. Citizens Action Coalition, AI data center project tracking.

© 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.