Colorado's data center divide: tax breaks vs. tough rules

State of play: Two sharply different Democratic bills — one offering tax incentives to attract data center projects, and another imposing rigorous regulatory rules on them — are moving through the Legislature.

The incentive legislation offers sales-and-use tax exemptions for 20 years with a possible 10-year extension for data centers that invest at least $250 million in the first five years.

• The project must pay prevailing wages, meet energy-efficiency and water-cooling standards, and coordinate with power providers.
• Supporters argue Colorado needs incentives to compete with roughly 37 other states offering similar perks, but critics say it will increase utility bills and impede Colorado's climate goals.

What they're saying: "The future is technological," state Rep. Alex Valdez (D-Denver), a lead sponsor of the industry-backed tax break bill, told the Colorado Sun. "We're trying to do it the right way."

The other side: The regulation approach is drawing support from environmental organizations by requiring data centers to reach 100% renewable energy starting in 2031.

• Other requirements include paying for electrical grid upgrades or contracting for grid upgrades, supporting energy-saving programs, and conducting community impact reviews in impacted areas.

What they're saying: "Massive data centers add incredible pressure to our power grid and water systems — challenges we can't ignore," state Rep. Kyle Brown (D-Boulder County) said in a statement.

• "This legislation gives Colorado the commonsense guardrails we need to protect our communities and guide smart development."