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Washington did not enact the broad data-center energy rules proposed in House Bill 2515. But it did pass a separate tax law: ESSB 6231, signed by Gov. Bob Ferguson on April 1, 2026. Starting July 1, the law ends the sales-and-use-tax exemption for refurbishment and replacement server equipment while preserving incentives for qualifying new construction. The result is a split outcome—not a wholesale repeal of data-center tax breaks.
Two bills, two different outcomes
The 2026 legislative session produced two distinct data-center stories. HB 2515 proposed a statewide framework for large energy-use facilities, including data centers, but did not become law. ESSB 6231 changed tax preferences for data centers and was signed on April 1, with its principal tax changes taking effect July 1, 2026.
That distinction matters. Saying that Washington enacted “data-center rules” can imply that lawmakers adopted HB 2515’s proposed requirements. They did not. And saying the state ended all data-center tax incentives overstates what ESSB 6231 does.
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Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →- HB 2515: Passed the House, then stalled in the legislative process; it did not become law.
- ESSB 6231: Passed the Senate 26–23 on February 28 and the House 51–46 on March 12, then was signed April 1.
- From July 1: Refurbishment and replacement-server purchases generally lose the exemption; qualifying new construction can still qualify under the remaining programs.
HB 2515’s legislative history and the history of ESSB 6231 show the separate paths.
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What HB 2515 would have done
HB 2515, titled “Addressing emerging large energy use facilities,” was intended to address the pressures that large new electricity loads can place on the grid and public resources. Its proposed framework included energy and water reporting, forecasts of future energy needs, clean-power requirements over time, and measures addressing electricity demand, grid impacts, and the costs of connecting large facilities.
The House passed the bill 51–41 on February 14, 2026. It then moved through Senate committee consideration, including an amended version referred to Ways and Means. No action was recorded there on March 2; on March 12 it returned to the House Rules Committee. It did not receive final passage and did not become law.
Supporters argued that stronger disclosure and planning could help protect affordability, grid reliability, water resources, and communities. Opponents, including technology companies, raised concerns about compliance costs, delays, competitive disadvantage, disclosure of sensitive capacity plans, and how the cost of new grid connections would be assigned. Those were arguments about a proposal, not proof that a particular cost or consequence would have followed.
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Why Microsoft and other operators objected
Microsoft publicly opposed advancing HB 2515 without substantial changes, describing it as “uniquely anti-competitive,” according to GeekWire’s reporting. Microsoft and Amazon were also reported to have lobbied for modifications. The objections fit a broader business concern: a large facility’s economics depend not just on land and construction, but on power availability, interconnection terms, ongoing operating costs, and the predictability of rules over a long investment horizon.
For an operator, requirements to report energy, water, or future capacity could mean new compliance work and disclosure of plans it considers commercially sensitive. Rules governing grid connections or cost allocation could affect project economics. A company could also worry that a state-specific framework would make Washington less attractive than competing locations. These are plausible concerns raised in the debate, not established findings that HB 2515 would necessarily have caused higher bills, delays, or lost investment.
The business landscape is not limited to hyperscalers. A cloud company may own a campus; a colocation provider may operate a building used by many tenants; and an enterprise may own or lease its own facility. Their exposure to reporting, power, and compliance requirements can differ. Microsoft has an estimated 30 data centers in Washington, while Amazon’s Pacific Northwest data-center footprint has historically been concentrated more heavily in Oregon, according to the cited reporting. That context helps explain why the same state proposal could affect companies differently.
What ESSB 6231 changes—and what it leaves in place
Washington’s data-center tax preferences exempt qualifying purchases of certain equipment and related labor from sales and use tax. ESSB 6231 narrows that framework, especially for investment in facilities already operating. The enrolled law, the Department of Revenue’s tax-legislation summary, and the Legislature’s JLARC review describe the changes.
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| Activity or project | General treatment under the change |
|---|---|
| Qualifying new data-center construction | May remain eligible under the applicable urban or rural program, subject to its requirements and limits. |
| Refurbishment of an existing data center | New refurbishment certificates may not be issued on or after July 1, 2026; the existing refurbishment exemption expires that day. |
| Replacement server equipment | Removed from the definition of eligible server equipment, so replacement servers generally no longer qualify for the exemption. |
| Eligible power infrastructure | Certain qualifying power infrastructure remains within the exemption framework for eligible projects. |
| Existing certificate for new construction | Treatment depends on the certificate and statutory conditions, including timing and whether work is new construction or refurbishment. |
The distinction is not “old equipment versus all new equipment.” The law specifically removes replacement server equipment from eligibility; it does not automatically disqualify every purchase made for a data center. Nor does a project qualify merely because its owner calls it new construction. Location, facility type, power and other statutory thresholds, certificate status, and the character and timing of the work all matter.
Why a server-refresh change can matter over time
The tax change reaches beyond a one-time construction budget. Operators periodically replace servers as computing needs and equipment change. Dan Diorio of the Data Center Coalition described server replacement cycles of roughly three to five years, as reported by GeekWire. If an operator previously could claim an exemption on qualifying replacement equipment, removing that benefit can add tax cost repeatedly over a facility’s life, not just when it opens.
That makes the law’s tilt consequential: it preserves a route to tax relief for qualifying new projects while withdrawing it from refurbishment and replacement servers. It could influence whether an owner upgrades an existing site, undertakes work that qualifies as new construction, or considers investment elsewhere. The law establishes the change in tax treatment; it does not establish how companies will respond or whether those decisions will increase land, water, or electricity demand.
Colocation customers may also be affected indirectly. A provider that faces higher costs for server refreshes or facility improvements could seek to reflect those costs in lease rates or service terms. Whether a tax cost is passed through, absorbed by the operator, or shared through contract negotiations depends on the deal. The statute alone does not show who ultimately bears the cost.
New construction incentives remain, but qualification is limited
ESSB 6231 does not abolish the state’s data-center exemptions. Qualifying new construction can still use separate urban and rural programs, and some eligible power infrastructure remains covered. But the programs have different rules and timelines; a blanket statement that “new data centers still qualify” is too broad.
Under the amended structure, the urban program is limited to six new-construction exemption certificates per calendar year, with first-in-time processing provisions. The law bars new urban certificates after July 1, 2028, and sets the urban exemption’s expiration at July 1, 2038. The rural program has separate eligibility rules and dates: no new certificates after July 1, 2036, and an expiration date of July 1, 2048 for the amended exemption structure. Geographic eligibility, project timing, power thresholds, and other statutory conditions determine which route, if any, is available.
Owners facing a transaction close to July 1, 2026 should not assume that an order date alone settles eligibility. Certificate issuance, installation, construction milestones, operational completion, equipment classification, and the law’s effective-date language may matter. A project combining improvements to an existing facility with genuinely new construction may require particular care in classifying the work. The tax result should be checked against the applicable certificate and statute with qualified Washington tax advice.
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How much revenue could the change raise?
The state Department of Revenue fiscal materials estimate about $63 million in additional General Fund revenue in fiscal year 2026, about $140.48 million in the 2025–27 biennium, and about $151.22 million in 2027–29. A separate local-government fiscal estimate projects increases of about $19.998 million in FY 2026 and $45.54 million in 2027–29. These figures refer to different levels of government and accounting periods; they should not be added or compared as though they were the same measure. The estimates come from the state fiscal note.
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ESSB 6231’s findings frame the change as removing a tax preference to increase General Fund revenue and support essential state services. Whether a tax preference delivers enough economic development to justify its cost is a separate question from the projected receipts. JLARC found that beneficiaries had used the urban preference for refurbishment and server purchases, but no new data-center construction had occurred under the pilot program as of its review. It concluded that future use of the amended preference would be concentrated largely on new construction and recommended allowing the urban preference to expire because the pilot had not produced new facilities.
There is also an employment and investment argument for incentives. The Data Center Coalition cited a PwC-commissioned report estimating nearly 9,000 direct data-center jobs, 39,000 indirect jobs, and $1.8 billion in state and local tax revenue in Washington in 2023. Those are industry-commissioned figures, not a neutral forecast of the effect of this particular exemption. The policy question is whether the incentive changes where or how much investment occurs—and how its benefits compare with forgone tax revenue and public infrastructure needs.
Who may gain, and who may bear costs
- State government: The narrowed exemption is projected to increase General Fund receipts, though the estimates are forecasts rather than guaranteed collections.
- Cities and counties: Local governments may receive more sales-tax revenue as qualifying purchases become taxable. They may also face costs for roads, emergency response, permitting, water, wastewater, or other local infrastructure.
- Data-center owners: Operators generally lose the exemption for refurbishment and replacement servers but may still qualify for new-construction incentives. The balance depends on the facility and its certificates.
- Tenants and colocation customers: The law allows qualifying tenants to claim exemptions in certain circumstances. Contract terms will determine whether a provider’s higher equipment or refurbishment costs reach customers.
- Utilities and ratepayers: HB 2515’s proposed statewide framework did not become law, leaving its proposed approach to large-load reporting and cost allocation unresolved. That does not mean ratepayers will necessarily pay more; the effect depends on utility planning, tariffs, interconnection arrangements, and other applicable processes.
- Workers, suppliers, and communities: Construction and equipment vendors can benefit from projects, while nearby communities may weigh jobs and revenue against land, water, electricity, traffic, and infrastructure impacts.
JLARC’s review found that at least 38 states offer some form of preferential tax treatment specifically for data centers. The competitive context is real, but neighboring states are not interchangeable: Oregon has no state sales tax, Idaho offers data-center-related tax treatment, and JLARC reported that California has no data-center-specific tax incentive. Differences in electricity supply, siting, labor, infrastructure, and the design of state programs also matter.
The grid debate did not end with HB 2515
HB 2515’s failure means the particular statewide framework it proposed did not take effect. It does not establish that Washington has no rules governing utilities, permits, or facility development. Rather, questions about how large new loads are forecast and connected, who pays for grid upgrades, what energy and water information is available, and how communities evaluate projects remain subject to other applicable processes and decisions.
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That leaves an important distinction for ratepayers: advocates’ concern that fast-growing data-center demand could shift costs onto households is not the same as evidence that it has happened in a specific utility territory. The bill’s failure leaves its proposed safeguards unresolved; it does not settle the ultimate allocation of costs. Assessing that requires utility-specific evidence about load forecasts, infrastructure investments, rates, and customer contributions.
What facility owners should check before claiming an exemption
- Whether the facility is in an eligible urban or rural area and meets the program’s power, size, and other requirements.
- Whether the certificate covers new construction or refurbishment, and whether it remains valid under the amended law.
- Whether the purchase is replacement server equipment or another category of equipment, such as qualifying power infrastructure.
- Whether the project and transaction meet the relevant construction, installation, certificate, and effective-date conditions.
- Whether a tenant has an independent exemption claim and what the lease says about taxes and pass-through costs.
- Whether sales-and-use-tax treatment is being confused with property tax, utility charges, business-and-occupation tax, or federal tax treatment, which are separate questions.
This is a general explanation, not tax advice. A Washington tax professional should review the specific facility, certificate, equipment, and transaction before an operator relies on an exemption.
Bottom line
Washington did not reject data centers, and it did not enact HB 2515’s proposed statewide energy framework. It did change the tax bargain: refurbishment and replacement servers generally lose an exemption starting July 1, 2026, while qualifying new construction retains a narrower path to tax relief. The regulatory debate over large loads, grid costs, and public-resource impacts remains open.
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