Rural Data Centers Eye $40.9 Billion Federal Tax Windfall

More than 100 rural data center projects in the United States could become eligible for federal opportunity zone tax benefits starting January 1, 2026, according to new research by the Searchlight Institute reviewed exclusively by WIRED.

The expansion, codified in the One Big Beautiful Bill Act, opens a fresh set of corporate tax breaks to facilities sited in qualifying rural census tracts. The Joint Committee on Taxation estimates the rural opportunity zone expansion will cost $40.9 billion over the next decade.

The tax overhaul matters because data centers — the physical backbone of the generative AI boom — are migrating away from cities at an accelerating pace. New research from Pew shows that while just 13 percent of operating US data centers sit in rural areas, around 67 percent of planned facilities are heading there.

What changes on January 1?

Under the expanded opportunity zone program, any company that builds or substantially improves a project inside a designated rural tract can route capital gains through a specialized investment vehicle and defer, reduce, or eliminate the federal tax owed on those gains.

Ways and Means Committee chair Jason Smith endorsed the expansion in a statement last year. The new rules "may significantly lower barriers for large-scale, capital-intensive projects in rural areas—most notably hyperscale data centers," Smith said. "The economic case for building data centers in designated rural opportunity zones becomes far more compelling."

The program carries a single gatekeeping requirement: capital investment. No minimum job count. No wage threshold. No obligation to hire locally.

"Right now, the only requirement to get the benefits is capital investment," said Emily Kraschel, a tax policy analyst at the Searchlight Institute. "However, that doesn't guarantee that that money is necessarily creating jobs or creating a local economic boost."

Kraschel added that traditional manufacturing sites absorb workers in large numbers, but data centers do not. "You'd be more sure of that with a more traditional factory that requires lots of workers," she said. "But with a data center, that assumption goes a little wonky."

How many rural data centers qualify?

Searchlight cross-referenced its own database of under 700 planned or under-construction US data centers against the federal list of qualifying rural opportunity zones. The result: more than 100 projects in active development sit inside tracts that could tap the new benefits.

Other industry datasets put the total number of US data centers in development at closer to 1,500, which means the eligible count could climb well above 100 once analysts widen the net. Many hyperscalers have already announced rural siting decisions in states including Mississippi, Indiana, Iowa, and Ohio.

Because the IRS treats opportunity zone participation as confidential taxpayer data, no public list exists of which companies have actually claimed the break. Outside analysts can only infer participation from project locations.

Why are tech giants distancing themselves?

WIRED contacted Meta, Amazon, Microsoft, and Google — all of which are developing data centers in potentially eligible areas — to ask whether they plan to use the program.

All three that responded denied it.

Microsoft general counsel of infrastructure legal affairs Rima Alaily told WIRED the company "does not use the opportunity zone program to invest in the purchase or construction of its data centers."

Amazon spokesperson Julia Lawless went further. The company "does not actively seek out" land in opportunity zones, Lawless said, and has not claimed the benefit for its projects. "If we locate in one of these areas, it's because our site selection criteria—from available land to access to talent—align with tracts that governments across all levels have previously identified for economic development; not because we utilized the OZ benefit," Lawless said. "We have not used this program for our site selection and have no plans to add it to our criteria for our future decisionmaking process."

Google did not respond.

The denials land in a hostile media environment. Amazon recently drew criticism for negotiating a lower tax bill on a Mississippi data center. The New York Times reported last week that Meta wrote off data center equipment under a federal research-and-experimentation tax break — a separate program — prompting accusations of creative accounting at AI scale.

Does the program actually create jobs?

Academic research on the original 2017 opportunity zone program has produced mixed results. Several studies found that many projects getting federal kickbacks would have happened even without the tax boost, and that investment did not reliably flow to the most disadvantaged tracts.

Data centers raise a specific complication. Construction crews can number in the hundreds, but the permanent operational workforce is small — often dozens, not thousands, of jobs per facility.

University of Texas-Austin government professor Nathan Jensen said he would "be very surprised" if at least some developers were not weighing the tax break in their siting decisions.

"It's essentially free money," Jensen said.

Jensen also flagged an emerging contradiction in US industrial policy. "It's interesting we have this program that's incentivizing an investment while states are trying to de-incentivize or even ban it," he said.

The tension reflects a deeper split. Federal tax code treats data centers as desirable capital investment. State legislatures and ratepayer advocates increasingly treat them as electricity and water liabilities that drain public resources.

What is the political response?

Senator Josh Hawley introduced legislation last month that would strip opportunity zone funding from data centers entirely. The Missouri Republican framed the bill as an effort to "ensure Big Tech companies don't get tax breaks to build data centers on farmland."

The Hawley bill sits alongside a separate bipartisan permitting reform package moving through Congress, plus a failed Senate vote on a ratepayer protection measure that critics called lip service to Republican Senator Jon Husted of Ohio, who faces a tough reelection fight in a state where data center development has become a flashpoint issue.

Local resistance is hardening. In Pennsylvania, one operator is still struggling with community opposition after offering residents $10,000 each to accept a project, according to the Wall Street Journal.

What's the bigger picture for AI infrastructure?

The opportunity zone expansion adds a new federal subsidy layer on top of state-level tax abatements, cheap rural land, and below-market electricity contracts that already make rural counties attractive to hyperscalers. The combined package gives AI infrastructure developers an unusually rich set of incentives to push compute capacity outside metro areas — and to do so with relatively little public accountability.

Whether that bargain produces the local jobs Congress assumed it would, or simply subsidizes compute expansion that would have happened anyway, will shape the next round of state-level fights over data center permitting, water rights, and grid capacity through the 2026 midterms.