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Senator Ron Wyden's white paper proposes a new federal 'Data Center Public Investment excise tax' at a rate in the low single-digits on data center development. Wyden also calls for repealing existing tax breaks that 40 states currently provide to data center developers, many of which come in the form of sales tax exemptions on servers and equipment.
Wyden said approximately $700 billion in data centers are currently under development nationwide. Wyden also said data center construction has quadrupled nationwide over four years, and McKinsey estimates the AI industry will pour $7 trillion into infrastructure by 2030.
The libertarian Cato Institute argued the proposed tax could drive data center tax rates over 100% and that taxing revenue rather than business activities could penalize the least profitable data centers. Cato's analysis said such a tax could end new data center development and risk stripping the U.S. of its status as the global leader in AI and cloud-based technologies.
Ohio has paused tax incentives for data center facilities after realizing the state is losing billions in foregone taxes, according to the source text.
The IRS disallowed the two conservation easement deductions based on potential mining activity, according to court filings reported by Law360. The Alabama developer argued the IRS failed to adequately explain why potential mining activity was sufficient grounds to reject the combined $78 million in deductions.
Court documents associated with the dispute include two petitions identified as Petition (Hollow Oak) and Petition (Singh Moore), according to Law360. The two easements together represent a combined $78 million in disallowed deductions.
The Alabama developer told the court the IRS was wrong to disallow the two conservation easement deductions without adequately explaining why potential mining activity justified the disallowance, according to Law360's September 3, 2026 report.
The two conservation easement deductions at issue have a combined value of $78 million, according to Law360. The IRS disallowed both deductions, and the Alabama real estate developer is seeking to have them restored through a legal challenge.
Each 1031 exchange carries the original cost basis forward into the replacement property, deferring gain rather than erasing it. If the owner holds the final property until death, Internal Revenue Code Section 1014 gives heirs a stepped-up basis equal to fair market value on the date of death, permanently eliminating all deferred gain from every prior exchange for income tax purposes, according to the source.
The replacement property must be formally identified within 45 calendar days of closing the sale of the relinquished property, and the purchase of the replacement must close within 180 calendar days of that same original sale closing. Both clocks run concurrently, include weekends and holidays, and missing either deadline collapses the exchange and makes the full accumulated gain taxable, according to the source.
An ordinary cash sale triggers all accumulated deferred gains in a single tax year. On the source's example of a $2 million property with a basis tied to a 1994 purchase, selling rather than exchanging exposes up to $1.85 million in gain to a 20% federal capital gains rate, a 3.8% net investment income tax, and a 25% unrecaptured depreciation recapture tax, according to the source.
Yes. Unrecaptured Section 1250 gain, which represents depreciation recapture and is taxed at a federal rate of up to 25% on an ordinary sale, is deferred through each 1031 exchange along with the capital gain. The stepped-up basis under Section 1014 wipes both the deferred capital gain and the depreciation recapture away at death, according to the source.
Since the Tax Cuts and Jobs Act took effect on January 1, 2018, only real property qualifies for 1031 exchanges. Both the relinquished and replacement properties must be held for investment or business use. A primary residence does not qualify, nor does a property bought primarily to resell. Exchanges of equipment, artwork, or vehicles are no longer permitted, according to the source.
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