Senator Ron Wyden (D-Ore.) has proposed a massive new tax framework targeting the data center boom. As the ranking member of the Senate Finance Committee, Wyden released a discussion draft on October 23, 2026, aimed at forcing the hyperscalers driving the AI and cloud computing expansion to pay for the strain they place on local communities and power grids. According to a recent breakdown by BDO, Wyden's proposal attacks the data center industry on two primary fronts: eliminating existing tax incentives and creating a brand new excise tax. Here are the key takeaways from the legislation: The End of Data Center Tax Breaks Wyden argues that hyperscalers are spending "money hand-over-fist" to build data centers and no longer need special tax code subsidies. The bill would eliminate four major benefits for new data centers (generally defined as 25 MW or larger): 1. No More Bonus Depreciation: Data center assets placed in service after enactment would no longer be eligible for 100% bonus depreciation under IRC § 168(k). 2. R&D Credit Exclusion: The bill clarifies that data center equipment costs do not qualify for the Research and Development tax credit. 3. Opportunity Zone Ban: Qualified Opportunity Zone funds would be prohibited from investing in new data center businesses, as Wyden argues they do not create long-term local employment. 4. REIT Restrictions: Rent collected by data centers would no longer qualify as income for Real Estate Investment Trusts (REITs), unless more than 80% of the REIT's stock is publicly traded. The New "Data Center Public Investment" Excise Tax The legislation proposes a new gross receipts excise tax applied directly to data center services. -This tax is specifically targeted at "hyperscale" data centers, defined by relationships with major players who spend at least $1 billion annually on data center services. -For massive tech companies that build and operate their own data centers for internal use (meaning they have no external "gross receipts" to tax), the bill creates an alternative "cost-plus" imputed tax formula. This formula calculates a tax based on asset depreciation, operating costs, and an assumed 40% profit margin. The revenue generated from this excise tax is intended to directly aid American workers displaced by AI and to help local communities deal with the strain data centers place on housing and the power grid. From https://t.co/gMm8lJEapN, other notable bills taking aim at data centers and AI include: 1. Senate Democrats Mark Warner, D-Va., and Tammy Duckworth, D-Ill., and 28 House Democrats have introduced companion legislation that would deny bonus depreciation to data centers (H.R. 10448 and S. 5054). 2. Sen. Mark Kelly, D-Ariz., has introduced a bill that would impose a digital ad, AI use tax, and AI excess profits tax (S. 5518). 3. Sen. Josh Hawler, R-Mo., has introduced a bill (S. 5418) that would exclude data centers from the definition of qualified opportunity zone businesses. 4. Sen. Bernie Moreno, R-Ohio, has introduced a bill (S. 5689) to make large data centers ineligible for any federal tax credit, incentive, or benefit and impose a 100% federal excise tax on state incentives. While this is currently just a discussion draft from the Democratic staff, it signals a major shift in how Washington views the booming AI infrastructure space. https://t.co/gMm8lJEapN