Lombardo doubles down on data centers, offers trimmed tax breaks, ‘commitments’ to wary public

Gov. Joe Lombardo in a new executive order is making clear his eagerness to welcome more AI data centers into the state, calling them “the means by which Nevada will meet an unprecedented challenge and realize an unprecedented opportunity, one of the most significant for economic growth and fiscal diversification this State has seen in a generation.”

The Republican governor on Friday is expected to sign an executive order to establish  data center development standards in Nevada.

The executive order, which was provided to media outlets in advance, reduces the amount of sales and use tax data centers are eligible to have abated. It does not eliminate the tax breaks entirely, as some are calling for.

The executive order also requires data centers seeking tax abatements to sign a “community support commitment” intended to ensure that regular and emergency water and power costs are borne solely by the data centers and not by ratepayers. Standards for those commitments must be set by the Governor’s Office of Economic Development by Nov. 6, three days after Election Day.

Lombardo’s executive order comes just days after Axios reported that a Trump pollster warned GOP candidates that “unqualified support for building more AI data centers is a losing position” and they should avoid using the phrase “build more data centers.”

Attorney General Aaron Ford, the Democrat hoping to make Lombardo a one-term governor, has promised to pause data center tax abatements. Ford has called Lombardo and President Trump “data centers’ biggest cheerleaders” and pointed to the $240 million in data center tax breaks handed out during Lombardo’s time in office so far.

Lombardo’s campaign countered that by pointing out Ford helped champion the 2015 legislation to establish the tax abatements for data centers. A PAC affiliated with the Clark County Education Association, which has endorsed Lombardo, attacks Ford on the same grounds.

The 2015 legislation passed with wide bipartisan support when Republicans controlled both houses of the Legislature, and was signed by Republican Gov. Brian Sandoval. Ford and others have emphasized that the conversation surrounding data centers and their projected future utility needs were markedly different during those conversations more than a decade ago.

Nevada Democratic state Sen. Dina Neal, who like Ford has recently come under attack from the CCEA, has noted that when data center tax abatements were being passed in 2015, CCEA itself did not object.

Communities across Nevada have pushed back against plans for data centers. Boulder City is currently fighting an attempt to build one on nearby federal land. Nye County outright banned the development of them. Several state lawmakers have expressed an openness to ending all tax abatements to the industry.

On the opposite end, CCEA earlier this month called for the state to bargain with data centers. The union said its priority was to end the abatement of the local schools support tax, which is a portion of the state’s sales tax.

That proposal aligns with what Lombardo’s executive order does. Currently, data centers can get most of their sales tax abated and pay a reduced 2% sales tax rate. The executive order exempts the local schools support tax from abatements, effectively making the sales tax rate data centers pay 4.6%.

Sales tax for everyone else in Nevada ranges from 7.1% to 8.375%, depending on the county.

Data centers can also get 75% of their personal property tax abated.

In a statement released through the the governor’s office, the Data Center Coalition thanked the governor “for his leadership on this issue and for his willingness to engage directly with all stakeholders as Nevada works through the complex issues associated with data center development.”

The self-described “voice of the data center industry,” the coalition’s members include most of the largest players in data centers and AI, including Google, Microsoft, Meta, Anthropic, and Open AI, as well as Nevada data center giant Switch.

Lombardo’s executive order removing some of the data center industry’s tax abatements would apply only to new data centers and not the tax breaks at existing facilities which have cost the state nearly $340 million in lost tax revenue over fiscal years 2021-2024.