Administration pauses applications for sales tax exemptions until new statewide guardrails are in place
BOSTON — Massachusetts Governor Maura Healey has paused Massachusetts’ data center sales tax incentive program and unveiled a comprehensive framework aimed at ensuring future data center development does not increase energy costs, strain infrastructure, or negatively impact public health and the environment.
The administration announced Thursday that it will temporarily stop accepting applications for the Massachusetts Qualified Data Center Sales and Use Tax Exemption until stronger protections are established for residents, businesses and host communities.
The tax incentive, created by the Legislature in 2024 and launched last month, provides sales and use tax exemptions for qualifying data center construction and operating expenses.
“I am halting any tax incentives for data centers until we have strong protections in place for our residents and communities against higher gas and electric bills,” Healey said in a statement. “Data centers can support innovation and economic growth, but if developers want to build in Massachusetts, they need to first demonstrate that they can do so without driving up costs or harming our communities.”
Alongside the pause, the Healey administration released what it described as one of the nation’s most comprehensive frameworks for responsible data center development. The guidelines establish expectations for future projects in areas including energy use, water consumption, environmental protection, labor standards and community engagement.
Among the framework’s key provisions is a “Bring Your Own Clean Energy” approach, requiring new data centers to develop or directly procure the clean energy resources needed to power their operations. Developers would also be expected to cover the full cost of any new energy infrastructure required for their projects, rather than passing those costs on to existing utility customers.
The framework also calls for data centers to be built only in areas with sufficient water and wastewater capacity, while encouraging water-efficient cooling systems and wastewater reuse. During drought conditions, existing water users would receive priority over new data center operations.
Additional recommendations focus on minimizing air emissions and noise, reducing reliance on diesel backup generators, creating high-quality jobs through workforce training and labor agreements, and ensuring meaningful community participation during project planning. Developers receiving public incentives would also be expected to negotiate community benefit agreements and demonstrate how projects will provide economic value to local residents.
Lieutenant Governor Kim Driscoll said developers seeking to build data centers in Massachusetts must work closely with local communities and provide clear assurances that projects will benefit nearby residents.
Energy and Environmental Affairs Secretary Rebecca Tepper said data centers require significant amounts of electricity, grid infrastructure and water, adding that developers “can afford to pay for it.” She said the framework is intended to ensure projects bring their own clean energy, protect natural resources and create quality jobs.
Economic Development Secretary Eric Paley said the state aims to support data center investment while ensuring projects are built at an appropriate scale and in suitable locations.
The framework was developed following months of discussions with environmental organizations, labor unions, municipalities, utilities, community groups, environmental justice advocates, tribal representatives and industry stakeholders.
Several organizations, including the Massachusetts AFL-CIO, the Environmental League of Massachusetts, Clean Water Action, Acadia Center and Alternatives for Community and Environment, praised the administration’s decision to establish stronger standards before additional data center projects move forward.
