Colorado could offer tax breaks to data center developers that pledge to power their facilities with renewable energy.

A new bill proposed in the state’s House of Representatives would offer a 20-year, 100 percent sales and use tax exemption for qualifying data centers.

The bill would see a new body, the Colorado Data Center Development Authority, set up to manage proposals for data center projects. Utility companies will be asked to show that the power demands of new data centers “will not cause unreasonable cost impacts” for Colorado residents.

In the event that power companies need to provide new capacity for data centers, the legislation specifies that 75 percent of it must come from renewable sources. This must rise to 100 percent by 2040, the bill adds.

The bill was introduced in the Colorado House last week and builds on legislation first proposed last year, which was withdrawn following opposition from environmental campaigners. Sponsors include the House Majority Leader, Monica Duran, a Democrat.

Colorado is not currently a major data center market, though companies including DataBank, Flexential, Novva, QTS, CoreSite, IPI, and Verizon all operate in the state. It is also home to Crusoe, the AI cloud and data center company involved in major projects, including OpenAI’s Stargate.

Many other states offer a sales tax exemption to data centers, and by following suit, Colorado hopes to attract new business.

“Despite having a strong technology ecosystem, despite having a strong workforce here in Colorado, available power, available land — the state is not yet a strong data center market,” said Dan Diorio, vice president of state policy for industry group the Data Center Coalition, in comments reported by Colorado Newsline.

However, conservation and community groups, led by the Natural Resources Defense Council, condemned the legislation as a “data center handout bill.”

“Across the country, we are seeing the negative impacts of large data center development without meaningful community and ratepayer protections in place,” said Megan Kemp, state legislative representative with environmental group Earthjustice’s Rocky Mountain Office. “Colorado has the opportunity to lead in ensuring that data centers develop without harm to our residents. Now is the time to advance legislation that truly puts Coloradans’ health, well-being, and wallets first.”