Homestead, Florida, a majority-minority city of 86,000 people in the suburbs of Miami-Dade County, has an above average poverty rate and below median household income. The federal government has designated an opportunity zone there, where developers can get a tax break if they invest and spur economic growth.
That incentive is attracting data centers.
Alfred Farrington II, a Homestead native, wants to build a 10,000-square-foot micro data center in the city and 99 more around the country in the next ten years, all in opportunity zones. He’s planning on proposing a facility with a co-working space and electric vehicle charging and offering space to major companies like Oracle for server racks.
His pitch: This could give cities business prospects they’ve been searching for through the opportunity zone program, which has been largely dominated by housing development. The city of Homestead did not respond to a request for comment on whether it would be interested in such a facility.
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“A lot of these opportunity zone cities, they’re still doing the affordable housing and things like that, but they want something else,” Farrington said. “They are looking for things that are going to bring jobs to their city, things that are going to put their city in the forefront of having economic success.”
Across the country, data centers are going up in low-income communities. Fourteen percent of data centers are located within opportunity zones, according to a report from the nonprofit National Community Reinvestment Coalition. Among approved, permitted and under-construction data center projects, 17.3% are in the tax-incentivized zones.
In total, 93 proposed data centers and 78 operating data centers are located in an opportunity zone, according to the nonprofit environmental research organization FracTracker Alliance.
Data center operators can use opportunity zones to cut down their tax bills like any other business, making the program a potential boon for investors seeking tax benefits to support the industry’s rapid build-out.
But political fault lines are emerging over whether data center projects fulfill the purpose of the tax break as investing in opportunity zones becomes more attractive than ever for data center companies.
“Job creation really needs to be a primary goal of our economic development strategies going forward,” said Matt Gardner, a senior fellow at the liberal-leaning Institute on Taxation and Economic Policy. “This just seems like pretty clearly an abuse of the intention of the opportunity zone program. It’s creating opportunities for AI bots, not humans.”
As Americans become increasingly concerned about artificial intelligence and data centers’ strain on resources, Republicans and Democrats are growing more aligned on restricting public benefits for the industry. Restricting data centers’ ability to leverage programs like opportunity zone tax incentives could be one policy area lawmakers pursue.
Sen. Josh Hawley (R-Missouri) in September introduced the No Tax Breaks for Data Centers Act to exclude all data centers from opportunity zone tax benefits. An August bill from Sen. Ron Wyden (D-Oregon) would prohibit opportunity zone funds from investing in data centers. Sen. Bernie Moreno (R-Ohio) unveiled a bill last month to ban federal tax breaks for data centers and enforce a 100% tax on any state and local incentives.
It is unclear exactly how many data center companies currently use opportunity zone benefits, which they report on their annual federal tax forms. The companies are not required to inform local governments whether they are using the federal tax incentive. Hyperscale data center operators like Amazon and Microsoft told The Washington Sun that they do not currently use opportunity zone benefits.
But investors in rural opportunity zones can reap even greater tax benefits starting in 2027, after last year’s budget reconciliation law made opportunity zones a permanent feature of the tax code.
And the data center industry wants to keep the option open.
“We have seen developers utilize [opportunity zones] as well, and I think that’s consistent with ultimately the goals of the program,” said Dan Diorio, the executive vice president for state policy at the Data Center Coalition. “These are large capital investments; they come with significant jobs, significant tax revenue. Ultimately, what we see is that data centers are a significant economic development opportunity.”
The program defers federal taxes on capital gains, such as those from the sale of stocks, in exchange for reinvesting them into an opportunity zone fund that backs local economic development projects. After five years in the fund, investors do not have to pay capital gains tax on 10% of the initial sum. For investors in rural funds, that number is 30%.
When Republicans passed their tax law, they acknowledged that the benefits could go to data centers. House Ways and Means Chair Jason Smith said in August 2025 that those new terms may “significantly lower barriers” for large-scale development in rural areas, like hyperscalers.
“The economic case for building data centers in designated rural opportunity zones becomes far more compelling,” Smith said then.
President Donald Trump and his administration have taken an all-in approach to data center development, potentially complicating Republicans’ willingness to buck data centers’ interests.
But the politics around data centers has changed since Republicans passed their budget bill last year and midterm voters forcefully rejected data center build-outs.
“This particular thing is happening right now that ‘We, as members of Congress, don’t view [data centers] as a legitimate form of economic development that we want to encourage,’” Gardner said. “One likes to think that if Congress could agree on any element of tax policy postelection, that might be [it].”
Farrington, too, said he’s felt the political change.
“You say ‘micro data center,’ and sometimes [local officials] only hear the ‘data center’ part,” he said.
The opportunity zone program aims to create jobs in low-income census tracts with few employers. Data centers create a limited number of jobs — including many temporary construction roles — and employ few people long term. However, data centers can lead to new jobs in the industries that support them, like transportation, warehousing, technical services and real estate, according to an MIT Center for Real Estate study. Counties with data centers built before 2023 added an average of roughly 1,000 to 1,300 nonconstruction jobs three to five years after the area’s first data center came online.
Data center companies already use a slew of other tax provisions to slash their tax bills. Hyperscalers have saved billions of dollars using the bonus depreciation tax break, which under the budget reconciliation law allows them to deduct 100% of certain equipment costs immediately rather than over a period of years. Meta has come under fire for framing its data centers as a risky experiment in order to use the research and development tax break.
“The idea that the build-out of any one facility doesn’t create a lot of jobs that are permanent just glides past the fact that, just like housing or other types of construction, a vibrant industry of construction creates a lot of jobs, and it’s not important for that job to be attached to one particular facility,” said John Lettieri, the president and CEO of the pro-opportunity zone Economic Innovation Group.
Some communities with opportunity zones are rejecting data centers outright. Arizona’s Pinal County Board of Supervisors voted down an expansive data center project planned for the area’s opportunity zones. The developer, Vermaland, originally drew up plans for a 3,300-acre campus with 59 buildings and two power plants, according to local reports.
Vermaland did not respond to a request for comment on whether the company intended to use opportunity zone tax benefits.
The Treasury Department last week designated every nominated census tract an opportunity zone, totaling more than 6,500 across the country. Those zones will be eligible for investment beginning in January 2027.
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