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CT — State Policy Updated January 2026

Connecticut

Data Center Tax Incentive Program Sales and use tax exemptions Property tax exemptions Financial transactions tax exemption DECD agreement required Host municipality fee agreement Air permits for backup generators Siting Council approval for substations

Overview

Connecticut offers a dedicated Data Center Tax Incentive Program that exempts qualifying facilities from sales, use, and property taxes for up to 30 years. Investment thresholds range from $50M in enterprise or opportunity zones to $400M elsewhere. Every project must negotiate a fee agreement with its host municipality before breaking ground.[1][2]

Incentives

Data Center Tax Exemption Program

Connecticut’s program exempts qualified data centers from three categories of state and local taxes.[1]

  • Sales and use tax exemption covers data center equipment and certain related services under Chapter 219 of the Connecticut General Statutes.
  • Property tax exemption applies to real property, buildings, structures, and enterprise information technology equipment at qualified data centers under Chapter 203.
  • Financial transactions tax exemption applies only to higher-tier projects that meet the elevated investment thresholds, shielding them from any state tax on trades of financial products.

Investment Thresholds

The program uses a two-tier structure based on location and total capital committed.[1][2]

  • Projects in an enterprise zone or federal opportunity zone must invest at least $50M within five years of the agreement’s effective date.
  • Projects outside designated zones must invest at least $200M within five years.
  • Standard agreements run for 20 years.
  • Agreements extend to 30 years if a project invests $200M or more in an enterprise/opportunity zone, or $400M or more elsewhere.

Annual Administration Fee

Qualified data centers pay an annual fee of up to $50,000 during the five-year qualifying period to support the Office of Data Infrastructure Administration and Security.[1]

Requirements and Conditions

DECD Agreement

Every data center must sign an agreement with the Connecticut Department of Economic and Community Development (DECD) to access the tax exemptions. The statute authorizes penalties and interest if the project fails to meet the agreement terms or eligibility requirements.[1]

Host Municipality Fee Agreement

State law requires the developer or owner to negotiate a fee agreement with the host municipality before beginning construction, rehabilitation, renovation, or repair of a facility that will become a qualified data center.[1][2] This ensures towns receive some revenue in lieu of standard property tax collections.

Air Permits for Backup Generators

The Department of Energy and Environmental Protection (DEEP) regulates backup generators and emergency engines under RCSA Section 22a-174-42.[3]

  • Emergency engines or distributed generators with potential emissions of 15 tons per year or more must comply with Section 42/3b/3c emission limits or obtain an individual permit under Section 3a.
  • Operating limits include fuel sulfur requirements and hours-of-operation caps (for example, 300 hours per year for emergency engines under Section 3b).

Electric Infrastructure Approvals

Data centers that require new electric substations or switchyards must obtain a Certificate of Environmental Compatibility and Public Need from the Connecticut Siting Council.[4]

  • Applicants must conduct municipal consultation at least 60 days before filing a certificate application.

What to Watch

  • Proposed S.B. 79 (2024) would eliminate the Chapter 203 and Chapter 219 tax exemptions for qualified data centers, signaling legislative scrutiny of the incentive program.[5] The bill was referred to the Finance, Revenue and Bonding Committee in February 2024.

Sources

[1] Connecticut General Assembly, “Public Act No. 21-1 — An Act Concerning Incentives for Qualified Data Centers to Locate in the State,” PDF (March 11, 2021), https://www.cga.ct.gov/2021/ACT/PA/PDF/2021PA-00001-R00HB-06514-PA.PDF (accessed January 8, 2026).

[2] Connecticut Department of Economic and Community Development, “Office of Data Infrastructure Administration and Security — About,” https://portal.ct.gov/decd/content/business-development/data-infrastructure-administration-and-security/office-of-data-infrastructure-administration-and-security/about (accessed January 8, 2026).

[3] Connecticut Department of Energy and Environmental Protection, “Air Emissions — Distributed Generators and Emergency Engines (Fact Sheet),” https://portal.ct.gov/deep/permits-and-licenses/factsheets-air/air-emissions---distributed-generators-and-emergency-engines-fact-sheet (accessed January 8, 2026).

[4] Connecticut Siting Council, “Application Guide for Electric Substation and Switchyard Facilities” (October 2024), PDF, https://portal.ct.gov/-/media/csc/guides/2024/elec-sub-application-guide-regsversion_a.pdf (accessed January 8, 2026).

[5] Connecticut General Assembly, “Proposed S.B. 79 — An Act Eliminating the Tax Exemptions for Qualified Data Centers” (2024 bill PDF; referred to Finance, Revenue and Bonding Committee, Feb. 14, 2024), https://www.cga.ct.gov/2024/cbs/S/pdf/SB-0079.pdf (accessed January 8, 2026).