NC Lawmakers Target Data Center Tax Breaks as Industry Boom Threatens State Revenue
State lawmakers push to eliminate tax breaks that could cost North Carolina $450 million annually if all proposed data centers are built.
RALEIGH, NORTH CAROLINA — North Carolina lawmakers are moving to overhaul tax incentives for data centers as the industry’s rapid expansion threatens to drain hundreds of millions from state coffers while driving up energy costs for consumers.
The North Carolina Department of Commerce estimates that data centers currently receive about $50 million annually in state sales and use tax exemptions. However, if all proposed data centers in the state are built, that figure would balloon to approximately $450 million each year.
“Now they’ve proliferated everywhere, so I don’t know that there needs to be an incentive to get more of them here,” Speaker Destin Hall (R-Caldwell) told reporters on Thursday. “Big companies like that, they ought to pay the same taxes as any other business.”
Governor Calls for Tax Reform
Democratic Governor Josh Stein has emerged as a leading voice pushing for changes to the current tax structure. Last month, Stein asked the legislature to modify or repeal sales tax exemptions for data centers, citing concerns about rising energy costs for consumers and lost tax revenue.
“We must be clear-eyed about the cost of data centers to ratepayers in terms of higher power bills, and clear about their cost to taxpayers in terms of lost revenue,” Stein said at a North Carolina Energy Policy Task Force meeting in April.
The current tax exemptions cover data center purchases of electricity and equipment. These breaks were originally enacted in 2006 and expanded in 2015 as economic development incentives to attract data center investment to the state.
Bipartisan Legislative Response
Lawmakers from both parties are now working on regulatory measures to address the anticipated data center boom. House Bill 1063, known as the “Ratepayer and Resource Protection Act,” has gained support from Democratic representatives including Leader Robert Reives (D-Chatham).
The legislation directly follows Stein’s request to repeal existing sales tax exemptions for data centers. The bill represents a significant shift in state policy toward an industry that has rapidly expanded across North Carolina in recent years.
Data centers operate energy-intensive facilities, running servers around the clock to power continuous streams of computer computations. This constant energy demand has raised concerns among state officials about the impact on both the electrical grid and consumer utility bills.
Economic Development Versus Tax Revenue
The debate highlights a tension between economic development goals and fiscal responsibility. While data centers bring investment and some jobs to communities, critics argue the tax incentives no longer serve their original purpose given the industry’s current growth trajectory.
The proposed changes come as North Carolina faces increasing demand for data center infrastructure driven by cloud computing, artificial intelligence applications, and digital services. State officials must balance attracting these investments while ensuring adequate tax revenue and protecting consumers from rising energy costs.
The legislation is currently under consideration by the North Carolina General Assembly, with lawmakers from both parties expressing interest in reforming the current incentive structure for data centers operating in the state.
