North Carolina has made significant changes to its tax incentives for data centers, notably repealing the sales and use tax exemption for electricity purchased by these facilities. This decision, part of the state’s 2026 budget signed by Gov. Josh Stein, also maintains other incentives for capital investments and qualifying equipment.
This policy shift comes at a time when the demand for AI infrastructure is growing rapidly, prompting lawmakers to rethink electricity consumption subsidies. The move is expected to increase General Fund revenue by $21.4 million in the fiscal year 2026-27, a figure projected to rise to $28.6 million annually by 2030-31. The budget now emphasizes power availability and deliverability, which are becoming increasingly crucial metrics for data center operators as they evaluate new settings for operations.
Industry experts caution that while the repeal alters the financial dynamics for large-scale AI data centers, it shouldn’t deter location-based decisions. Factors such as reliable power delivery, infrastructure capabilities, and operational cost stability remain paramount. The tax adjustment signals a broader trend: states may be less inclined to subsidize energy consumption indefinitely but still continue to foster capital investment and local economic growth.
North Carolina is also debating further regulations around large-load customer utility agreements through Senate Bill 730, which could impose additional requirements for data center development. The state appears to be refining its strategy for attracting AI infrastructure by separating the incentives for construction from those that support ongoing energy costs, setting a potential precedent for other states managing similar challenges.
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