NC bill targets more scrutiny, fewer tax incentives for data centers

Data centers operating in North Carolina would face heightened regulations - as well as reduced or no state and local incentives - as part of a House Democratic-sponsored bill filed April 27.

House Bill 1063, titled "Ratepayer and Resource Protection Act," has Guilford County Reps. Tracy Clark and Amanda Cook among its four primary and 14 co-sponsors.

The bill addresses several concerns expressed by Democratic Gov. Josh Stein on Jan. 12 in which he "reaffirmed his commitment to keeping electricity costs down" in the state. "That means making sure data centers pay their fair share for the electricity they require to be generated."

Clark said her support of the bill is based on aiding Guilford residents "who are overly burdened by increasing utility bills, made worse by Republicans overriding Gov Stein's veto this past summer on SB266 that emboldened Duke Energy to further offload their costs to ratepayers."

"Statewide surveys show that majority of North Carolinians do not support data center developments, and I will always support their wishes and prioritize the beauty and nature of my district."

The bill would be effective July 1 if it is signed into law.

However, the chances of support for HB1063 among House Republicans appears slim given that bipartisan House Bill 1002, with Rep. Pricey Harrison, D-Guilford, as primary sponsor, was filed in April 2025 with similar language, but was not heard in any House committee.

"The data center issue is likely to attract some attention during this year's legislative debates, but the sponsor list suggests this is not a bill that is likely to move," said Mitch Kokai, senior policy analyst with conservative think tank John Locke Foundation.

"Had Rep. (Lindsey) Prather worked with Republican colleagues on a bill with bipartisan appeal, the measure might have a chance."

Data centers are at the forefront of an artificial-intelligence boom in the U.S. because they help meet the ever-expanding need for information driven by industry sectors ranging from banking, energy and search engines to healthcare, retail and manufacturing.

For opponents, data centers are a drain on the electric grid because they operate thousands of servers, processors and storage drives that run continuously.

There's also weighing the pledges of significant tax revenue and hundreds of full-time jobs from the data centers versus the strain they can put on the electric grid and water systems, as well as residential energy bills.

The sponsors of HB1063 include as part of their reasoning that "the rapid growth of large-scale data centers imposed unusually large and concentrated demands on electric generation, transmission, distribution and water infrastructure."

"Existing economic development incentive programs were not designed to subsidize facilities whose operations require outsized public investments in energy and water infrastructure without proportionate public benefit."

The sponsors say HB1063 will serve "to protect North Carolinians from rising utility bills and ensuring affordability by preventing cost-shifting, protecting taxpayers and ensuring that data centers bear the full cost of the energy, water and infrastructure required to support their operations."

The bill defines large data centers as having a projected peak electricity demand of at least 40 megawatts and projected annual water consumption in excess of 1 billion liters.

Data center developers would be required to provide a preconstruction disclosure statement that includes projections of peak electricity demand, annual electricity consumption, annual water consumption, and detailed description of cooling technologies and on-site clean-energy sourcing apparatus.

Large data centers would be required to offset at least 25% of its projected peak electricity demand with clean-energy sources.

Data centers would be required pay the full cost of purchasing electricity, water or other utility services, along with incremental costs to the public utility for infrastructure construction.

Meanwhile, "other members of the using and consuming public will be held harmless and protected from bearing any increased costs as a result of providing electric, water and sewer services to the large data center."

The state Utilities Commission would be allowed to set tiered rate schedules, but only if the data center end users "are responsible for the entire costs of any capital investments or incremental operating expenses."

Large data centers could be required to agree to a special high-capacity rate.

Local governments would be allowed to exercise local zoning and land use authorities.

Large data centers would be required to use a closed-loop or reclaimed water system for cooling purposes "to the maximum extent practicable." An evaporating cooling system would not be permitted.

In this case of the proposed data centers in Walnut Cove and Rural Hall, the separate developers said a closed-loop water system would be used that would require an original fill-up and occasional replenishing.

The bill would prevent state and local governments from providing infrastructure grants or other incentives "funded directly or indirectly by utility ratepayers."

Local governments would be prohibited from providing tax incentives, subsidies or financial assistance, including property tax abatements, deferrals, rebates, grants or repayments in lieu of taxes.

The bill also would repeal lucrative sales tax exemptions for data centers, as well as exclude data centers from state economic-incentive grants.

Proponents of data centers say the sales tax exemptions and state incentives are a major reason why North Carolina has gained major projects from Apple, Google, Meta, Microsoft and other data center end users.

A proposed multi-billion dollar data center in Walnut Cove has been put on hold after the Stokes County Board of Commissioners voted April 13 to void its rezoning approval for the controversial project.

However, developer Engineered Land Solutions of Charlotte confirmed plans to resubmit its application.

Commissioners voted 3-2 on Jan. 12 to approve two rezoning requests needed to allow for a data center use on the planned 1,000-acre site.

Plans for the data center, nicknamed "Project Delta" were unveiled in November that encompass up to 5 million square feet of space.

Drew Nations, president of Engineered, claimed during the public hearing that the data center could generate between $20 million and $40 million in annual property taxes and between 250 and 500 jobs.

Opponents to the Stokes data center question the validity and reality of either economic projection since data centers tend to have between 25 and 50 employees.

Meanwhile, bare-bones plans for a proposed 99-acre, four-building data center in Rural Hall have been submitted to the City/County Planning Board, according to a rezoning application on the board's website.

The application for a planned $3 billion data center was submitted by The Drox Group LLC of Charlotte, which had its developer provide an overview presentation March 30 to local residents, most of whom expressed opposition to the proposal.

Developer Michael Foess said at the meeting it has requested to postpone the planned April 9 consideration of Project Iron Spur.

As to potential benefits, Foess said the Drox Group, the owners and developers, is expected to invest some $3 billion. He said Forsyth County could eventually rake in $30 million to $60 million in property tax revenue.

Foess acknowledged what opponents call "known unknowns" regarding the long-term effects on human health and the natural environment.

"The site plan will be revised," he said more than once.

North Carolinians - at least according to the latest Carolina Journal Poll - want existing or proposed data centers to rely on their own energy supply source.

The poll asked 600 likely voters on March 22-23 if they support a policy that would require data centers to provide for their own energy generation.

More than 78% said yes, including 60% who strongly agree with establishing such a requirement. Meanwhile, just 9.9% said they would oppose such a policy.

The Elon University Poll released in April found a sizable not-in-my-backyard sentiment among North Carolinians when it comes to building large data centers.

Poll officials asked 800 adults between March 13 and March 20 if they would oppose or support construction of a large data center in their local community.

About 44% of participants said they would oppose, while 24% said they would support and 32% were unsure.

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This story was originally published May 2, 2026 at 8:49 PM.