NC has given data centers tax breaks for 20 years. It doesn’t know exactly how much
AI-generated summary reviewed by our newsroom.
- Gov. Stein urges state to reconsider data center sales tax exemptions
- N.C. Commerce Department estimates data center operators benefit $50 million annually
- Stein discussed repealing or sunsetting tax breaks or altering eligibility rules.
North Carolina has not generally used its biggest economic incentive program — called the job development investment grant, or JDIG — to attract new data centers. Among the reasons: These facilities employ relatively few workers compared to manufacturing sites that consume similar amounts of energy.
But over the past 20 years, the state has induced tech companies to build data centers through other tax exemptions on electricity, servers, software, cooling equipment and other machinery. The first tax break for the sector arrived in 2006, when Google encouraged the North Carolina General Assembly to put a provision in the state budget providing sales tax relief for data centers in counties with modest economic growth. Within several years, Google and fellow tech giants Meta and Apple had established a so-called “data center corridor” in former furniture- and textile-industry towns west of Charlotte.
More recently, Microsoft and Amazon have each announced hyperscale data center projects in North Carolina that promise to house rows upon rows of servers. With these facilities, the state would have data centers operated by the No. 2, No. 3, No. 4, No. 5, and No. 9 most valuable companies in the world.
It’s not clear exactly how much money North Carolina incentives have saved data center operators; unlike states like Virginia, Georgia, and Ohio (which require annual reporting), North Carolina doesn’t make these companies share their spending totals beyond one-time, initial estimates.
To qualify for data center incentives, North Carolina operators must invest at least $75 million in their sites, meet county wage standards, and provide health care for full-time employees. The North Carolina Department of Revenue can audit companies to confirm their eligibility.
Using industry reports and public data, the N.C. Department of Commerce estimated data centers statewide currently benefit from around $50 million in tax breaks annually, up from a reported $4 million in 2015. With artificial intelligence fueling a national race for computing power, the commerce department found sales tax breaks would reach $450 million a year if every data center project in the state’s pipeline materializes, plus at least $1.5 billion in tax breaks on equipment purchased during construction.
Stein urges NC to reexamine incentives
The commerce department shared these figures at an April 8 meeting of the Energy Policy Task Force, a 26-member body (including representatives from Amazon and Google) that Democratic Gov. Josh Stein created last summer. At the meeting, Stein recommended the state reconsider its exemptions.
“When this tax break was enacted in 2006 and then expanded again in 2015, we lived in an entirely different world,” he said. “At that time, no one could have anticipated the explosive growth of data centers and how much energy they consumed.”
In an April 6 memo to the task force, Stein’s office detailed options to “repeal” or “modify” the tax breaks. Exemptions could be ended suddenly or sunset overtime, the memo stated. According to Stein’s office, roughly 25 states with data center incentives have set expiration dates for their tax breaks, while North Carolina is among seven states that don’t. The memo also listed efforts in multiple other states to modify or end their tax benefits as many residents fear data centers will raise their utility bills.
North Carolina could also adjust current legislation to ensure operators who receive benefits supply their own electricity. On March 4, President Donald Trump’s White House released a Ratepayer Protection Pledge that asks companies building data centers to voluntarily work out separate rate deals with local utility companies and governments to ensure household bills don’t rise. Last month, seven leading tech companies — Amazon, Microsoft, Meta, Google, Oracle, OpenAI and xAI — signed this pledge.
“Data centers power telehealth appointments, digital classrooms, secure banking systems, air traffic control networks, financial institutions, and the online commerce that American businesses and consumers depend on every day,” Josh Levi, president of the Data Center Coalition, said in a statement on the pledge. “The data center industry is equally committed to being good neighbors, and that includes our ongoing commitment to paying our full energy costs.”
Stein’s memo acknowledged a full repeal could dissuade data center developers from choosing North Carolina. While some communities would cheer, other North Carolina municipalities have welcomed these projects as reliable property tax sources.
Yet the governor himself downplayed the importance of these incentives Wednesday. “Given the trillions of dollars of capital that is flowing freely into data center construction, they simply do not need economic incentives to occur,” he said. “The market is already delivering the incentives.”
