States Reconsider Data Center Tax Incentives
Bills in 28 states seek to scale back or modify existing incentive programs.
April 20, 2026 – Thirty-eight states offer tax incentives to data centers, but lawmakers are increasingly reconsidering those subsidies as costs rise and energy demand surges.
At least nine states have already considered repealing data center incentives this year, according to a new report from the National Conference of State Legislatures, while lawmakers in 28 states have introduced bills to scale back or modify existing programs.
Connecticut, Georgia and Washington have proposed “off-ramps” that would phase out incentives for future projects. Other states, including Colorado and New Hampshire, have explored new incentives, but with more stringent energy and labor requirements, though none have advanced this year.
Data centers, large facilities that store and process digital information, have expanded rapidly across the country, with more than 4,000 now operating nationwide and a heavy concentration in Virginia.
States have long used tax breaks to attract those projects, which require significant upfront investment and can bring large amounts of capital into local economies. But critics say those incentives often fail to deliver the promised local benefits.
Advocates argued Wednesday that developers tend to “overstate benefits,” noting that tax abatements can significantly reduce the actual revenue communities receive from data center projects.
At least 10 states forgo more than $100 million annually in data center tax incentives, with Texas and Virginia each losing up to $1 billion per year.
As the fiscal cost mounts, lawmakers are increasingly responding by tightening incentive programs rather than eliminating them outright, often adding requirements tied to energy use, wages or investment levels.
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