In a shift in state policy, North Carolina’s bipartisan leadership is reconsidering its tax incentives for data centers, a sector that has rapidly expanded in recent years. Democratic Governor Josh Stein, alongside Republican leaders, is advocating for the repeal of the state’s sales and use tax exemptions that have long benefited data centers.
Speaking to reporters, Hall remarked on the necessity of data centers, stating, “You’ve got to have them to a degree,” but he expressed concerns about the existing policies, noting, “I think some of those policies, though, were implemented when maybe the state was trying to lure more and more of those for economic development purposes. Now, they’ve sort of proliferated everywhere. So I don’t know that there needs to be an incentive to get more of them here.”
The tax exemptions, initially enacted in 2006 and revised in 2010 and 2015, were designed to attract burgeoning data center businesses to North Carolina. Today, the state hosts massive investments from tech giants like Amazon, Apple, Google, and Microsoft, each committing at least $1 billion. Meta has also contributed significantly with a $750 million data center in Forest City and a $6 billion partnership with Corning to manufacture fiber.
Hall emphasized the need for fairness in taxation, stating, “Big companies like that, they ought to pay the same tax as any other business that’s beside of them and make it fair. And so whatever we need to do that, I’m fine with.”
Proposed legislation, House Bill 1213, seeks to eliminate these tax breaks. Sponsored by Reps. Donnie Loftis, R-Gaston; Bill Ward, R-Pasquotank; and Pricey Harrison, D-Guilford, the bill has been sent to the House Finance Committee for consideration.
Current Exemption Criteria
Under current North Carolina law, eligible data centers can avoid paying sales tax on construction materials, cooling equipment, hardware, software, and electricity. Since 2015, 37 data centers have qualified for these incentives.
Eligibility criteria include a minimum investment of $75 million over five years, offering wages above the county average, and providing health insurance to employees.
Governor Stein’s directive to the N.C. Department of Commerce led to an analysis revealing potential uncollected sales tax revenue of $45 to $57 million annually. This figure could soar to $450 million if all planned data centers are realized, with $1.5 to $2.3 billion in potential sales taxes during construction.
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Google data centers photo gallery
Representatives from the Data Center Coalition have previously highlighted the importance of these incentives, suggesting they encourage continuous investment in technology. Dan Diorio, vice president of state policy for the Coalition, noted that the tax exemption allows data centers to upgrade their equipment more frequently, enhancing technological capabilities.
Senate Leader’s Perspective
Senate leader Phil Berger, R-Rockingham, has questioned the ongoing necessity of these incentives, particularly the tax exemption on electricity used by data centers. Berger commented, “The sales tax on electricity at data centers probably ought to be paid by the data centers. I mean, you’ve got to pay sales tax on your bill. They should pay sales tax on their bill.”
Caldwell County, home to a $1.2-billion data center in Lenoir, boasts favorable conditions for data centers, including mild summers and access to fiber infrastructure. However, Hall raised concerns about the environmental impact of data centers, citing their substantial electricity and water usage.
“If you give these incentives and you get more and more of something that maybe we’re getting too much of, it’s probably time to back up on those incentives,” Hall remarked.
