Data centers in NC don't pay taxes on their supplies or their electricity. Should that change?

North Carolina Governor Josh Stein and a growing chorus of advocates are calling for a reevaluation or outright repeal of the state's long-standing sales tax exemption for data centers. Enacted in 2006 and modified in 2010 and 2015, the incentive allows data centers investing at least $75 million to avoid paying sales and use taxes on their construction costs, equipment, and electricity. While initially intended to attract major tech companies, recent estimates from the N.C. Department of Commerce project the annual tax revenue loss from the exemption to balloon from $45-57 million to $450 million if all planned data centers are built, in addition to billions in construction-related exemptions. Governor Stein publicly urged the legislature to reexamine these incentives, questioning their continued value to North Carolinians, especially given that the state receives 4.75% of the sales tax while local governments receive an additional 2.25%. Senator Phil Berger, R-Rockingham, a legislative leader, echoed this sentiment, suggesting the original purpose of incentivizing data center location may no longer be necessary. Industry groups, such as the Data Center Coalition represented by Dan Diorio, argue the exemption is crucial for North Carolina's competitiveness, promoting continuous reinvestment in energy-efficient equipment and supporting technician jobs. Critics, including Kasia Tarczynska of the watchdog group Good Jobs First, highlight a "profound lack of transparency" regarding the true cost of these tax breaks, noting that North Carolina is one of only 12 states that doesn't report this impact. Tarczynska contends that data centers are primarily driven by access to cheap power, water, land, and minimal regulation, rather than subsidies. She points to a Georgia audit that found 70% of data centers would have located there without tax exemptions. In response to these concerns, Governor Stein's State Energy Task Force is studying the issue, considering recommendations for a full repeal or modifications that could include sustainability requirements, reporting on energy usage, or mandates for carbon-free energy. Rep. Pricey Harrison, D-Guilford, plans to introduce a bill to repeal the exemption, arguing that the state should not subsidize an industry that comes with various concerns and is already eager to locate in the state.