NC budget framework would roll back data centers' tax exemption on electricity purchases

North Carolina legislative leaders, including Speaker of the House Destin Hall and Senate leader Phil Berger, have agreed to a budget framework that would eliminate the sales and use tax exemption for electricity purchased by data centers. This change is projected to generate an additional $20 million in annual tax revenue for the state, according to estimates from the N.C. Department of Commerce. The move is part of an ongoing conversation among state officials, including Democratic Governor Josh Stein, to re-evaluate the extensive tax incentives provided to data centers. While the electricity exemption is the only one targeted in the current budget agreement, it does not affect other significant exemptions data centers receive for construction materials, servers, software, and cooling equipment, provided they meet investment and wage standards. Both Hall and Berger have expressed interest in reviewing the broader landscape of data center tax exemptions, acknowledging a shift in how states approach attracting the industry. Berger noted that the electricity rollback was "what we were able to agree to" in the current budget discussions. Industry officials argue that these exemptions are crucial for siting decisions and encourage quicker equipment upgrades. Commerce officials estimate that the value of all exemptions could significantly increase if more data center projects are built, with construction material exemptions alone potentially reaching $1.5 billion to $2.3 billion. The legislative leaders indicated that further discussions and potential actions on data center tax policies are likely during the upcoming short session, with a bipartisan bill already introduced in the N.C. House seeking a complete repeal of the exemptions.