Momentum Around Data Center Legislation Grows

In June, Kansas became the 37th state to offer tax incentives to data centers, underscoring how the massive warehouse-like facilities that support the internet have become a priority for states and state legislators across the country.

Indeed, the National Conference of State Legislators predicts that a litany of issues surrounding data centers will be big in 2026, from tax incentives and prevailing wage requirements to energy usage and nondisclosure agreements.

Meanwhile, data centers have been in the news all over the nation.

Maryland Matters reported that more data center regulations could be coming to the Terrapin State. Texas is projected to become the top market for data centers in just two years, said The Texas Tribune.

The Georgia Recorder wrote about a wave of bipartisan bills concerning data centers introduced in the Peach State after an electric utility asked to expand its capacity to meet rising demand. And The Florida Phoenix described a bill to regulate data centers in the Sunshine State.

The Wisconsin Examiner reported that the lower house of the Badger State Legislature approved data center regulations. And The Daily Yonder, also in Wisconsin, said rural residents have organized opposition to data centers.

Colorado Newsline wrote about a Centennial State bill to provide tax breaks to data centers. The New York Times compared President Trump’s embrace of data centers with Alabama residents’ opposition to them.

“States are campaigning to attract the data centers AI companies will need, and bracing for impacts on energy grids and the environment,” said Governing magazine, while asking, “Which States Are Leading the Data Center Race?” late last year.

“Data centers will continue to be a big policy issue moving forward in 2026,” said Alex McWard, NCSL senior policy specialist for environment, energy & transportation, on a recent podcast. “However, the direction states will move could vary quite a bit.”

Legislators Not Just Looking at Tax Incentives

McWard said on the NCSL podcast that, for a while, state legislators have been focused on attracting data centers. And that sort of activity will continue, he said.

Indeed, state lawmakers in West Virginia were so intent on incentivizing data center development there last year that they passed a bill (HB 2014) that, among other things, prohibited local governments from imposing noise, lighting, land use and other restrictions on such facilities.

“Data centers have significantly, or can significantly, benefit the local economies through job creation, attracting investment,” said Del. Clay Riley (R), one of the measure’s sponsors, as The Associated Press reported. “This bill, as it sits, could facilitate that development and boost economic growth.”

But McWard said concerns about data centers’ energy and water usage are also now “leading to some pushback.”

He said a “great example” of that was in Virginia’s election this past November, in which “data center development was one of the primary points of contention.” He noted that “Virginia is a unique example, as it has the highest rate, highest concentration of data centers in the country. But regardless of whether a state is looking to increase data center development or not, they’re likely going to be paying greater attention to the energy usage of their data centers.”

In regard to that particular issue, McWard said what we’re likely to see is states continuing to “consider specific utility rate schedules for data centers and other large loads.”

“The price of electricity is the primary concern for most legislators’ constituents,” he said. “So, regardless of state energy or economics, not wanting data centers to ramp up electricity rates is something I think most legislators will agree on.”

According to State Net® data, at least 100 bills dealing substantially with data centers have been introduced in 25 states since the beginning of November. The bills cover the range of issues predicted by NCSL, namely tax incentives for data centers, efforts to rein in their energy and water usage, and attempts to conceal their activities behind NDAs.

The number of bills introduced in some states suggests data centers may be of particular concern there.

In Illinois, for example, 10 such bills have been introduced. In both Arizona and New Jersey, 11. In Tennessee, 13. And in Virginia, 32.

Data Center Bills Introduced in At Least Half of States

Over 170 bills dealing substantially with data centers have been introduced in 31 states this year, according to the LexisNexis® State Net® legislative tracking system. More than 30 of those bills were introduced in Virginia, which has the highest concentration of data centers in the nation.

Attention to Data Centers May Still Just be Starting

Despite all the legislative and media attention data centers have been drawing lately, we may still be seeing just the beginning of activity on this issue.

With data centers’ growing impact on energy grids — a Bloomberg analysis found wholesale electricity costs rose as much as 267 percent over the last five years near data center hubs — leaders at all levels are taking notice.

U.S. Sens. Richard Blumenthal (D-CT), Chris Van Hollen (D-MD) and Elizabeth Warren (D-MA) said in December they are investigating whether big tech companies like Google, Microsoft, Amazon and Meta are passing along the utility costs of data centers to typical Americans.

“Utility companies have spent billions of dollars updating the electrical grid to accommodate the unprecedented energy demands of AI [artificial intelligence] data centers and appear to recoup the costs by raising residential utility bills,” the senators wrote in letters to several Big Tech companies. “Through these utility price increases, American families bankroll the electricity costs of trillion-dollar tech companies. To add insult to injury for hard-pressed consumers, they are forced to pay higher prices while many data centers receive discounted rates as the utility companies are trying to attract their business. The contracts between data centers and utility companies that underlie these arrangements are almost always confidential, leaving the public in the dark on why their electric bill keeps going up.”

Late last year, we forecast that data centers would be a hot issue for 2026. It looks like the temperature is starting to get cranked up.

—By SNCJ Correspondent BRIAN JOSEPH

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