Intelligence Update
US states rethink tax breaks amid rising scrutiny and costs
Tax incentives are a key factor in determining where large US data center operators build or expand. Over the past 15 years, these incentives have strengthened business cases for many facilities and helped shape the US data center landscape. However, as data centers grow larger, consume more power, and face increased public scrutiny, some policymakers are now seeking to reduce or eliminate these incentives.
For example, in Washington state, a bill signed in early April 2026 will end a sales and use tax exemption for replacement server equipment at existing data centers, effective July 2026. In Virginia — the world's largest data center market — legislators are debating whether to end sales tax exemptions for data centers amid concerns about grid impact, land use and lost tax revenue, with a vote expected in late April 2026. These exemptions reached $1.6 billion in Virginia in 2025, representing a 118% annual increase.
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