Data center legislation surges as states shift from incentives to oversight

Key Takeaways

The last three years have seen an increase in state legislation governing data centers. Bills have been passed more frequently, in almost all states and by governments of both parties. Increasingly, legislation seeks to restrict, regulate and study the negative effects of data centers, in contrast to the pro-development attitude that characterized legislation in 2024. 

This is true of both Democratic and Republican state legislatures, whose legislation takes similar stances on data centers while lagging behind the turn against these facilities in public opinion. Overall, the legislation focuses on regulating resource use and altering tax structures to incentivize or, sometimes, discourage development. 

NACo tracked 97 state bills that became law between 2024-2026 governing the new class of hyperscale facilities designed for generative AI and cloud computing. 

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Some laws reduce county tax revenue by introducing tax exemptions for data centers while others protect it by suspending existing exemptions. Some limit county authority over land use and public utilities while others expand their authority to foster agreements with data center developers. 

The number of bills passed at the state level regarding data centers increased 323% over the past three years to 55 in 2026 from 29 in 2025 and 13 in 2024. This increase closely follows recent advances in and awareness of AI technology and highlights the attention warranted from counties as data centers expand across the country. Forty states with county governments enacted legislation on data centers from 2024 through 2026. 

State legislation dealing with data centers over this period primarily falls into four policy areas: electricity, tax incentives, water and local government authority. 

Over 78% of these bills involved electricity or tax incentives, with each being the focus of 38 bills. Only seven bills addressed water consumption by data centers, showing less attention or consensus compared to the consumption of electricity. This aligns with public opinion polling showing widespread voter concern over the impact of data centers on their electricity bills and taxes. 

Legislation shows mixed sentiment among both parties 

Out of the 97 bills passed over three years, 27% are “pro-data center,” 63% are “anti-data center” and 10% do not take a position.   

The number of anti-data center laws has increased over time to 24 in 2026, up from 16 in 2025 and one in 2024, while the number of pro-data center laws has slowly decreased to five in 2026 from 10 in 2025 and 11 in 2024. These trends show a turn against data centers by state legislatures, likely driven by increased awareness and growing voter skepticism around the topic. For counties, this may mean a slowdown in the pace of data center construction or increased regulations that may place a greater administrative burden on county governments. 

Electricity and tax incentives 

While no electricity-related bills passed in 2024, 14 passed in 2025 and 24 in 2026, showing an increasing focus on the energy use and electricity costs of data centers. Electricity was the primary focus of data center legislation in 2025 and 2026. 

Although most of the laws around electricity do not explicitly mention counties, some specifically preserve county land use authority, including South Dakota’s SB135 (2026) and Florida’s SB484 (2026). This is a positive trend amid a landscape of frequent land use preemption. 

The number of bills being passed around tax incentives has steadily increased to 14 in 2026 from 13 in 2025 and 11 in 2024. Most early laws dealing with tax incentives introduce or expand exemptions to state taxes for data centers, including Mississippi’s SB2001 (2024), which allows local governments to exempt data centers from sales and income taxes and Kentucky’s HB775 (2025), which exempts data centers from sales and use taxes in all 120 counties (the incentive was previously only available in localities with populations of at least 500,000). 

More recently, state governments have begun passing bills to reduce or eliminate data center tax incentives, including Arizona’s HB4168 (2026), which imposes a three-year moratorium on new data center tax incentives; Oregon’s HB4084 (2026), which temporarily excludes data centers from property tax exemptions until at least 90 days after the end of the 2027 state legislative session and Minnesota’s HF9 (2025), which abolishes the sales and use tax exemptions for electricity consumed by data centers. 

Other bills show increased skepticism of tax incentives for data centers without any firm action. Indiana’s HB1406 (2026) initiates a study on the effect of the state’s existing data center tax incentives on state and local revenue and South Carolina’s H5122 (2026) explicitly excludes data centers from a new sales tax exemption for internet and telecommunications service providers. 

A minority of bills affect county revenues through cuts to local sales taxes, with most only affecting state taxes. They also differ in the degree of control they grant to local governments over newly introduced tax incentives. 

Local authority 

Five bills directly deal with local government authority over data centers. Although few in number, legislation that alters county authority remains an important area of focus for county governments. 

Virginia’s SB94 (2026) requires counties to perform additional bureaucratic assessments of proposed data centers without providing them with more funding to do so, and Louisiana’s SB79 (2025) unilaterally redefines data center development as an “industrial purpose,” potentially overreaching into county land use authority. 

Delaware’s SB312 (2026) prohibits counties from entering into a nondisclosure agreement that would restrict the county from disclosing information to the public about large-scale data center development. Nondisclosure agreements are often targeted by data center opponents. 

Where to now?

Counties can expect the number of laws on this topic to continue to rise and regulations to continue to change as data centers draw more public attention and more studies emerge on their impact and effects on surrounding communities. These changes may directly impact county revenues and authority. On the other hand, if the issue has not yet reached the legislative agenda at the state level, counties must be aware that they could be increasingly tasked with working with developers or addressing public concerns.