Tag: Data Center Tax Incentives

  • 32 of 34 Winning Governors Back Data Center Curbs: AI Site Risk Is Now Statewide

    32 of 34 Winning Governors Back Data Center Curbs: AI Site Risk Is Now Statewide

    TL;DR · 30-second read

    The Short Version

    In this month’s American elections, the giant warehouses full of computers that power artificial intelligence became a campaign issue, and they lost.

    Of 34 winning candidates for governor, 32 want tighter rules on these buildings and 12 want to pause or ban new ones. Local voters approved limits in 44 of 45 town-level votes.

    Why it matters: until now, a company turned away by one town could simply try the next. Now whole states may change the rules, including the tax breaks these projects get and who pays for the extra electricity they use. That cost can show up in household power bills.

    The Associated Press reported that the November 2026 midterm elections brought a wave of winning candidates pledging tougher oversight of artificial intelligence data centers. Democrats won control of Congress and flipped governorships in Texas, Ohio, Georgia, Nevada and Iowa, several of them data center hot spots. They also took full control of state government in Arizona, Wisconsin, Minnesota, Pennsylvania, Nevada and Michigan.

    Data Center Watch, a project of AI security consultancy 10a Labs, found that 32 of the 34 winning gubernatorial candidates in called races support stronger regulation or restrictions, and 12 back bans or moratoriums. Redbud Consulting counted restrictions approved in 44 of 45 completed local referendums. AdImpact tallied more than $380 million in television ads mentioning data centers, with Democrats outspending Republicans on the topic by more than 3 to 1.

    Executive Summary

    Data center regulation was not on most ballots, and it was not a top issue for most voters. Even so, opposition to the facilities, and to their effect on electricity prices and water supplies, ran through the platforms of many winning candidates. Governors-elect in Texas, Ohio and Wisconsin have described specific levers they may pull: permit blocks, community-consent requirements, disclosure of water and energy use, repeal of sales tax exemptions, and protecting ratepayers from the energy costs of new projects.

    The significance for the industry is jurisdictional. Most data center fights so far have been local, decided project by project at zoning boards and town meetings. The midterm results move a large share of that risk up to statehouses, where tax incentives and utility cost-allocation rules are written. A single state rule applies to every site within the state’s borders. Morgan Stanley warned that new state regulations could split the country into areas open to new data centers and areas closed to them.

    The industry’s response so far has been to ask for clearer rules rather than resist them outright. OpenAI published a framework of community commitments, and the Data Center Coalition stressed the need to rebuild trust. The coalition also warned that moratoriums would carry real economic costs for host communities.

    From Zoning Board to Statehouse: Why the Risk Is Now Statewide

    Local fights have not gone away. Redbud Consulting tracked 47 referendums in 44 municipalities across 12 states, including 21 in Ohio, eight in Maine, seven in Illinois and four in Kansas. Restrictions passed in 44 of the 45 where counting was complete. But a local loss usually has a workaround. A developer rejected by one township can secure land in the next county, provided that county sits near the same transmission lines and inside the same state tax regime. A state-level rule closes that workaround. By Data Center Watch’s count, 32 of 34 winning governors back stronger regulation and 12 back bans or moratoriums. For any developer in those states, the question is no longer whether one parcel can be approved but whether any parcel can.

    The specific tools under discussion show where that risk lands. Wisconsin Governor-elect David Crowley has said he supports a moratorium and abolishing the state’s sales tax exemption for data center operators and developers. Servers and networking gear are typically replaced every few years, so an exemption on equipment purchases keeps paying out over a site’s life. Removing it would change a facility’s ongoing operating economics, not just its upfront cost. Crowley also wants to insulate ratepayers and taxpayers from the energy costs of these projects. In practice that is a question of who pays for new substations, transmission lines and generation when a large campus connects to the grid: the developer or every household on the utility’s bill. Requiring disclosure of water and energy use, and community support before a project can proceed, would add steps to every permit in the state.

    Morgan Stanley put the consequence directly: state rules could “split the country into areas that are open to new data centers and those without.” The people most exposed are developers with land and power reservations already in flipped states, utilities planning load growth around those projects, landowners expecting lease or sale income, and the construction firms booked to build. Political control matters too. In the six states where Democrats now hold full control, governors and legislatures can change tax law and utility rules together. Where a governor faces an opposing legislature, permits and vetoes become the main levers.

    Texas and Ohio Are Where the Pipeline Meets the Politics

    Morgan Stanley called the election of Democrat Gina Hinojosa as Texas governor the “most important election result” for data center development. The weight comes from scale. Commercial real estate firm JLL projects that Texas will overtake northern Virginia as the world’s largest data center market by 2030. Hinojosa has said she would block a permit for a project that was not a good deal for Texans or where residents had not had a say. She defeated Governor Greg Abbott, who had promoted Texas as “the epicenter of AI development” before moving to tighten rules late in the campaign.

    Water sharpened the issue in Texas. Clayton Tucker, the first Democrat elected Texas agriculture commissioner since 1986, said ranchers everywhere told him they saw data centers as a threat to dwindling water supplies, and he credited his opposition to new development for his win. In Ohio, which accounted for nearly half the local referendums Redbud tracked, Morgan Stanley said Governor-elect Amy Acton’s pledge to block projects that fail to meet certain standards “creates significant risk of data center project delays.”

    The two states face different exposures. Texas risk concentrates in the permitting and water questions Hinojosa and Tucker raised. Ohio pairs a skeptical governor with a dense record of local restrictions, which suggests resistance at both levels at once. Developers that treated either state as a default destination will now have to weigh how a new administration interprets its own pledges.

    A Strong Signal, a Softer Mandate

    The case that voters turned against data centers is real but has limits. The AP Voter Poll found that about three-quarters of U.S. voters oppose a new data center in their own community, with majorities opposed in red and blue states alike. Yet only about one-quarter said AI data centers were crucial to their vote for Congress, well below the shares citing government corruption or the cost of living. Much of the issue’s force came from its link to affordability, the electricity bill, rather than from data centers as a stand-alone concern.

    Both sides’ claims deserve scrutiny. On the campaign side, the $380 million in ad spending and Democrats’ more than 3-to-1 edge on the topic show a deliberate partisan strategy, not just organic sentiment. But the opposition was not one-party. Crowley hardened his position under pressure from his Republican opponent, Abbott tightened rules late in the race, and Stephen Sanders, a Republican, co-founded a protest group in Lubbock. Most of the water and power concerns raised on the trail did not come with consumption figures. On the industry side, the Data Center Coalition’s Dan Diorio warned that moratoriums could cost host communities tax revenue and payments from tech companies, and could slow a broader manufacturing expansion. He did not put numbers on those losses either. Policy written in the coming sessions will be stronger if both sides bring data.

    The Industry Asks for Rules as Capital Turns Cautious

    OpenAI’s response was to publish a framework of commitments to communities where it builds and to ask policymakers at every level for “clear rules for how the industry builds.” That is a notable posture: it concedes that state and local oversight is coming and seeks to shape it rather than block it. The Data Center Coalition likewise said developers must keep working to build trust, while acknowledging that winners who promised moratoriums will likely try to deliver.

    The financial backdrop raises the stakes. The Nasdaq sank to 11% below its all-time high on Thursday, a drop the AP attributed to worries that higher borrowing costs could slow data center construction. Data center building is driving much of U.S. economic growth, so a slowdown from either source, financing or politics, would spread beyond the sector. President Donald Trump may stall any federal crackdown, but the levers the new governors describe do not require Washington. Sales tax exemptions, permits and utility cost allocation are set by states. For lenders and investors, state-by-state political exposure now belongs in project underwriting alongside power availability and construction schedules.

    Background

    Data centers are large buildings filled with servers that store data and run software. The newest ones, built to train and run artificial intelligence models, draw enormous amounts of electricity and in many designs use significant water for cooling. Construction of these facilities has become a major driver of U.S. economic growth, and states competed for them for years with tax incentives. Texas Governor Greg Abbott, for example, promoted his state as the epicenter of AI development.

    As projects multiplied, so did local resistance over electricity prices, water use, noise and land. Most of that resistance played out in township and county decisions. The 2026 midterms were the first election cycle in which data centers became a recurring theme in statewide campaigns. More than $380 million in television ads mentioned them, and candidates for governor in key markets pledged moratoriums, permit blocks and the repeal of tax breaks.

    Sources

    Source: AI data centers took a beating in the midterm elections. A reckoning may be ahead for tech giants: AP News report on midterm results, governors-elect’s data center positions, local referendums and industry reaction.

  • Louisiana’s $1.8B Plant Fight Shows Who Really Decides AI Data Center Power Costs

    Louisiana’s $1.8B Plant Fight Shows Who Really Decides AI Data Center Power Costs

    TL;DR · 30-second read

    The Short Version

    Louisiana is competing hard for data centers, the giant computer warehouses that run artificial intelligence and use enormous amounts of electricity.

    Governor Jeff Landry signed an order saying such projects should lose a state tax break if they push up everyone else’s power bills.

    The catch: the biggest bill on the table is a $1.8 billion Texas power plant that the state’s largest utility wants to buy, largely to serve a Meta data center. The order does not touch it. The state’s elected utility regulators decide that one, and they are leaning toward no.

    Louisiana Gov. Jeff Landry signed an executive order on June 25, 2026, directing Louisiana Economic Development Secretary Susan Bourgeois to write, within 90 days, new requirements that data centers must meet to claim the state’s Data Center Sales and Use Tax Exemption, the Louisiana Illuminator reported. Under the order, data centers that cause electricity prices to rise across the grid should not qualify for the break unless other benefits outweigh the higher prices.

    The order arrives amid a dispute over Entergy Louisiana’s proposed $1.8 billion purchase of the Cottonwood power plant in Newton County, Texas, a price more than three times what the plant sold for in 2024. A consultant to the Louisiana Public Service Commission attributed that increase predominantly to the power needs of Meta’s Hyperion data center in Northeast Louisiana. The order explicitly does not apply to Entergy’s generation plans.

    Executive Summary

    Landry’s order puts Louisiana in the group of states trying to court hyperscale data centers (the very large campuses built by major cloud and AI companies) while promising that households will not subsidize their electricity. It does this through an economic development lever: a sales tax exemption that projects must now earn by showing they will not raise grid-wide power prices, or that their benefits outweigh any increase.

    The order’s reach, however, stops short of the decision that currently matters most to ratepayers. Entergy Louisiana’s plan to buy the Cottonwood plant, which consultant Lane Sisung projected would significantly raise monthly bills for the utility’s 1.1 million customers, is before the Public Service Commission, and the order states it does not limit the commission’s authority. That split between the tax lever and the rate lever is the story’s central point for anyone building, financing or siting AI infrastructure in the state.

    The Order Polices a Tax Break, Not a Power Plant

    The mechanism in Landry’s order is a condition on a tax incentive. Secretary Bourgeois has 90 days to set requirements for the Data Center Sales and Use Tax Exemption that balance investor interests with residents’ electricity costs. A project that raises prices across the grid is meant to lose eligibility unless its other benefits outweigh that effect. That is a gate for future incentive claims, administered by the state’s economic development agency.

    The largest cost item currently in view runs through a different gate. Entergy Louisiana’s proposed $1.8 billion purchase of the Cottonwood plant in Texas, more than triple its 2024 sale price, is a generation decision regulated by the Public Service Commission. Sisung’s analysis for the commission said the price increase is predominantly attributable to power demand from Meta’s Hyperion data center, and projected significant monthly bill increases for Entergy Louisiana’s 1.1 million ratepayers if the deal proceeds. The order says it does not apply to Entergy’s generation plans and does not impair the commission’s constitutional or statutory authority.

    So whether those 1.1 million customers absorb costs tied to Hyperion’s load will be settled by five elected commissioners, not by the executive order. Republicans hold a 3-2 majority on the commission and have said they are inclined to follow Sisung’s advice against approving the purchase. For developers and utilities, the practical reading is that Louisiana now has two venues for data center cost questions, and the one with direct control over rates is the commission.

    Why an Incentive Condition Is Useful but Indirect

    Tying a tax break to grid effects is not empty. Incentives are negotiated before a site is chosen, so a cost test attached to them can shape project terms early, for example by encouraging developers to fund their own generation or accept tariffs that assign new-capacity costs to them. That is leverage a governor has and a commission does not.

    The limits are equally clear. Generation needed to serve a large new customer is typically committed through utility agreements and regulatory approvals that the incentive does not govern. Whether a project “causes energy prices to rise across the grid” is also a modeling question, and the order’s balancing test, which allows other benefits to outweigh higher prices, leaves room for judgment. How strict the rule proves to be depends on requirements that have not yet been written.

    Every Side’s Claims Deserve the Same Scrutiny

    Entergy and Meta have said they disagree with Sisung’s assessment, and Landry has said the Cottonwood proposal would breach promises both companies made not to shift electricity costs to ratepayers. The companies’ disagreement is a claim that needs the same testing as the consultant’s conclusion; the commission’s proceeding is where that evidence should be weighed. Entergy Louisiana CEO Phillip May attended the signing and accepted a copy of the order, while the governor said he had not changed his view on Cottonwood.

    The critics’ claims also warrant scrutiny. Commissioner Davante Lewis called the event a “PR stunt” and criticized closed-door data center deals. Jackson Voss of the Alliance for Affordable Energy supported the goal but said Landry pressed the commission last year to shorten its review of Entergy’s power agreement with Meta under the governor’s Lightning Speed Initiative. The Sierra Club called the order “hollow.” The Lightning Speed critique goes to how the current cost question arose; the “hollow” charge is a prediction about rules not yet published, and it can be tested against them once they are.

    What It Signals for Hyperscale Siting

    For companies evaluating Louisiana, the order adds a cost-allocation test to a financial incentive that matters in site selection. Developers should expect to document grid effects when claiming the exemption, and should treat utility and commission proceedings as the place where their power costs, and who pays them, are ultimately fixed.

    The episode also shows the tension facing any state pursuing AI buildout: the order describes data centers as a once-in-a-generation opportunity for rural growth while acknowledging that their power demand can raise costs for existing customers. Louisiana’s answer so far splits that problem between two institutions, and the commission’s Cottonwood decision will be the first real test.

    Background

    Louisiana has actively recruited large data center projects, most prominently Meta’s Hyperion campus in Northeast Louisiana, which Entergy Louisiana has agreed to supply with power. Gov. Jeff Landry’s Lightning Speed Initiative was created to accelerate permitting for Big Tech and AI investments, and the state offers a Data Center Sales and Use Tax Exemption as an incentive.

    Electricity rates for Entergy Louisiana’s 1.1 million customers are set by the Louisiana Public Service Commission, an elected five-member body with constitutional authority over utilities. The commission is now reviewing Entergy’s proposed $1.8 billion Cottonwood plant purchase, the first major test of whether costs tied to data center demand will reach household bills.

    Sources

    Source: Landry signs order to protect utility customers as he promotes more data center development — Louisiana Illuminator report on Gov. Jeff Landry’s June 25, 2026 executive order tying the state’s data center tax exemption to electricity costs.