North Carolina Cuts Data Centre Power Tax Break As AI Loads Grow

North Carolina has ended a sales tax exemption on data centre electricity purchases, but the state kept capital incentives for qualifying equipment and investment as AI campuses push power policy higher on the agenda.

The North Carolina data centre electricity tax repeal was enacted through Gov. Josh Stein’s 2026 budget, which highlighted the removal of exemptions for data centres’ electricity use.

The budget leaves in place exemptions for qualifying equipment and other eligible investments.

The North Carolina General Assembly’s Fiscal Research Division said removing the electricity exemption will raise General Fund revenue by $21.4 million in fiscal year 2026-27 and $28.6 million annually by fiscal year 2030-31.

The policy change gives data centre developers a narrower incentive package.

North Carolina is still supporting capital investment, but the repeal removes a subsidy tied to long-term power consumption, a larger operating issue for AI-scale campuses.

North Carolina Ends Electricity Exemption While Keeping Equipment Incentives

Under the budget, qualifying data centres lose the electricity-related sales and use tax break.

Exemptions for qualifying equipment and other capital investments remain under existing statutes, keeping a split between construction incentives and operating-cost support.

The repeal took effect after passage of the state budget.

It changes the recurring cost side of a data centre project without removing the equipment incentive framework that developers can still use for new campuses.

Neil Osnato, founder of Persistence Analytics Group, said the repeal changes economics at the margin, especially for large AI campuses where power is not a minor operating expense.

He said developers still prioritise utility power delivery, transmission support, interconnection timing and durable operating costs.

Osnato also described the change as a sign that states may be less willing to subsidise open-ended electricity consumption while still backing capital investment, equipment, construction and local economic development.

Fiscal Research Division Estimates $21.4 Million First-Year Gain

The Fiscal Research Division estimate gives lawmakers a budget score for the repeal rather than a final answer on data centre power costs.

The state revenue forecast now sits alongside a larger debate over who should bear the cost of new AI power demand.

Lawmakers are still debating broader rules for large-load customers after the budget removed the electricity exemption.

That debate continues because the pending utility bill would address how large power users sign service agreements, not only how they are taxed.

Dan Diorio, vice president of state policy at the Data Centre Coalition, said the electricity exemption had been an important part of the overall data centre sales tax exemption programme.

He said the remaining budget framework still gives data centres certainty to continue investing in North Carolina.

Senate Bill 730 Would Add Large-Load Utility Agreements

North Carolina lawmakers are also considering the proposed Ratepayer Protection Act.

If enacted, the bill would require special utility service agreements for qualifying large-load customers and add requirements for future data centre development.

The pending bill keeps the data centre power debate open after the budget repeal.

The budget has already changed tax treatment for electricity consumption, while the proposed act would address how large loads interact with utilities and ratepayer protections.

The public record still lacks final passage of the Ratepayer Protection Act, a public response from Duke Energy, or a disclosed governor’s-office response beyond the budget statement.