Legislation and Administrative Actions Imposing Limitations on Data Center Development
This article originally appeared in the July 2026 edition of Development Incentives Quarterly.
Authored by: Kris Parchem
States have adopted a variety of measures affecting data center development, including restrictions on tax incentives, temporary administrative pauses, environmental review requirements and legislation preserving local regulatory authority. Certain enacted measures prohibit new incentives beginning as early as 2027, while other provisions phase out incentive eligibility for new projects or uses through 2038 and beyond. Grandfathering provisions generally permit previously approved projects to proceed under existing agreements, subject to limitations on extensions or increases in benefits. The table below summarizes significant legislative and administrative actions currently affecting data center development or incentives. States in which proposed restrictions have not been enacted or otherwise implemented are beyond the scope of this survey. These measures vary significantly in scope, ranging from restrictions on incentive eligibility to temporary administrative pauses and legislation preserving local regulatory authority.
Specific States
|
Jurisdiction |
Source |
Summary |
|
Alabama |
Code of Ala. § 40-9B-4.1 |
No incentive provided in Act 2012-210 is available to any company filing an application after July 31, 2028; however, any project granted an incentive prior to that date remains entitled to the incentive pursuant to the project agreement, regardless of whether Act 2012-210 is reauthorized. |
|
Arizona |
HB 4168 |
Governor Katie Hobbs signed an $18.3 billion bipartisan state budget imposing a three-year moratorium on new data center tax incentives, effective July 1, 2026. |
|
Illinois |
Administrative pause directed by Gov. Pritzker on new data center tax incentive agreements |
Governor JB Pritzker directed the Illinois Department of Commerce and Economic Opportunity to pause new agreements under the state's data center tax incentive program beginning July 1, 2026. The pause effectively suspends the availability of such incentives for new applicants while policymakers consider potential reforms to the program, which was established in 2019. |
|
Maine |
LD 713 |
After vetoing broader legislation that would have imposed a construction moratorium, Governor Janet Mills signed separate legislation barring data center projects from receiving certain state business development tax incentives. |
|
Maryland |
SB 116 |
The bill is now law and requires a comprehensive state study of the environmental, energy and economic impacts of data center development before certain future infrastructure investment initiatives or specialized incentive programs may proceed. |
|
Ohio |
Administrative pause directed by Gov. DeWine |
Governor Mike DeWine directed the Ohio Tax Credit Authority to suspend consideration of new tax exemption requests for data centers. The pause remains in effect while the newly formed Joint Data Center Committee evaluates potential policy recommendations regarding data center development. |
|
South Dakota |
SB 135 |
SB 135 preserves local governmental authority to regulate, limit, or prohibit data center development. The bill also contains provisions addressing utility cost allocation, water-use review and other impacts associated with data center projects, reflecting a broader regulatory approach rather than a statewide moratorium on development. |
|
Texas |
Tex. Local Gov’t Code § 212.133 |
Texas has not enacted a data-center-specific moratorium or incentive suspension. However, Texas law authorizes municipalities to adopt temporary development moratoriums, including with respect to commercial development, if specified procedural requirements and written findings are satisfied. A municipality may impose such a moratorium to address deficiencies in public facilities or to protect public health, safety, or welfare. These provisions could affect data center projects in particular circumstances but are not directed specifically at data centers. |
|
Tex. Local Gov’t Code § 212.1362 |
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Tex. Local Gov’t Code § 212.135 |
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Tex. Local Gov’t Code § 212.1352 |
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Tex. Local Gov’t Code § 212.1351 |
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|
Utah |
Utah Code Ann. § 11-41-202 |
Utah Code Ann. § 11-41-202 prohibits political subdivisions from providing new incentives to "large load data centers" after May 6, 2027, subject to grandfathering provisions for previously approved agreements and survey area resolutions. Utah Code Ann. § 63N-3a-402 further limits the availability of incentives outside designated zones, subject to certain preexisting-project exceptions. |
|
Utah Code Ann. § 63N-3a-402 |
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|
Washington |
Rev. Code Wash. (ARCW) § 82.12.9861 |
The use tax exemption for eligible server equipment and eligible power infrastructure in computer data centers located in counties with populations over 800,000 does not apply if the equipment or infrastructure is first used by qualifying businesses or qualifying tenants on or after July 1, 2038. The statutory exemption expires July 1, 2043. |
