Gov. Josh Stein is putting North Carolina’s two decade old tax breaks for data centers under a bright spotlight, questioning whether the long running sales and use tax exemptions that helped launch the state’s hyperscale boom are still worth the price. He has asked a state energy task force to reexamine the credits, warning that the incentives could cost the state hundreds of millions in forgone revenue just as residents are staring down rising utility bills. The fight over those perks now sits at the center of North Carolina’s role in the AI era data center buildout.
In an interim report from the energy policy panel, the group recommended that state officials “assess the dollar and strategic value of existing sales and use tax exemptions for data centers,” according to the Governor's office. The task force, which Stein created in August 2025, said data centers are driving rapid load growth and flagged the exemptions as a major policy question that deserves closer scrutiny.
Analysts at the Department of Commerce and in the governor’s office used public filings to estimate that North Carolina is currently giving up roughly $50 million a year in sales and use taxes tied to data centers. That figure could climb to about $450 million annually if all proposed projects are built, plus roughly $1.5 billion to $2.3 billion in one time construction exemptions. The breaks cover purchases such as equipment, computer software and electricity, and are available to facilities that meet the state’s investment thresholds. Those figures and the legal framework were reported by WRAL.
Stein put the issue sharply on social media: “Do we really want to subsidize data centers’ consumption of energy and electricity, when they make everyone else's power bills go up?” As Spectrum News reported, he stressed that he is not trying to chase data center investment out of North Carolina, only to make sure taxpayers are not stuck with hidden costs.
Microsoft’s promises and local permit fights
Microsoft has confirmed plans to begin permitting for a large campus on the roughly 1,350 to 1,385 acre Person County mega site, and county officials say the company has pledged to “pay its own way” so it does not force up local electricity prices while also minimizing and replenishing water use. Those assurances were reported by Data Center Dynamics and in county statements. Still, the promises have not quieted the fight. Neighbors and local boards from Wake County to Stokes County and beyond have weighed moratoria and tougher reviews as residents raise alarms about noise, water supplies and strain on the grid. Microsoft’s Catawba County buildout has become one of the more closely watched examples in the broader local debate.
Local pushback and lawsuits
Some of the loudest objections have come out of Stokes County, where residents and environmental groups sued after commissioners approved rezoning for a potential 1,844 acre data center campus along the Dan River, according to Inside Climate News. The plaintiffs argue that county leaders cut procedural corners and downplayed risks to culturally sensitive sites, while the developer counters that the project would deliver jobs and fresh tax revenue. The lawsuit, and other skirmishes like it, are part of a wider pattern of local resistance that has pushed some counties to pause or rethink permits for new data centers.
How the Legislature figures in
Any move to change or repeal the sales and use exemptions would have to come from the General Assembly, where lawmakers are already split over how to balance state revenue, business incentives and North Carolina’s reputation for economic development. WUNC reports that Stein has framed the idea as one potential way to shore up public services without touching other parts of the tax code, but Republican leaders will ultimately decide whether the proposal goes anywhere.
Next steps
The governor’s task force plans to keep studying large load tariffs, “bring your own capacity” arrangements and reporting requirements for how much water and energy data centers use, with an eye toward delivering more detailed recommendations next year, as laid out in an interim report from the Governor's office. For now, Stein’s comments have turned a simmering series of local disputes into a statewide policy question. The coming months will determine whether North Carolina sticks with the data center incentives that helped build its footprint or reshapes them in the name of protecting ratepayers and natural resources. The governor’s office says it will roll out follow up work as the task force continues its meetings.
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