2026 Legislative Agendas Put Data Center Incentives in the Spotlight

2026 Legislative Agendas Put Data Center Incentives in the Spotlight

States offer tax breaks but increasingly are attaching wage requirements, energy use fees and bans on NDAs.

There are more than 4,000 data centers nationwide, and states are competing to attract these energy-intensive operations through various economic and tax incentives. (Richard Newstead/Getty Images)

Data centers-massive facilities that power the internet-are increasingly in the spotlight as states seek to balance energy considerations with economic development priorities. In June 2025, Kansas became the 37th state to offer tax incentives for data centers as legislators across the country focus on issues from tax abatements to nondisclosure agreements.

As lawmakers prepare for 2026 legislative sessions, bill prefiling is well underway. State tax incentives for data centers are poised to again be a top issue. Early 2026 legislation suggests that prevailing wage requirements, attention to energy use and nondisclosure agreements are on the agenda.

Prevailing Wages in Construction

At least 17 states already require data centers to create permanent jobs to receive a tax incentive, and five require those jobs to pay well. Measures currently under consideration in Pennsylvania and New Jersey represent a new approach: requiring that workers constructing data centers be paid a prevailing wage.

Introduced in December, Pennsylvania's bill (HB 2061) would amend the commonwealth's data center tax incentive to require that contractors and subcontractors constructing or expanding data centers pay their workers "not less than the prevailing minimum wage and benefit rates," as defined by the U.S. Department of Labor. Data centers that fail to meet this requirement could lose Pennsylvania's exemption from the state sales and use tax.

Similarly, New Jersey's measure (A 6237) would impose a prevailing wage requirement, but it differs slightly in that the only data centers subject to the requirement would be those with a higher electrical capacity or electrical usage, demonstrating legislators' ongoing consideration of the energy demands posed by the facilities.

Data Center Energy Use

Concerns remain about the high levels of energy used by data centers. In June, Minnesota amended its tax incentive to remove the sales tax exemption that large data centers previously enjoyed. Minnesota also created a new fee for large-scale data centers to be levied annually based on energy use.

Similarly, a New York measure (SB 8546) would levy a grid modernization surcharge on large data centers based on energy usage, with generated revenue designated to boost grid reliability.

A Wisconsin bill introduced this month would require data centers to receive some kind of sustainable design certificate withing three years of construction, mirroring existing requirements in Illinois and other states. Prohibiting Nondisclosure Agreements

In 2025, legislatures across the country-including in Indiana and New York-considered bills that would limit public officials from entering into nondisclosure agreements, or NDAs, in economic development projects, including data centers. Increasing public attention to the use of NDAs in data center construction has been reported by NBC News, among other sources.

A New Jersey bill (S 5003) would prohibit data centers from entering into NDAs that hide details of the development plans from the public. While other states have considered limits on NDAs in economic development, including for data centers, New Jersey's effort is the first that would prohibit the data centers themselves from entering into such agreements with public officials.

In April, Minnesota's Senate considered a change (Amendment 41 to SF 4035) that would have prohibited municipalities from entering into NDAs regarding potential data center developments. The amendment was ultimately defeated by a tied vote in the Senate.

Looking Ahead

Whether aiming to offer new requirements for workers or bolster their energy grids, legislators remain focused on data centers. Indeed, just this week lawmakers in Michigan introduced legislation to entirely repeal the state's tax incentives for data centers.

Amid a federal push to preempt state authority on AI laws, data center incentives promise to remain a hot topic in 2026 legislative sessions across the country.

Nicholas Miller is a policy associate in NCSL's Fiscal Affairs Program.