Mid-Year Report: The 2026 State Legislative Sessions and the New Incentive Landscape

Michael Hart/Unsplash.

On June 30, 2026, Virginia Governor Abigail Spanberger signed a $205 billion biennial budget that made Virginia, home of the world's largest data center market, the first state in the nation to tax the electricity data centers consume. Twenty-four hours later, the tax took effect, an Illinois pause on new data-center incentive agreements became operative, an Arizona three-year moratorium on new data-center exemption applications opened, and a Wyoming fund that steers severance-tax dollars into uranium and critical-minerals projects began accepting its first revenues. July 1, 2026 was the single busiest effective date for state incentive policy in years, and it marks the halfway point of a legislative year that has redrawn the incentive landscape in at least 26 states.

The two months since have settled most of what was still open at the midpoint. Missouri Governor Mike Kehoe signed HB 3231 on July 13. Pennsylvania's budget arrived on July 12 without the GRID data-center standards, so Governor Josh Shapiro imposed them by executive order on August 18. New Jersey Governor Mikie Sherrill signed the End Data Center Tax Credits Act on August 27. Massachusetts missed its July 31 formal-session deadline with its economic development bill still in conference, but under new joint rules the bill is alive for a fall session.

This Mid-Year Report, the flagship installment of our State Incentives Watch series, catalogs the 27 most consequential state actions of the 2026 sessions by category (passed, paused, repealed, failed, and pending), verifies the status of each as of September 1, 2026, and previews the deadlines that will shape the rest of the year. It builds on our February memo, The Data Center Incentive Reckoning: More Than 300 Bills Filed in 30+ States, and our January preview, Five Incentive Trends to Watch in the 2026 State Legislative Sessions.

Key Takeaways

01The data-center incentive reckoning moved from rhetoric to statute. More than 300 data-center bills were filed in 30-plus states in the opening weeks of the year. By September the results were law: Virginia taxed consumption, Illinois, Ohio, and Arizona paused their exemption programs, New Jersey and Washington clawed back or narrowed credits, Alabama capped abatement terms, and Pennsylvania conditioned its exemption by executive order.
02Virginia enacted the nation's first data-center electricity consumption tax. The budget signed June 30, 2026 imposes $0.011 per kilowatt-hour on data-center power use, including self-generated power, capped at $600 million per year, while preserving the sales-and-use tax exemption for data center equipment. A 100 MW facility at 85% utilization now carries roughly $8.2 million a year in new operating cost.
03Traditional incentive expansion did not stop; it consolidated and grew more conditional. Maryland's DECADE Act (SB 388, signed May 12), Iowa's HF 2799 (signed June 2), and Missouri's HB 3231 (signed July 13) rebuilt core toolkits around fewer, larger, more accountable programs, and Iowa paired its new EDGE program with the outright repeal of its New Jobs Tax Credit.
04States wrote direct checks for sites, sectors, and specific deals at a scale that rivaled tax policy. Arkansas set aside $300 million for a single West Memphis megaproject, Virginia enacted four company-specific packages tied to $7.1 billion of investment, North Carolina funded a $200 million regional development reserve, Louisiana appropriated $125 million for High-Impact Jobs, and Tennessee and Wyoming stacked money behind nuclear and critical minerals.
05The rest of 2026 is deadline-driven. Opportunity Zone 2.0 nominations close September 28; Ohio's HB 957 and Illinois' fall veto session will revisit paused exemptions; Massachusetts' conference committee decides the Mass WINS package; and on November 3, voters in 36 states elect governors who will control the next generation of incentive policy.

Accountability is now a bipartisan design principle, not a talking point. Michigan's $2 billion SOAR fund, defunded in the budget enacted last October after reporting showed roughly 21% of promised jobs materialized, is the cautionary tale legislators in both parties cite. The year's new programs answer it with performance-contingent payments (Virginia), statutory caps (Alabama, Louisiana), and certification conditions (Pennsylvania's GRID standards). Companies siting compute-intensive projects now face a materially different, and less generous, state incentive map than they did on January 1.

The 2026 Sessions at a Glance

Fifteen states expanded incentives, three paused them, three pulled money back, four repeal efforts failed, and two fights continue.

The 2026 Sessions at a Glance (Verified as of Sept. 1, 2026)

StateCategoryActionBill / VehicleStatusDate
MarylandPassedDECADE Act: extends R&D, job creation, and security-clearance credits; expands deal-closing toolsSB 388 / HB 898 (Ch. 351)SignedMay 12, 2026
IowaPassedCreates EDGE program and BIG training fund; repeals New Jobs Tax CreditHF 2799Signed; effective July 1June 2, 2026
MissouriPassedInnovation zones, MODESA revival, angel investment creditHB 3231SignedJuly 13, 2026
ColoradoPassedExtends Job Growth Incentive Tax Credit through TY2034HB26-1014SignedMay 29, 2026
KansasPassedExtends STAR Bonds; creates Kansas Sports Facilities AuthorityHB 2466SignedApr. 9, 2026
New MexicoPassedExpands Advanced Energy Equipment Tax Credit (fusion, critical minerals, inverters)HB 154 (Ch. 17)SignedMar. 3, 2026
LouisianaPassedFunds High-Impact Jobs Program at $125MFY27 appropriationEnactedJune 2026
NebraskaPassedGrow the Good Life Act: HQ retention credits up to $50MLB 1165SignedApr. 16, 2026
TennesseePassedNuclear Energy Fund +$25M; GIVE nuclear workforce +$10MFY26-27 budgetEnactedApr. 23, 2026
WyomingPassedEnergy Dominance Fund: ~$105M for oil, gas, coal, uranium, critical mineralsSF0123 (Ch. 107)Signed; effective July 1Mar. 7, 2026
VirginiaPassedFour megaproject packages: Avio, Hitachi Energy, Eli Lilly, AstraZenecaHB 1531, HB 799, HB 800, HB 1076SignedApr. 6, 2026
Rhode IslandPassed$100M bond for Quonset pad-ready sites and growth-industry infrastructureFY27 budget; Nov. ballotSigned; voters decide Nov. 3June 12, 2026
ArkansasPassed$300M set-aside for West Memphis advanced-manufacturing superprojectFiscal-session budgetEnactedLate Apr. 2026
North CarolinaPassed$34.4B budget: $200M Regional Economic Development Reserve; $133.9M JetZero siteS.L. 2026-41 (S 257)SignedJuly 7, 2026
AlabamaPassedCaps data-center abatements at 20 years (30 with community investment)HB 399 (Act 2026-573)Signed; caps apply Jan. 1, 2027Apr. 16, 2026
IllinoisPausedTwo-year pause on new Data Center Investment Program agreementsExecutive directive to DCEOEffective July 1June 5, 2026
OhioPausedTax Credit Authority pause on new data-center exemption approvalsExecutive directionActiveMay 27, 2026
ArizonaPausedThree-year moratorium on new data-center exemption applicationsFY27 budgetSigned; runs July 1, 2026 to June 30, 2029June 2026
WashingtonRepealedEnds exemption for replacement and refurbished data-center server equipmentESSB 6231 (Ch. 266)Signed; applies July 1, 2026Apr. 1, 2026
New JerseyRepealedEnd Data Center Tax Credits Act: rescinds $250M in uncommitted AI/data-center creditsS4390 / A5165 (P.L.2026, c.77)SignedAug. 27, 2026
MichiganRepealedSOAR fund defunded; incentive strategy overhaul due by year-end 2026FY2026 budgetEnactedOct. 2025
GeorgiaFailedData-center sales-tax exemption repealSB 410Died at adjournment (passed Senate 32-21 in March)Apr. 2026
WisconsinFailedFour data-center bills, incl. AB 245 (modify exemption) and AB 228 (TIF)AB 245, AB 228, et al.Died at adjournmentMar. 2026
ConnecticutFailedElimination of data-center incentivesSB 245Died at adjournmentMay 6, 2026
ColoradoFailedRollback of $453M in business tax breaksHB26-1221 / HB26-1222Died in Senate committeeMay 2026
PennsylvaniaPendingGRID data-center standards; conditions sales-tax exemption on certificationHB 2650; Executive Order 2026-05Passed House June 24; Senate has not acted; EO signed Aug. 18Aug. 18, 2026
MassachusettsPendingMass WINS economic development bill, incl. AI and defense authorizationsH.5576 / S.3178In conference committee since July 30July 2026

Sources: State legislature bill pages, governor press releases, and LegiScan, verified September 1, 2026.

The Through-Line: The Data-Center Reckoning Became Law

The defining incentive story of 2026 is that states stopped debating data-center subsidies and started rewriting them. When we published The Data Center Incentive Reckoning in February, more than 300 data-center bills had been filed in over 30 states in the first six weeks of the year, a pivot from the expansion playbook of 2021 to 2024 toward energy cost-shift protections, caps, and transparency mandates. Seven months later, that bill count has converted into an unmistakable pattern of enacted law: one first-in-nation tax, three program pauses, two rescissions, one abatement cap, one executive-order certification regime, and a set of failed repeals that will be refiled in 2027.

Virginia's consumption tax is the compromise template other states will study. The budget Governor Spanberger signed June 30 ended a multi-year standoff over repealing the state's data-center sales-and-use tax exemption by keeping the exemption and taxing the load instead: $0.011 per kilowatt-hour on data-center electricity consumption, including self-supplied generation, effective July 1, 2026, with collections above $600 million per year refunded pro rata to operators. The first collection covers July through September and is due this month; the State Corporation Commission administers it, and the tax sunsets June 30, 2028 unless extended. The design matters for site selectors. For a 100 MW facility running at 85% utilization (roughly 744.6 million kWh per year), the tax works out to approximately $8.2 million per year, a real, modelable operating cost, but one that preserves the far larger upfront equipment exemption that anchored Virginia's dominance in the first place. Earlier in the session, Virginia lawmakers passed 15 of the 61 data-center bills introduced, including generator permitting and water-use reporting requirements.

The pause states, Illinois, Ohio, and Arizona, are running the same play for the same reason: exemption costs blew through forecasts as AI demand surged. Ohio's data-center sales-tax exemption cost more than $1.5 billion in 2025, nearly 12 times the state's $136 million forecast, before Governor Mike DeWine directed the Tax Credit Authority to stop taking new applications on May 27. Illinois Governor JB Pritzker, after the General Assembly declined to act on his February proposal for a two-year suspension, ordered DCEO on June 5 to stop processing new Data Center Investment Program agreements as of July 1 and published a seven-point framework (a data-center rate class, self-supplied clean energy, water permits, an NDA ban) that he wants enacted in the fall veto session. Arizona's bipartisan $18.3 billion budget, signed by Governor Katie Hobbs in mid-June, bars the Arizona Commerce Authority from accepting new data-center exemption applications from July 1, 2026 through June 30, 2029. The rush to file before the window closed was extraordinary: the Authority received 113 applications between June 15 and June 30, nearly as many as the 123 it had received in the program's entire history since 2013. In all three states, existing agreements and certificates are honored; the pain is prospective.

"Illinois has an opportunity to continue leading in technological innovation and economic growth, but we also have a responsibility to protect working families."

Gov. JB Pritzker, announcing the Data Center Investment Program pause

Source: Office of the Governor, June 5, 2026. Photo: official portrait, Office of the Governor of Illinois.

For developers, the operative question in every state is no longer "how much?" but "on what conditions?" Alabama kept its abatements but capped them; Indiana and Oklahoma (covered in our February memo) conditioned theirs on local revenue-sharing and self-funded infrastructure; Pennsylvania now conditions its exemption on GRID certification by executive order. The unconditional hyperscale package is going extinct.

Of more than 300 data-center bills filed, the enacted outcomes are taxes, pauses, caps, and conditions, not outright repeal.

What Happened to the 2026 Data-Center Bills

OutcomeCountStates
Bills filed nationally (first six weeks)300+ in 30+ statesMultiState tracker, Feb. 2026
Consumption tax enacted1VA
Exemption programs paused3IL, OH, AZ
Credits repealed or rescinded2WA, NJ
Abatement term capped1AL
Exemption conditioned on certification1PA (executive order)
Repeal efforts failed4+GA, WI, CT, CO
Virginia inset: bills introduced / passed61 / 15VA

Sources: MultiState (Feb. 2026), Virginia Mercury (Mar. 2026), state legislature records.

What Passed: New and Expanded Programs

Even as data-center generosity contracted, 15 states enacted new or expanded incentives in the first half. Most of them are narrower, more conditional, and more sector-targeted than the programs they replace.

Statewide toolkit overhauls

Maryland: DECADE Act (SB 388/HB 898), signed May 12, 2026 as Chapter 351. Governor Wes Moore's signature economic package, the Delivering Economic Competitiveness and Advancing Development Efforts (DECADE) Act, extends the sunsets of the Research and Development Tax Credit (to 2031), the Job Creation Tax Credit (to 2032), and the Employer Security Clearance Cost Tax Credit (to 2032); eliminates the $10 million per-production cap on the film credit; raises the state's major-project deal-closing capacity under MEDAAF (loans and investments to $7.5 million, grants to $5 million) while dropping the 10% local match; and extends the Build Our Future matching-grant program (up to $2 million per award) through 2030 under MEDCO administration (SB 388).

Iowa: HF 2799, signed June 2, 2026; effective July 1, 2026. Governor Kim Reynolds closed the session by signing an omnibus that creates the EDGE program (Headquarters Expansion and Development for Growth and Employment) for high-value corporate and HQ projects, revises the MEGA megaproject program and Business Incentives for Growth (BIG), adds a BIG training fund tying workforce dollars to employer demand, and repeals the state's New Jobs Tax Credit, a textbook example of 2026's consolidation trend: new tools funded by retiring old ones (HF 2799).

Missouri: HB 3231, the Missouri Innovation, Public Safety, and Accountability Act, signed July 13, 2026. The 100-plus-page omnibus, which cleared the Senate 25-7 on May 13 and the House 119-24 on May 14, revives the Missouri Downtown Economic Stimulus Act for office-to-residential conversions, creates Missouri Innovation Zones eligible for job-creation, relocation, conversion, and angel credits plus local abatement and TIF, and modernizes the angel investment credit: 40% of a qualified investment in an innovation zone (60% in rural areas outside innovation zones), capped at $75,000 per investor per year and $6 million statewide beginning in 2027, with the statewide cap growing 20% a year from 2029 if fully subscribed. The arithmetic: a $125,000 investment in a certified rural startup generates the full $75,000 annual credit (HB 3231 summary).

"Missouri is open for business, growth, and opportunity. The passage of House Bill 3231 was critical in our efforts to continue revitalizing Missouri's main streets, central business districts, and downtowns."

Gov. Mike Kehoe, signing HB 3231

Source: Office of the Governor, July 13, 2026.

Colorado: HB26-1014, signed May 29, 2026. Extends the Job Growth Incentive Tax Credit, worth 50% of the employer's FICA liability on net new jobs over award periods of up to eight years, through tax year 2034, giving Colorado's flagship jobs credit a decade of runway (HB26-1014). Colorado's session cut both ways; see the failed rollback bills below.

Kansas: HB 2466, signed April 9, 2026. Governor Laura Kelly signed a bipartisan bill extending the STAR Bonds sunset to July 1, 2031 and creating the Kansas Sports Facilities Authority to govern a planned $3 billion domed NFL stadium in Wyandotte County, the vehicle for the Kansas City Chiefs agreement announced in December 2025, with initial authority appointments due by August 31, 2026 (HB 2466).

Deal-specific and megaproject packages

Virginia: four company-specific packages, signed April 6, 2026. Governor Spanberger signed bipartisan legislation creating performance-based grant programs for four named projects: Avio USA (more than $537 million invested and 1,500-plus jobs in Pittsylvania County for solid rocket motors; state package capped at $97 million, up to $6 million a year from 2027 to 2046), Hitachi Energy (more than $457 million and 825-plus jobs in Halifax County for large power transformers; up to $29.4 million, at $4.6 million a year through 2035), Eli Lilly (more than $2 billion and 450-plus jobs in Goochland County for API manufacturing; $300 million, payable up to $15 million per year over 20 years), and AstraZeneca ($4 billion and 500 jobs in Albemarle County; up to $34 million per year through 2045). That is a combined $7.1 billion of investment and roughly 3,250 jobs, all structured as annual, performance-contingent payments rather than upfront cash.

Arkansas: $300 million superproject set-aside, enacted late April 2026. In its fiscal session, the legislature approved, and Governor Sarah Huckabee Sanders signed, a $300 million reservation for an unnamed, non-data-center advanced manufacturing "superproject" in West Memphis: $150 million in incentives and $150 million in infrastructure, for a facility projected at up to 4,000 initial jobs and 2,000 more at build-out. None of the money moves unless the project lands. Arkansas voters will also decide SJR 15 on November 3, a constitutional amendment authorizing economic development districts with bonding power.

Nebraska: LB 1165, the Grow the Good Life Act, signed April 16, 2026. Introduced for the Pillen administration against the backdrop of the Union Pacific and Norfolk Southern merger, LB 1165 passed 42-7 on April 10 and offers a large employer that keeps its headquarters and base employment in Nebraska through an out-of-state merger up to $50 million in credits over 10 years, plus workforce-retention grants (up to $300,000 per employer per year) and enhanced ImagiNE Nebraska percentages, with ImagiNE credits newly usable against employee child-care costs (LB 1165). It is the nation's clearest statutory answer yet to merger-driven HQ flight.

Sector plays: energy, nuclear, and critical minerals

New Mexico: HB 154, signed March 3, 2026 as Chapter 17. Governor Michelle Lujan Grisham expanded the Advanced Energy Equipment Income Tax Credit, 20% of qualified manufacturing-equipment expenditures capped at $25 million, by replacing the federal cross-reference with a state-defined product list covering solar and wind components, battery electrode-active materials and cells, fusion machines, inverters, and 29 listed critical minerals converted or purified to specified forms, for tax years beginning on or after January 1, 2026 (HB 154). For a company investing $50 million in qualifying equipment, the credit is worth $10 million; the cap binds only above $125 million of qualified spend. The session also moved more than $500 million into economic development broadly, including roughly $270 million for fusion and quantum initiatives.

Tennessee: FY26-27 budget, enacted April 23, 2026. The $58.3 billion budget adds $25 million to the Nuclear Energy Fund (created in 2023 with $70 million, credited with recruiting Orano, Type One, BWXT Enrichment, Oklo, and Radiant, $7.3 billion of announced investment), $10 million to GIVE for nuclear workforce programs, and $3 million for Tennessee Tech's Next-Gen academies, alongside $43 million for quantum computing and $38.5 million for AI adoption. Paired with TDEC's first-in-nation fusion licensing rules (effective June 9, 2026), Tennessee is running the most complete state nuclear industrial strategy in the country.

Wyoming: SF0123, the Energy Dominance Fund, signed March 7, 2026 as Chapter 107; effective July 1, 2026. The act diverts 0.5% of severance-tax collections for two years into a roughly $105 million matching grant and loan fund for oil, gas, and coal projects and, notably for our clients, uranium and critical-minerals development (SF0123). It is the largest state-level critical-minerals capital pool created this year.

Site readiness and direct appropriations

Rhode Island: FY27 budget, signed June 12, 2026. The $15.2 billion budget Governor Dan McKee signed carries a $100 million economic development bond, $55 million to create pad-ready sites at Quonset Business Park and $45 million for infrastructure serving ocean, defense, life-sciences, and data-analytics industries, that goes to voters on November 3 as part of a five-question, $600 million bond slate. It also extends the sunsets on nine Commerce RI programs, including Rebuild RI and Qualified Jobs. (The governor's January proposal was $115 million with $70 million for Quonset; the enacted figures are lower.)

North Carolina: S.L. 2026-41, signed July 7, 2026. The state's first comprehensive budget since 2023, ratified July 2 with veto-proof majorities and signed by Governor Josh Stein, appropriates $34.4 billion, funds a new Regional Economic Development Reserve through which lawmakers directed $203.2 million in special appropriations, and provides $133.9 million for site improvements supporting the JetZero aircraft plant at Piedmont Triad International Airport (S 257).

Louisiana: $125 million for High-Impact Jobs, enacted June 2026. The legislature funded the High-Impact Jobs Program, the capped, wage-focused successor to the now-closed Quality Jobs Program, at $125 million for FY27, $50 million above Governor Jeff Landry's $75 million request, alongside SB 383's modernization of Incumbent Worker Training (projected 2027 funding rises from $20 million to $35 million). High-Impact Jobs pays reimbursable grants of 18% of payroll for jobs at 125% of the parish average wage and 22% at 150%, on the first $200,000 of salary per job. Unlike open-ended Quality Jobs, the new program is fiscally capped at its appropriation, the accountability trade at the heart of 2026 program design (LED program page).

Alabama: HB 399, signed April 16, 2026 as Act 2026-573. Alabama belongs in both halves of this report: it passed a statute, but the statute is a guardrail. HB 399 (Rep. Leigh Hulsey, R-Helena), which cleared both chambers unanimously on April 9, caps data-processing-center abatements at 20 years for abatements granted on or after January 1, 2027, down from the 30 years available under prior law, with an additional 10 years available only if the operator signs a binding community-investment agreement (roads, broadband, water systems, or local education support) with the Departments of Revenue and Commerce. See our full analysis of HB 399.

Seven enacted actions committed more than $1.2 billion of new state money to sites, sectors, and named projects in the first half of 2026.

New State Money Committed to Economic Development, H1 2026 (Selected Enacted Actions)

StateVehicleAmountPurpose
VirginiaHB 1531, HB 799, HB 800, HB 1076$426.4M+ (Avio $97M, Hitachi Energy $29.4M, Eli Lilly $300M; AstraZeneca up to $34M/yr not itemized)Performance-based grants for four named projects
ArkansasFiscal-session budget$300MWest Memphis superproject ($150M incentives, $150M infrastructure)
North CarolinaS.L. 2026-41$200M reserve ($203.2M directed) plus $133.9MRegional Economic Development Reserve; JetZero site work
LouisianaFY27 appropriation$125MHigh-Impact Jobs Program
WyomingSF0123~$105MEnergy Dominance Fund (oil, gas, coal, uranium, critical minerals)
Rhode IslandFY27 budget (Nov. 3 bond question)$100MQuonset pad-ready sites ($55M); industry infrastructure ($45M)
TennesseeFY26-27 budget$38MNuclear Energy Fund ($25M), GIVE ($10M), Next-Gen academies ($3M)

Sources: Enacted budgets, bill texts, and governor releases, verified September 1, 2026.

What Paused

Three states froze data-center incentives without repealing them, preserving optionality while their studies run. The details differ; the logic is identical.

  • Illinois (announced June 5, 2026; effective July 1, 2026). A two-year pause on new Data Center Investment Program agreements, ordered by executive directive after the General Assembly did not act on the Governor's February budget proposal. Existing agreements are honored. The Governor's seven-principle framework (rate class, cost causation, interruptible service tied to clean-energy self-supply, water permitting, an NDA ban, and community-benefit agreements) is teed up for the fall veto session.
  • Ohio (May 27, 2026). The Tax Credit Authority stopped considering new data-center sales-tax exemption requests at Governor DeWine's direction while the General Assembly's Joint Data Center Committee studies the program, whose 2025 cost, more than $1.5 billion against a $136 million forecast, became a national data point. The Authority was allowed to clear one already-scheduled request before the pause took hold, and roughly $42.3 million in exemptions for two Columbus-area projects were approved in June. Pending HB 957 (Rep. Tristan Rader, D-Lakewood) would end the exemption outright effective October 1; it sits in House Ways and Means, joined by HB 999, which would bar property-tax exemptions for data centers.
  • Arizona (signed June 2026). The FY27 budget bars new data-center transaction-privilege-tax exemption applications from July 1, 2026 through June 30, 2029, a compromise from Governor Hobbs' proposal to eliminate the exemption entirely, projected by her office to save roughly $57 million. Existing certificates are unaffected, and the Commerce Authority has 60 days to rule on each of the 113 applications filed in the final two weeks of June.

"There is no question that Arizona's data center tax exemption has achieved what it sought to do."

Gov. Katie Hobbs, on the three-year moratorium in the FY27 budget

Source: Arizona Capitol Times, July 9, 2026. Photo: official portrait, Office of the Governor of Arizona.

What Was Repealed, Rescinded, or Defunded

Washington: ESSB 6231, signed April 1, 2026 as Chapter 266, Laws of 2026; changes apply July 1, 2026. Washington narrowed rather than ended its data-center preference: replacement server equipment and refurbished facilities no longer qualify for the sales-and-use tax exemption, only original equipment at eligible new facilities (ESSB 6231). The Department of Revenue projects local revenues alone rise $20.2 million in FY2027. Operators budgeting hardware refresh cycles in Quincy or Grant County should re-run their models now.

New Jersey: S4390/A5165, the End Data Center Tax Credits Act, signed August 27, 2026 as P.L.2026, c.77. The legislature voted on June 30 (35-4 in the Senate, 74-4 in the Assembly) to strip the roughly $250 million in uncommitted Next New Jersey Program credits reserved for AI and data-center projects, cutting the program's authorization from $500 million to $250 million and leaving the single award already made, $250 million to CoreWeave, intact. Governor Sherrill let the bill sit for nearly two months after signing the Data Center Fair Share Act (S731/A796), which creates a dedicated data-center rate class, on July 7, then signed it on August 27 alongside S3379/A4096, which requires semiannual water and energy consumption reports to the Board of Public Utilities. New Jersey is now the only state this year to have both rescinded incentive money and re-priced data-center power.

Michigan: SOAR defunded in the FY2026 budget, enacted October 2025; overhaul due by year-end 2026. Lawmakers cut all funding for the $2 billion Strategic Outreach and Attraction Reserve from the $81 billion state budget after reporting showed the state had awarded more than $2 billion, and spent roughly $1 billion, for about 21% of the jobs promised. Neither party fought to save it. Michigan is not exiting the incentive business: a new R&D credit (annual cap $100 million) took first claims April 1, 2026, and legislative leaders have committed to a replacement strategy by year-end built around payroll-withholding capture rather than upfront cash. SOAR is now the reference case every accountability amendment in every state cites.

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What Failed

The repeal wave broke against industry resistance in at least four states, which is why the 2027 sessions will re-run these fights.

  • Georgia. SB 410 passed the Senate 32-21 on March 6 but died in House Ways and Means at adjournment, leaving the state's data-center sales-tax exemption intact despite an estimated $2.5 billion in forgone 2026 revenue (per reporting by The Current).
  • Wisconsin. Four data-center bills, including AB 245 (modifying the exemption) and AB 228 (TIF eligibility), died at the March adjournment; the 2023 exemption is now projected to cost more than $2 billion (per Wisconsin Public Radio).
  • Connecticut. SB 245, which would have eliminated data-center incentives, died in the Finance, Revenue and Bonding Committee when the session adjourned May 6.
  • Colorado. HB26-1221 and HB26-1222, which would have rolled back roughly $453 million in business tax breaks, died in Senate committee in May after Governor Jared Polis threatened a veto (per CPR News), in the same session that extended the Job Growth Incentive Tax Credit.

The pattern is worth internalizing. Outright repeal failed everywhere it was attempted this year except New Jersey (rescission of uncommitted funds); what passed instead were taxes, pauses, caps, and conditions. Incumbent incentive holders were grandfathered in every enacted action we track.

The Second-Half Outlook

Opportunity Zones 2.0 is the single most time-sensitive item on any incentives calendar, and the window is now four weeks wide. Governors' 90-day window to nominate up to 25% of eligible low-income tracts opened July 1, 2026 and closes September 28, 2026, with 30-day extensions available to no later than October 28 under Revenue Procedure 2026-14. Treasury has identified 25,332 eligible tracts, 8,334 of them entirely rural, where investments earn a 30% basis step-up under the OBBBA's permanent OZ regime. New designations run January 1, 2027 through December 31, 2036, and Treasury has 30 days (extendable to December 28) to certify each nomination. States including North Carolina, Texas, Florida, New Mexico, West Virginia, and South Carolina have opened formal nomination processes (HUD tracker). If a tract matters to your project, the advocacy window closes September 28; after that, absent an extension, the map is fixed for a decade.

Pennsylvania's GRID standards are now binding by executive order, not statute, and the Senate has said it will not act. HB 2650, passed by the House 134-68 on June 24, would have codified Governor Shapiro's GRID standards by conditioning the state's data-center sales-and-use tax exemption (projected to cost more than $517 million annually by FY2030-31) on bring-your-own-power, transparency, local hiring, and environmental commitments, with Department of Revenue certification. The $50.85 billion budget Shapiro signed on July 12, twelve days late, left HB 2650 and four other House-passed data-center bills untouched in the Republican-led Senate. On August 18, Shapiro signed Executive Order 2026-05, which directs the Department of Revenue to require GRID compliance from every applicant for the Computer Data Center Equipment exemption, requires DEP to withhold permits until a project shows consistency with local comprehensive plans and secures municipal approvals, and binds projects over 25 MW through consent orders with a clean-firm energy ramp from 10% in 2027 to 32% by 2035. Senate Majority Leader Joe Pittman has said he has no intention of taking action to regulate data center development, which leaves the executive order, and any legal challenge to it, as the operative rulebook for the East Coast's largest new data-center market outside Virginia.

"If these companies want to do business here, they need to comply with the strictest guardrails in the nation on data center development, starting today."

Gov. Josh Shapiro, signing Executive Order 2026-05

Source: PoliticsPA, August 18, 2026. Photo: official portrait, Office of the Governor of Pennsylvania.

Watch five more items. Massachusetts' economic development package, which started as Governor Maura Healey's $305 million Mass WINS Act and grew to $561 million in the House (H.5576, passed July 9) and $575.4 million in the Senate (S.3178, passed July 24, with $75 million for AI and $100 million for defense), did not clear by July 31, but under the Legislature's new joint rules a bill in conference remains eligible for a fall or year-end formal session; the conference committee was appointed July 30. Ohio's Joint Data Center Committee findings and HB 957 (proposed October 1 repeal) will determine whether the DeWine pause hardens into repeal. Illinois' fall veto session will test the Pritzker framework. Michigan's promised incentive-strategy overhaul is due by year-end, with withholding-capture proposals already drafted. And Virginia's first consumption-tax remittance, covering July through September, comes due this month, the first real data on what the tax raises.

Then there is November 3. Voters in 36 states elect governors, 15 of them open seats under term limits, in the first midterm since AI infrastructure became a kitchen-table utility-bill issue. Michigan's next governor inherits the SOAR rebuild; Ohio's inherits the exemption decision; Pennsylvania's Senate map decides whether GRID ever becomes statute; the winners in open-seat states will appoint the commerce secretaries and authority boards that administer every program in this report. Arkansas voters will separately decide SJR 15's economic-development-districts amendment, and Rhode Island voters will decide the $100 million Quonset and industry-infrastructure bond. Expect incentive accountability, pro and con, on the trail, and expect the 2027 sessions to open with the largest freshman-governor incentive agenda in a decade.

The next four months decide the OZ map, the Pennsylvania rulebook, and three paused exemption programs.

Timeline and Next Steps

DateMilestone
June 30, 2026Virginia biennial budget signed; data-center consumption tax enacted
July 1, 2026VA tax, IL pause, AZ moratorium, WY Energy Dominance Fund, IA HF 2799 all take effect; OZ 2.0 nomination window opens
July 12, 2026Pennsylvania FY27 budget signed without GRID standards
July 13, 2026Missouri HB 3231 signed
July 30, 2026Massachusetts conference committee appointed on economic development bill
Aug. 18, 2026Pennsylvania Executive Order 2026-05 imposes GRID standards
Aug. 27, 2026New Jersey End Data Center Tax Credits Act signed (P.L.2026, c.77)
Aug. 31, 2026Kansas Sports Facilities Authority initial appointments due
Sept. 2026First Virginia consumption-tax remittance (July to Sept.) due
Sept. 28, 2026OZ 2.0 governor nominations due (extensions to Oct. 28 on request)
Oct. 1, 2026Proposed effective date of Ohio HB 957 exemption repeal (pending)
Fall 2026Illinois veto session takes up the Pritzker data-center framework; Massachusetts fall formal session possible
Nov. 3, 2026Elections: 36 governorships; Arkansas SJR 15; Rhode Island $100M bond
Dec. 31, 2026Michigan incentive-strategy overhaul due; Ohio Joint Data Center Committee study window
Jan. 1, 2027OZ 2.0 designations take effect; Alabama 20-year abatement cap applies; Missouri angel credit opens

What to do now: If a project sits in or near an eligible low-income tract, get the case for that tract in front of the governor's office before September 28, and ask whether the state intends to request the 30-day extension. If you operate or plan a data center in Virginia, model the $0.011 per kWh tax against alternatives before the first remittance; in Illinois, Ohio, or Arizona, confirm that any existing agreement or certificate is documented as grandfathered; in Pennsylvania, assume GRID compliance and DEP consent orders are conditions of the exemption until a court says otherwise. For everyone else, map projects against the year's new programs (Maryland's DECADE credits, Iowa's EDGE, Louisiana's $125 million High-Impact Jobs appropriation, Missouri's innovation zones and 2027 angel credit, and the Wyoming and Tennessee sector funds) and build the performance-contingent jobs, wage, and capital-investment models that Virginia-style annual-payment packages and capped programs now require, so commitments are bankable and clawback risk is priced.

References

  1. Virginia Budget Creates New Electricity Consumption Tax for Data Centers, Williams Mullen (June 2026)
  2. Virginia legislators advance $205 billion budget including new tax on data centers, Virginia Mercury (June 22, 2026)
  3. Governor DeWine Announces Pause of Data Center Tax Exemption, Office of Governor Mike DeWine (May 27, 2026)
  4. Ohio pauses data center tax exemptions amid growing debate over costs and benefits, Ohio Society of CPAs (May 29, 2026); Ohio lawmakers consider ending data center tax breaks amid growing scrutiny, Ohio News (Sept. 11, 2026); HB 957, LegiScan
  5. Gov. Pritzker Pauses New Data Center Tax Incentives, State of Illinois Newsroom (June 5, 2026)
  6. Arizona Data Center Tax Incentive Pause Signed by Governor Hobbs, Bloomberg Tax (June 2026)
  7. Data centers dominated 2026 session, Arizona Capitol Times (July 9, 2026)
  8. Data center developers rush to apply for paused tax break, Axios Phoenix (July 8, 2026)
  9. Legislature votes to eliminate $250 million in AI data center tax credits, New Jersey Globe (June 30, 2026); S4390 (P.L.2026, c.77), LegiScan; New Jersey Enacts End Data Center Tax Credits Act, Bloomberg Tax (Aug. 2026)
  10. Governor Sherrill Announces Ratepayer Relief, Signs Major Legislation on Energy, Office of Governor Mikie Sherrill (July 7, 2026); Governor Sherrill signs data center transparency legislation (Aug. 27, 2026)
  11. ESSB 6231 Bill Summary, Washington State Legislature (Chapter 266, Laws of 2026)
  12. Michigan legislators kill Gretchen Whitmer's $2B cash-for-jobs program, Bridge Michigan (Oct. 2025)
  13. Alabama Provides Data Processing Center Abatement Periods, Bloomberg Tax (April 2026); Alabama Senate sends bill to limit data center tax breaks to governor, Alabama Political Reporter (Apr. 10, 2026)
  14. SB 388 (DECADE Act), Maryland General Assembly; Governor Moore Signs Legislation Enhancing Key Maryland Economic Development Programs, MEDA (May 2026)
  15. Gov. Reynolds acts on final bills of 2026 legislative session, Office of Governor Kim Reynolds (June 2, 2026); HF 2799, LegiScan
  16. HB 3231 bill summary, Missouri House of Representatives; Governor Kehoe Signs Missouri Innovation, Public Safety and Accountability Act into Law, Office of Governor Mike Kehoe (July 13, 2026); Missouri tax incentive program aims to turn empty offices into housing, Missouri Independent (July 1, 2026); New Angel Investment Incentive Supports Missouri Startups, Missouri Technology Corporation (Aug. 4, 2026)
  17. Governor Kelly Signs Bipartisan Bill Creating Kansas Sports Facilities Authority Act, Office of Governor Laura Kelly (Apr. 9, 2026); HB 2466, Kansas Legislature
  18. HB 154 final text, New Mexico Legislature; HB 154 bill page
  19. High-Impact Jobs, Louisiana Economic Development; 2026 Legislative Session Took Major Steps to Strengthen Louisiana's Workforce, Leaders for a Better Louisiana (June 2026)
  20. Nebraska seeks to sweeten corporate incentives, partly to ensure Union Pacific stays and grows, Nebraska Examiner (Jan. 23, 2026); LB 1165, LegiScan
  21. Gov. Lee Marks the Close of the 2026 Legislative Session, Office of Governor Bill Lee (Apr. 23, 2026)
  22. SF0123, Wyoming Legislature; SF0123 history, LegiScan; Wyoming House advances $105M Energy Dominance Fund, Cap City News (Mar. 4, 2026)
  23. Governor Spanberger Signs Bills Into Law, Office of Governor Abigail Spanberger (Apr. 6, 2026); Spanberger signs bipartisan bills tied to billions in business investment, Virginia Mercury (Apr. 6, 2026); Virginia governor signs 4 laws establishing manufacturing grant programs, Manufacturing Dive (April 2026)
  24. Governor McKee Signs Fiscal Year 2027 Budget, Office of Governor Dan McKee (June 12, 2026); FY27 budget heads to Gov. McKee's desk after Senate approval, Rhode Island Current (June 9, 2026)
  25. Arkansas lawmakers near fiscal session end, set aside $300 million for superproject, Talk Business & Politics (Apr. 25, 2026)
  26. Session Law 2026-41 (S 257), North Carolina General Assembly; Stein says he'll take action on state budget, WRAL (July 2026); The state budget contains 727 special appropriations, EdNC (July 2026)
  27. PA House Passes Legislation to Codify Gov Shapiro's GRID Standards, Commonwealth of Pennsylvania (June 24, 2026); Governor Shapiro Signs Bipartisan 2026-27 Budget, Commonwealth of Pennsylvania (July 12, 2026); Shapiro Sets Binding GRID Requirements in Pennsylvania, POWER (Aug. 2026); Shapiro Signs Executive Order Restricting Data Center Development, PoliticsPA (Aug. 18, 2026); Shapiro releases full PA data center incentive proposal, Spotlight PA (June 2026); Budget Leaves Data Centers Unresolved, PECPA (July 2026)
  28. Revenue Procedure 2026-14, Internal Revenue Bulletin 2026-20, Internal Revenue Service; Opportunity Zones Round Two Selection Process: FAQ (R48952), Congressional Research Service (2026); Opportunity Zones Updates, HUD
  29. Senate Passes Economic Development Bill, Massachusetts Senate (July 23, 2026); H.5576 bill history, Massachusetts Legislature; Key Bills Remain Active as Legislature Ends Formal Sessions, Associated Industries of Massachusetts (Aug. 3, 2026)
  30. Governors' Elections, National Governors Association; State Data Center Policy: Governors Restrict Tax Exemptions, MultiState (June 22, 2026)
  31. HB26-1014, Colorado General Assembly (signed May 29, 2026); GA SB 410 and CT SB 245, LegiScan. Failed-bill statuses for WI AB 245/AB 228 and CO HB26-1221/HB26-1222 per Wisconsin Public Radio and CPR News session reporting (March to May 2026).

© Copyright 2026. The views expressed herein are those of the author(s) and not necessarily the views of Crawford Partners, its management, its subsidiaries, its affiliates, or its other professionals. Crawford Partners is not a law firm and cannot provide legal advice.