New Jersey Rescinds $250 Million in AI Tax Credits
On June 30, 2026, the New Jersey Legislature passed the "End Data Center Tax Credits Act" (S4390/A5165), rescinding the $250 million uncommitted balance of tax credits reserved for artificial intelligence and data center projects under the Next New Jersey Program-AI. The Senate approved the bill 35-4 and the General Assembly 74-4, unwinding an incentive the state created two years earlier under P.L.2024, c.49, signed July 25, 2024. Governor Mikie Sherrill signed it on August 27, 2026, as P.L.2026, c.77, alongside S3379/A4096, which requires data centers to report water and energy consumption to the Board of Public Utilities twice a year.
Key Takeaways
| 01 | The act cuts the Next New Jersey Program-AI allocation in half, from $500 million to $250 million. S4390 amends Section 98 of the New Jersey Economic Recovery Act of 2020 (P.L.2020, c.156), eliminating the entire uncommitted balance. The act took effect on enactment, August 27, 2026. |
| 02 | The $250 million already awarded is untouched. In 2025, the New Jersey Economic Development Authority (NJEDA) approved the program's first, and now only, award: $250 million to CoreWeave for its roughly $1.8 billion, 392,600-square-foot AI data center at the former Merck campus in Kenilworth, disbursed at up to $50 million per year over five years against a 10-year commitment period. |
| 03 | The rescinded credits return to the NJEDA's Aspire and Emerge programs. Senate committee amendments on June 24 stripped the introduced bill's $125 million energy-storage tax credit and one-time $100 residential ratepayer credit. The final act is a straight rescission that frees the $250 million for other NJEDA programs funded from the same Aspire/Emerge allocation. |
| 04 | The NJEDA is no longer accepting Next NJ-AI applications. The NJEDA paused new applications in June 2026 to review the program. After the August 27 signing, it said the program is fully allocated and is no longer accepting new applications. |
| 05 | The rescission is part of a broader change in New Jersey's data center policy. It follows Governor Sherrill's May 27 comprehensive data center plan and her July 7 signing of the Data Center Fair Share law (S731/A796), which creates a dedicated ratepayer class requiring data centers to pay their own energy and grid-infrastructure costs. |
What the Act Does, and Does Not Do
S4390 reduces the program's allocation and leaves its statute in place. The Next New Jersey Program Act remains on the books, and its AI and data center allocation drops to the $250 million already committed. The First Reprint reported by the Senate Budget and Appropriations Committee amends Section 98 of P.L.2020, c.156 (C.34:1B-362), the section that sets the tax credit caps across the state's post-2020 incentive programs. The committee's statement reports the Office of Legislative Services' determination that the bill will not have a fiscal impact on State revenues, since it does not reduce the cumulative amount of tax credits authorized and reallocates the $250 million back to the Aspire and Emerge programs. Exhibit 1 summarizes the program's terms, which are otherwise unchanged.
Exhibit 1
The statute survives, but the only funded award is the one already made.
Next New Jersey Program-AI terms, as of August 27, 2026
| Category | Description |
|---|---|
| Authority | NJEDA, under the Next New Jersey Program Act, P.L.2024, c.49 |
| Award formula | Lesser of: 0.1% of total capital investment x number of new full-time jobs; 25% of total capital investment; or $250M |
| Eligibility | AI businesses (more than 50% of employees or revenue in AI); at least $100M capital investment; at least 100 new full-time jobs paying at least 120% of the county median salary; collaboration with a New Jersey research university, startup, incubator, or accelerator |
| Disbursement | Over five years; credits transferable |
| Status | No new applications accepted; uncommitted $250M rescinded by S4390, leaving the program fully allocated |
Sources: NJEDA, Next New Jersey Program-AI program page; P.L.2024, c.49; S4390 (First Reprint).
The bill narrowed considerably on its way to passage. As introduced June 1, 2026, S4390 and its Assembly companion A5165 would have redirected the $250 million to energy affordability: up to $125 million in Board of Public Utilities (BPU) tax credits for energy storage projects and a one-time $100 gross income tax credit for residential electric customers earning $55,000 or less. The Senate Budget and Appropriations Committee struck those provisions on June 24, reporting the bill 13-0 and retitling it, leaving the uncommitted balance available to the NJEDA's other economic development programs drawn from the same Aspire/Emerge allocation. Exhibit 2 compares the two versions.
Exhibit 2
The Senate committee kept the $250 million cut and removed the energy storage and ratepayer credits.
S4390, introduced version and bill as passed
| Provision | As introduced (June 1, 2026) | As passed (June 30, 2026) |
|---|---|---|
| Next NJ-AI allocation | Cut from $500M to $250M | Cut from $500M to $250M |
| BPU energy storage tax credits | Up to $125M | Removed |
| Residential ratepayer credit | One-time $100 for households earning $55,000 or less | Removed |
| Destination of rescinded $250M | Energy storage and ratepayer relief | NJEDA Aspire/Emerge pool |
| Effective date | Immediately | Immediately upon enactment |
Sources: S4390 as introduced; S4390 First Reprint; Senate Budget and Appropriations Committee statement, June 24, 2026.
Sponsors described the credits as a poor use of state resources. Senate President Nicholas Scutari (D-Union) and Sen. Joseph Cryan (D-Union) sponsored the Senate version. Assemblymen Andrew Macurdy (D-Union) and Balvir Singh (D-Burlington) and Assemblywoman Annette Quijano (D-Union) carried the Assembly bill. Only four members of each chamber voted no. Singh said AI data centers, "backed by some of the wealthiest corporations and investors in the world, do not need additional subsidies on the backs of New Jersey taxpayers," according to the New Jersey Globe.
"AI data centers are no longer the best use of state resources."
Assemblyman Andrew Macurdy (D-Union), prime Assembly sponsor of A5165
Source: New Jersey Globe, July 6, 2026.
New Jersey's Broader Data Center Policy
The rescission is the incentive part of a data center policy the Governor announced in May. On May 27, 2026, Governor Sherrill announced a statewide data center plan built on four pillars: fair-share rules requiring data centers to bring new clean energy online and fund the grid infrastructure they require; mandatory energy and water use reporting; statewide standards for community benefits agreements; and jobs that use local trades and pay prevailing wages. Five days later, on June 1, S4390 and A5165 were introduced.
"Data centers are among the biggest drivers of energy costs, which I am working tirelessly to bring down."
Governor Mikie Sherrill, announcing the comprehensive data center plan
Source: Office of the Governor, May 27, 2026. Photo: official portrait, Office of the Governor of New Jersey.
On July 7, 2026, the Governor signed the regulatory half into law. The Data Center Fair Share Act (S731/A796), enacted as P.L.2026, c.32, creates a new ratepayer class and rate structure requiring data centers to pay for their own energy use and associated grid infrastructure, incentivizes them to bring new clean power to the grid, and requires them to curtail before residential customers when the grid is strained. Two companion laws, the repeal of the return on equity (ROE) adder (S1673/A2757) and the Advanced Grid Technologies Act (S4411/A5188, P.L.2026, c.34), target utility transmission spending, which totaled $14.7 billion in supplemental projects charged to New Jersey ratepayers from 2008 to 2025. The administration credits the combined agenda with more than $1 billion in annual ratepayer savings, citing analysis by Synapse Energy Economics. Exhibit 3 lists the sequence.
Exhibit 3
New Jersey went from a data center plan to a signed ratepayer law in six weeks and a signed rescission in 13 weeks.
New Jersey data center actions, January to August 2026
| Date | Action |
|---|---|
| Jan. 2026 | Executive Orders 1 and 2 freeze rate hikes and accelerate new generation |
| May 27, 2026 | Governor Sherrill announces comprehensive data center plan |
| Jun. 1, 2026 | S4390/A5165 introduced with $125M storage credit and $100 ratepayer credit |
| Jun. 24, 2026 | Senate Budget and Appropriations Committee strips redirection provisions, reports bill 13-0 |
| Jun. 30, 2026 | Senate passes S4390 35-4; Assembly substitutes and passes 74-4 |
| Jul. 7, 2026 | Data Center Fair Share Act, ROE Adder repeal, and Advanced Grid Technologies Act signed |
| Aug. 27, 2026 | Governor Sherrill signs S4390 (P.L.2026, c.77) and the data center water and energy reporting bill (S3379/A4096) |
Sources: New Jersey Legislature; Office of the Governor.
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What This Means for AI and Data Center Projects
Projects that had counted on a Next NJ-AI award lose that credit. For a company that had planned a $400 million AI data center creating 120 qualifying jobs, the program formula would have produced an award equal to the lesser of $48 million (0.1% x $400 million x 120 jobs), $100 million (25% of investment), or the $250 million cap. That $48 million credit, paid over five years, is no longer available. Under the Fair Share law, data centers will also pay for their own energy use and associated grid infrastructure through a separate rate class.
New Jersey is one of several states that changed how they treat data centers in 2026. Illinois Governor JB Pritzker paused new Data Center Investment Program agreements effective July 1, 2026, after the program delivered more than $983 million in incentives to 27 facilities from 2020 through 2024. Virginia's new budget imposes a $0.011/kWh electricity consumption tax on data centers effective July 1, 2026, and Pennsylvania Governor Josh Shapiro's Executive Order 2026-05, signed August 18, 2026, conditions the state's data center sales tax exemption for new applicants on compliance with his GRID standards.
New Jersey's remaining incentives for large projects are not specific to AI. Emerge offers per-job tax credits drawn from the same annual allocation that funded Next NJ-AI. Aspire, which reserves up to $2.5 billion for transformative projects at up to $400 million per project, paused new applications on July 23, 2026. The Next New Jersey Manufacturing Program (P.L.2025, c.123) offers up to $500 million beginning in fiscal year 2026, with $100 million reserved for clean energy product manufacturers for the program's first two years. Exhibit 4 summarizes the three programs.
Exhibit 4
Emerge and the manufacturing program remain open to large New Jersey projects, and Aspire has paused new applications.
Remaining New Jersey programs for large projects, as of August 2026
| Program | What it offers | Capacity or cap |
|---|---|---|
| Emerge | Per-job tax credits for job creation | Shared Aspire/Emerge annual allocation |
| Aspire | Gap financing credits for real estate development | Up to $2.5B for transformative projects; $400M per project; new applications paused July 23, 2026 |
| Next NJ Manufacturing | Credits for manufacturing facilities, P.L.2025, c.123 | $500M from FY2026; $100M set aside for clean energy manufacturers |
Sources: NJEDA; P.L.2025, c.123; S4390 (First Reprint).
The next cost decision sits with the BPU. Under the Fair Share law, P.L.2026, c.32, the BPU must set standards for a large data center rate class by order no later than 12 months after the July 7, 2026 effective date, and each electric utility must then file a tariff petition within 180 days of that order.
What to Do Now
This is for AI and data center companies that had counted on a Next NJ-AI award for a New Jersey site. That credit is no longer available, and Emerge and the Next New Jersey Manufacturing Program remain open to large projects. The BPU's rate class standards for data centers are due by July 7, 2027. If you want a read on fit before then, reach out to our team.
References
- New Jersey Legislature, S4390/A5165, "End Data Center Tax Credits Act", passed both houses June 30, 2026.
- New Jersey Legislature, S4390 First Reprint, as reported by the Senate Budget and Appropriations Committee, June 24, 2026.
- New Jersey Legislature, S4390 as introduced, June 1, 2026.
- Senate Budget and Appropriations Committee, Statement to S4390 with committee amendments, June 24, 2026.
- LegiScan, New Jersey S4390 (2026-2027 Session).
- Office of the Governor, "Governor Sherrill Announces Comprehensive Plan on Data Centers", May 27, 2026.
- Office of the Governor, ratepayer relief and energy legislation signing, July 7, 2026.
- NJEDA, Next New Jersey Program-AI program page (notice that new applications are no longer accepted, August 27, 2026).
- NJEDA, S3432, Next New Jersey Program Act, P.L.2024, c.49, signed July 25, 2024.
- New Jersey Legislature, Next New Jersey Manufacturing Program Act, P.L.2025, c.123, approved August 13, 2025.
- New Jersey Globe, "Legislature votes to eliminate $250 million in AI data center tax credits", July 6, 2026.
- Real Estate NJ, "CoreWeave begins $1.8 billion data center project in Kenilworth, landing first award under new EDA tax credit program", November 2025.
- Capitol News Illinois, "Gov. JB Pritzker to suspend tax breaks for data centers, urging more discussion", June 5, 2026.
- Office of the Governor, "Governor Sherrill Delivers All Four Pillars of Data Center Plan, Puts Power Back in the Hands of Communities", August 27, 2026.
- NJEDA, Aspire Program page (notice pausing new applications, July 23, 2026).
- New Jersey Legislature, Data Center Fair Share law, P.L.2026, c.32, approved July 7, 2026.
- Office of the Governor of Pennsylvania, Executive Order 2026-05, August 18, 2026.
- News 12, "New Jersey pauses program used to dole out tax breaks for AI data centers", June 23, 2026.
© Copyright 2026 TC Policy Group, LLC (d/b/a Crawford Partners). 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.