States Reassess Tax Incentives and Regulations for Data Centers

In separate actions during July 2026, multiple U.S. states addressed data center tax incentives and regulations. In Texas, Gov. Greg Abbott announced that the state legislature would hold hearings that week on data center financing, including a possible elimination of the sales tax exemption data centers currently receive. In Nebraska, Gov. Jim Pillen signed an executive order on July 15 ending data centers' access to tax incentives under the state's ImagiNE Nebraska Act. In Illinois, Gov. JB Pritzker, speaking at the Aspen Ideas climate conference on July 23, discussed shifting state policy toward disincentivizing rather than financially incentivizing new data center development. According to Abbott, the cost of Texas's data center sales tax exemption has grown substantially, from about $14.6 million in the 2014-15 period to a projected $3.3 billion by 2028-29, which he described as unsustainable. Abbott also said data centers operating or seeking to build in Texas must comply with new state guidelines restricting their locations near residential neighborhoods. In Nebraska, Pillen's executive order was signed alongside Senator Mike Jacobson and state economic development officials, with the stated purpose of allowing the state to assess the benefits and resource impacts of data center projects before restoring or modifying incentive access. As of the latest reporting, Texas hearings on data center financing were scheduled to proceed, with no confirmed legislative outcome yet reported. Nebraska's executive order has taken effect, ending incentive access under the ImagiNE Nebraska Act, though the process and timeline for any future reassessment of incentives were not detailed in available reporting. Illinois has not enacted a formal policy change, as Pritzker's comments reflect a stated shift in approach rather than an announced law or executive action. The specific criteria each state will use to evaluate resource impacts, and whether other states will follow with similar measures, remain unresolved.