NCSL tells Alaska committee states are narrowing — not expanding — most data‑center tax incentives

The Alaska House State Affairs Committee heard a briefing April 28 from the National Conference of State Legislatures (NCSL) on how state legislatures nationwide are handling data‑center development, taxation and grid impacts.

Nicholas Miller, NCSL fiscal affairs policy associate, told the committee that 38 states offer a targeted tax incentive for data centers — most commonly a sales‑tax exemption — but that more states are moving to narrow or roll back incentives than to create new ones this year. “One data center can be, over 1,000,000,000 dollars,” Miller said, underscoring the scale of capital investment that drives policy decisions.

Miller said incentives persist because states compete to attract large capital projects, but added that permanent employment at operational data centers is typically small — “on the order of 10 or 20” full‑time positions — even though construction jobs can be substantial. He described three categories of state revenue approaches: adjustments to property tax treatment, changes to sales‑tax treatment, and bespoke or new taxes targeted at data centers.

Alex McWard, senior policy specialist with NCSL’s energy program, told the committee that data centers are increasingly discussed in terms of their peak energy demand. States commonly define large facilities by megawatt thresholds (examples cited ranged from about 20 MW to 100 MW) and are creating new customer classes and tariffs to prevent interconnection costs from shifting to residential ratepayers. McWard pointed to recent state actions — Utah’s interconnection rules and Texas legislation creating mandatory demand‑management requirements for very large loads — as examples of regulatory responses to grid pressures.

Both presenters said states are also exploring reporting requirements for energy and water use; Nebraska enacted annual reporting this year, while governors in California and New Jersey vetoed similar bills citing concerns about oversight and confidentiality. Miller and McWard noted that some states are attaching energy‑performance or green‑certification conditions to incentives; others are proposing compensation mechanisms if property values drop near new centers.

Committee members pressed presenters about Alaska‑specific issues: Representative McCabe asked whether data centers can build and sell power back to the grid; McWard cited a Pennsylvania bill that would require hyperscale operations to bring and pay for their own transmission and allow excess to be sold back. Representative Himshoot asked about latency and usefulness of Alaska sites for different data‑center purposes; Miller said latency matters for transaction‑sensitive centers but is less important for many AI training operations.

Members also raised water use and noise concerns and asked for more technical briefings on closed‑loop versus evaporative cooling. McWard and Miller provided several examples of state strategies — moratoria, targeted reporting and tariff design — that Alaska policymakers could consider as the state balances cooling advantages from northern climates with infrastructure and interconnection constraints.

The briefing closed with committee interest in follow‑up sessions, including presentations from operators and technical experts on cooling systems and interconnection mechanics.