Tax Exemptions
Republican leaders in the North Carolina General Assembly are joining Democratic Governor Josh Stein in calls to repeal all, or at least part, of the state's long-standing sales and use tax exemptions for data centers.
"You've got to have them to a degree," Hall said of data centers during a Thursday gaggle with reporters. He continued, "I think some of those policies, though, were implemented when maybe the state was trying to lure more and more of those for economic development purposes. Now, they've sort of proliferated everywhere. So I don't know that there needs to be an incentive to get more of them here."
North Carolina's sales tax exemptions for data centers were originally passed in 2006 and updated in both 2010 and 2015. As Hall and also Stein have pointed out, they date back to an era when North Carolina was trying to lure business from a still-nascent industry.
Now, that industry's footprint in North Carolina is highlighted by some of the largest companies in the world. Amazon, Apple, Google and Microsoft have each announced or already built data centers worth at least $1 billion. Meta has invested at least $750 million into a Forest City data center and also embarked on a partnership worth up to $6 billion with Corning to manufacture the fiber it needs for its data centers.
"Big companies like that, they ought to pay the same tax as any other business that's beside of them and make it fair. And so whatever we need to do that, I'm fine with," Hall said in response to a question from the N.C. Newsroom.
Bipartisan legislation introduced in the N.C. House last month would repeal the data center tax exemption. The bill, which was referred to the House Finance Committee, is only eight lines long and narrow in its focus. House Bill 1213 Track's primary sponsors include Rep. Donnie Loftis, R-Gaston; Rep. Bill Ward, R-Pasquotank; and Rep. Pricey Harrison, D-Guilford.
Under North Carolina state law, data centers that meet eligibility requirements do not have to pay sales tax on their construction materials, their cooling equipment, any hardware, any software or the electricity they use to power their equipment. Since the incentives were updated in 2015, the Department of Commerce has deemed 37 data centers are eligible to receive the tax breaks. To be eligible, a data center must invest at least $75 million into its facility over a five-year period, be offering wages above the average of the county where it is located and be offering health insurance to its employees.
Earlier this year, Stein directed the N.C. Department of Commerce to estimate the sales tax revenue that data centers could be paying. Using publicly available data, Commerce analysts found that North Carolina is not receiving between $45 and $57 million in sales tax payments. The analysis also determined that could jump as high as $450 million a year if all of the data center projects planned for North Carolina are built. And in the process of construction, those data centers would pay between $1.5 and $2.3 billion in sales taxes without exemptions in place.
Representatives of the Data Center Coalition, an industry trade group, previously told the N.C. Newsroom that North Carolina's sales tax incentives are a key part of why the state is attractive to data center developers.
Senate leader Phil Berger, R-Rockingham, previously expressed skepticism about whether data center developers still need the incentives. Berger was also clear that he believes data center development is, all in all, a positive for North Carolina. This week, Berger was more specific in what he thinks needs to happen with the exemptions, pointing specifically to the part where data centers don't pay taxes on the electricity they use. Berger said, "The sales tax on electricity at data centers probably ought to be paid by the data centers. I mean, you've got to pay sales tax on your bill. They should pay sales tax on their bill."
NC’s budget negotiations are moving, but dragging
While optimism still exists, top Republican leaders haven’t moved forward with a budget compromise, now three weeks into the North Carolina General Assembly’s short session.
Republican Senate leader Phil Berger often refers to legislative timelines as a “runway,” meaning if a bill is an airplane, it needs a long enough runway to take off rather than crash.
Budget negotiations haven’t crashed yet, but Berger indicated the Senate could build its own plane. In other words, if the House and Senate don’t reach a deal soon, Berger is willing to push forward a new Senate budget bill.
That would mean that the two chambers would move separately rather than agree on a compromise the version of the House and Senate budget bills that stalled out last year.
Republican House Speaker Destin Hall is not ready for that yet. He told The News & Observer on Thursday that he thinks “at this stage, there’s still a chance that we’re going to get it done in a conference report format. I’m still hopeful for that.”
A conference report is the final, negotiated version of a bill that each chamber has already passed. But those negotiations aren’t public.
“I don’t think it’s really constructive for each side to fire off their own bills,” the speaker said about Berger’s potential go-around. Hall offered his own signal: “But it won’t be the first time that one chamber sends a bill to the other to not be taken up,” he said.
Hall said he and Berger have been “regularly talking” and that even if they reach agreement on big issues like tax revenue and salaries, it will still take a number of weeks for staff to work on the “mechanics of the budget.”
He said that lawmakers understand “we need to get moving on it, but we certainly still have plenty of time this session to do that.” By this session, he means the legislative short session that has no set end date.
The voting calendar Hall sent out to lawmakers when the session began April 21 showed House votes through July 2.
The Senate has not published a voting calendar beyond the day-to-day schedule. Due out soon is the revised revenue forecast, now that April 15 tax collections are being counted.
The revised revenue forecast from the Legislative Fiscal Research Division and Office of Budget and State Management might not change the discussion about future tax cuts, Hall said.
The forecast shows that benchmarks are expected to be met that automatically reduce the individual income tax rate in 2027 down to 3.49%, from the 2026 rate of 3.99%.
That’s at the heart of the budget negotiations, with the Senate wanting to keep tax reductions planned in 2023, while the House wants to account for inflation and other spending changes. And they can’t decide on the amount of raises for teachers and state employees if they don’t know how much money will be coming in.
Berger said they are still talking about a comprehensive budget, not separate bills — as sometimes happens after talks break down — and that he’s still hopeful.
“We still are having conversations. I’m hopeful that we’ll have an announcement. Don’t know exactly when, but the sooner, the better,” Berger told reporters on Tuesday.
The Senate finished its voting sessions on Wednesday.
“The Senate intends to go forward with a budget. We’re hopeful that we’ll go forward with the joint process,” Berger said. But if they don’t reach an agreement to get started, he said, they won’t meet a deadline of the end of the fiscal year, June 30.
Still, he doesn’t want to start from scratch. Berger said the House and Senate can dust off their 2025 budget bills, take “a look at things, see what’s changed — but it’s not like starting from the very beginning.”
“I’m hopeful that we can work out a joint process where we, at the very beginning, have both the House and the Senate involved in crafting the document.”
“But we’re not there at this point,” Berger said. The runway still stretches out ahead.
Speeding Devices
North Carolina lawmakers will consider allowing use of technology that would prevent speeding by people who have proven incapable of driving the speed limit on their own. House Bill 1199 Track would require drivers who lose their license because of repeated speeding tickets or similar traffic violations to equip their car, truck or motorcycle with a device that would prevent it from going over the speed limit. Drivers would need to have the device in their vehicle for a year as a condition of getting their license back.
States are beginning to embrace Intelligent Speed Assistance or ISA in law enforcement. This summer, Virginia will begin to require ISA use by people convicted of reckless driving over 100 mph.
Supporters of the devices say existing law enforcement strategies aren’t enough. Members of North Carolina Families for Safe Streets joined ISA bill sponsors at the General Assembly on Wednesday and held photos of loved ones killed in speed-related crashes as they urged lawmakers to require the technology.