Georgia’s Tax Approach to Data Centers Offers States a Blueprint

For states competing for data center sites, tax incentives alone are no longer enough to win. To remain competitive, states will need adequate power capacity and cost, water availability, and political transparency.

Despite Georgia lawmakers declining to repeal new sales tax subsidies for data center equipment, there is growing concern among states that lost sales tax revenue has outpaced collections from data center construction and operation. Future energy strain gave several Georgia’s state leaders pause, as Georgia Power projected 80% of future added generation capacity could be driven by data center demand.

Georgia’s close call with repealing data center tax breaks align with rising national pushback against data centers amid growing demand. Even Virginia, the world’s largest data hub, has introduced legislation to end a projected $1.6 billion annual tax break.

State leaders worry that rapid development, fueled by the artificial intelligence explosion, will have long-lasting fiscal and infrastructural impacts. This change is unfolding against a volatile geopolitical backdrop that is upending global energy costs.

In particular, the Iran conflict has increased fuel costs, infrastructure instability, and supply chain constraints. The regional instability may lead to domestic investment being favored over international sites, adding an additional layer of complexity to states’ decisions surrounding data centers.

Georgia vs. Virginia

Debates over data center tax incentives aren’t unique to Georgia. Two-thirds of states offer data center-specific tax breaks, including sales-and-use tax exemptions, electricity tax exemptions, and property tax abatement on real estate, equipment, and construction materials. Several states, Virginia being the most notable, have started introducing legislation to limit these incentives.

Virginia state lawmakers have yet to approve a budget with the 2026 legislative session, and the $1 billion in funding tied up the state’s data center retail sales-and-use exemption is central to the divide. With a long-standing, historically stable incentive structure, Virginia remains aggressive in data center growth outlook.

Following Virginia’s data center tax treatment can be useful to better understand Georgia’s data center trajectory:

• Income tax: Georgia slightly edges out Virginia with 5.19% income tax in 2026 versus 6%, although Texas, Nevada, and Ohio have no corporate income tax.
• Property tax: Georgia doesn’t have cohesive tax property relief. In comparison, states such as Virginia and Texas are known for extensive tax reductions and abatements.
• Certainty of legislation: Georgia may have an advantage over Virginia with the certainty of its legislation, despite being restrictive. Markets with clearer front-end rules may outperform incentive-rich but uncertain markets. Georgia’s conscious decision to limit new growth while maintaining current certificates also sets the stage for better retention of data center developments.

Data center refurbishments are an ongoing operational necessity, as equipment typically only lasts three to five years. This means Georgia may benefit from more predictability in data center-related revenue due to stickiness of existing facilities and more restraint on surging growth, which is more difficult to manage in real time.

Outlook for Georgia

Predictability could become a competitive advantage for Georgia. Execution risk, including power availability and regulatory delays, can be more impactful on siting decisions than tax packages. Placing constraints on new growth creates guardrails for power regulators to scale and better manage increasing shifts in grid capacity and demand.

Georgia’s regulatory-driven energy model will now be more explicit and enforceable, making ratepayer protection the key focus at the expense of competitiveness. Shifting incremental costs for power generation, transmission, and distribution to data centers will favor fewer but more intentional projects, with hyperscalers that are able to commit to long-term contracts and fund necessary infrastructure.

This, in turn, should reduce more speculative projects and improve zoning challenges, and reduce local opposition to data center projects. Although additional legislation is possible, Georgia’s General Assembly has been largely bipartisan and holistic with data center reform, signaling a more durable policy shift rather than reactionary, disconnected one-off measures.

While new tax policies aim to restrict data center growth, and more leaders are approaching construction with caution, the long-term impact to data center sites remains in flux.

Increased US growth or relocation is possible, with data centers in the Middle East suffering direct hits and Middle Eastern investors possibly reconsidering their data spend amid regional conflicts. Growth may slow but shifting priorities mean states can remain competitive even with restrictive data center legislation.

Georgia’s approach to data center growth can serve as a blueprint for other states looking to incorporate tax incentives or redefine their strategy. When compared with other favorable data center states, Georgia is enabling controlled, sustainable development by focusing on retention and ratepayer protection over aggressive new growth.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Brad Leskoven is director of tax services at Cherry Bekaert.

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