An effort to roll back tax incentives for AI data centers moved forward this week as both houses of the Legislature advanced a bill to redirect $250 million in previously authorized tax credits toward energy storage projects and utility bill relief for lower-income New Jersey residents.
The Assembly State and Local Government Committee approved A5165, the “End Data Center Tax Credits Act,” sponsored by Assemblymen Andrew Macurdy (D-Summit) and Balvir Singh (D-Burlington). The legislation would redirect tax credits originally intended to support AI data center development to programs aimed at lowering electricity costs.
Macurdy and Singh both testified in favor of the measure
Macurdy argued that the proposal reflects a shift in the state’s priorities since the tax credits were first authorized.
“I believe that government programs should be continuously scrutinized to ensure the most efficient use of taxpayer dollars possible,” Macurdy said. “This proposal represents a re-evaluation.”
Singh acknowledged that economic incentives can serve an important purpose, but arguedthat AI data centers no longer require taxpayer assistance.
“But AI data centers backed by these wealthy corporations at this time right now do not need additional subsidies on the backs of New Jersey taxpayers,” he stated.
Under the bill, $125 million of the redirected tax credits would be made available to the Board of Public Utilities for energy storage projects. The remaining $125 million would be used to provide utility bill relief to commercial electricity customers with annual incomes of $55,000 or less.
Data centers have become an increasingly controversial issue in New Jersey over the past year, fueled by concerns about their growing electricity demands and their impact on surrounding communities.
In Vineland, residents have repeatedly complained about a loud humming noise coming from a recently constructed data center. The facility also became a flashpoint during the Democratic primary in the 2nd congressional District. Even proposals that ultimately failed to move forward elsewhere, including one in Andover, generated significant local opposition.
Public polling has also reflected growing skepticism toward additional data center development. An April poll found that New Jersey voters favored a temporary pause on new data center construction, while a May survey found that a majority opposed building an AI data center in their own community.
Gov. Mikie Sherrill has also proposed new guardrails on AI data center development in New Jersey.
A5165 passed the Assembly committee with Democrats Rosy Bagolie (D-LIvingston), Robert Karabinchak (D-Edison), Vincent Kearney (D-Garwood), Cody Miller (D-Monore) and Lisa Swain (D-Fair Lawn) voting yes, and Republicans Alex Sauickie (R-Jackson) and Erik Simonsen (R-Lower Township) abstaining.
The Senate companion bill S4390 also cleared the Senate Budget and Appropriations Committee unanimously, suggesting bipartisan support may be emerging around an issue that has become increasingly politically contentious nationwide.