New Jersey has eliminated $250 million in uncommitted tax incentives for AI data centers. Gov. Mikie Sherrill signed the "End Data Center Tax Credits Act" (A5165/S4390) on Thursday, canceling the remaining unallocated funds from the state's Next New Jersey tax-credit program while leaving the one existing award intact.
The bill, sponsored by Assemblyman Andrew Macurdy, a Democrat from Summit who represents New Jersey's 21st Legislative District, passed the Senate 35-4 and the Assembly 74-4 on June 30. The legislation rescinds the $250 million in incentives that had not yet been committed to specific projects.
"Our role as elected officials is to continually scrutinize whether taxpayer dollars are being used as effectively as possible," Macurdy said. "In 2026, New Jersey residents should not be subsidizing large AI data centers."
Canceling the remaining data center incentives
The Next New Jersey tax-credit program, established in 2024, set aside $500 million for qualifying AI and data center projects. The state's Economic Development Authority awarded the first $250 million to CoreWeave, which plans to build a $1.8 billion AI data center at the former Merck campus in Kenilworth. That award remains intact.
The move drew opposition from the New Jersey Business and Industry Association. The state Office of Legislative Services and the NJBIA both said the cancellation will not generate new state revenue.
Sherrill also signed separate legislation Thursday requiring data centers to report their energy and water use twice a year.
Summit's local ban
The state action follows Summit's own prohibition on AI data center facilities. The city's Common Council adopted its initial ban June 16, defining an AI data center as a facility using 20 megawatts of power. After officials and residents raised concerns that smaller facilities could evade the prohibition, the council passed a follow-up ordinance on July 28 that removed the threshold and clarified the ban extends citywide.
The city cited concerns about infrastructure and long-term planning in support of the prohibition, according to the ordinance. For legal and regulatory professionals monitoring AI policy, this paired state and local action shows how AI-specific tax incentives are facing new scrutiny - and how such decisions can be reversed or narrowed through legislation. You can follow this evolving regulatory area through AI for Legal resources, or review how lawmakers approach these issues with the AI Learning Path for Policy Makers.
Why this matters for legal professionals
This law is a concrete example of a state rescinding draft AI-related tax benefits, which has direct implications for attorneys advising data center developers, energy providers, or municipalities. The legal landscape for AI infrastructure is shifting from federal policy debates to state-level statutes, local ordinances, and contract terms like those governing CoreWeave's remaining award. For lawyers tracking these changes, knowing the mechanics of these decisions - from tax-credit administration to city zoning authority - matters more than the political discussion around them.
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