S.C. Senate waters down data center reform

Correction: A previous version of this report incorrectly stated that sales tax revenue lost due to data center exemptions totaled $828 million, as referenced on the Senate floor. We have since been made aware that the correct total is $828,288. The report has been updated accordingly.

Update 4/28/26: S.867 Data Center Development Act has advanced to the Senate floor.

The time crunch is on to get a responsible approach to data center permitting over the finish line in South Carolina. The General Assembly is scheduled to adjourn on May 14, 2026, and barring a special session, that deadline will mark the end of opportunities to advance legislation this year.

The SC Policy Council has raised concerns this legislative session on the excesses of data centers and the preferential treatment they are given in the state of South Carolina. 

There are only two data center reform bills that have received a committee hearing in both the House and the Senate: S.867 and S.902, which are fairly similar. An analysis of both bills can be found here.

S.867 establishes a statewide data center permitting process and has had the most meaningful time in subcommittee, with testimony coming from multiple entities on both sides of the debate. This bill has not advanced.

Senate members have been thoughtful with the introduction of data center reform legislation, and South Carolina citizens are depending on the advancement of this legislation for community protections.

With time running out in the legislative session, the S.C. Senate instead has chosen to advance two provisos in their version of the state budget that study water and tax exemption use by data centers, and one proviso that temporarily suspends economic development tax incentives.

Senate budget provisos not enough

During the budget debate, the Senate added a proviso for this fiscal year that will require water usage reporting from commercial data centers by January 31^st, 2027. This is a welcome requirement, but there’s no effort to curtail water usage like with S.867’s requirements for water cooling technology.

If we get back the water report next year and it’s too much water, all we did was study the millions of gallons of water usage to further sit on our hands and take no action.

Another approved Senate proviso prevents further incentives from going to data centers from the Coordinating Council for Economic Development. This is a welcome suspension of incentives, it won’t stop a large amount of money from going to data centers, the bulk of which comes from sales tax exemptions. Incentives cited on the Senate floor amounted to $250,000.

Finally, the last and what could have been the most important proviso requires reporting on how much money in tax exemptions goes to data centers and how many data centers collect that exemption.

Data centers have been exempt from sales taxes amounting to $828,288 in 2025, another example of the general assembly picking winners and losers in an isolated industry.

A permanent elimination of these exemptions is the right path, and a temporary suspension would have at least freed up revenue for additional individual income tax relief this year. Now the state is studying the money that it subsidizes data centers with, but there’s no plan to actually address the targeted tax exemptions. The previous proviso attempt that failed would have temporarily suspended those exemptions.

Recent co-op development

Amidst the S.867 Data Center Development Office debate, The Central Electric Cooperative Board released a new “rate” for data centers over 20 megawatts with multiple protections for consumers:

• 15-year minimum contracts with penalties if terminated early
• Prepayment for electric infrastructure upgrades
• Provisions for scaling down use during energy shortages
• Financial security requirements, including cash deposits
• Monthly energy demand minimums to ensure enough revenue is generated to cover required system costs

This announcement is a welcome assurance that ratepayers serviced by electric cooperatives will not be subsidizing data centers. However, Dominion Energy, Duke Energy, and Santee Cooper are not tied to these new provisions.

The new provisions from electric cooperatives are also not codified into law, and do not address many of the concerns that S.867 could rectify.

Problems at the county level

Residential energy customers outside of electric cooperative territories will not have the protections outlined by the Central Electric Power Cooperative Board.

South Carolina citizens still have concerns over the location of data centers, their infrastructure demands in utility service territory, noise, buffers, water usage, pollution, and lighting.

Debates at the county-level have ensued over the proposed locations of new data center construction, along with the massive property tax exemptions that data centers would get in those locations.

Colleton County, for example, has considered locating a data center campus in a rural development zone. Marion County signed a non-disclosure agreement with a data center that citizens view as secretly locating a data center into their community. York County is considering their own regulations before a data center is approved, while Horry County is considering similar regulations.

State lawmakers have an opportunity to introduce a uniform permitting process that ensures transparency and helps locate data centers at abandoned “brownfield” sites rather than untamed rural areas and near neighborhoods.

S.867 Data Center Development Office

A statewide permitting process will provide a uniform approach to analyzing sites for utility infrastructure, along with water supply, wastewater treatment capacity, road access, and overall suitability of the site.

The Public Service Commission would be tasked with approving rate agreements that maintain data center payment for projected infrastructure costs and requiring financial assurances for such.

Standards for noise, vibration, light impact, buffers, and water-cooling technology would be set. Counties would still be able to impose additional regulations and reject data centers through zoning and land use decisions.

S.867 would essentially alleviate the concern that citizens have with the effects a data center could have on their community. Stipulations would be put in place that data centers of various sizes would have to participate in, limiting negative impacts on communities and the environment. The bill would require data centers to pay their own way with energy infrastructure and imposes responsible measures on how water resources are used while limiting negative effects on surrounding communities.

Water and energy use by data centers would be available to the public with required reporting from the bill as well.

The differing approaches by counties to data centers has brought a level of uncertainty to both residents and data center developers themselves. S.867 would set expectations for the industry and residents, allowing development projects to move forward responsibly without harm to either side.

Recommendations for amendments

Senator Shane Massey filed S.784 earlier this year with language that would eliminate blanket sales tax exemptions and introduce heightened eminent domain requirements. These provisions would pair well with S.867 and would result in comprehensive legislation that focuses on transparency and proper locating of new data center facilities. Elements of S.784 can be added as amendments to S.867.

S.867 has a hearing on Tuesday, April 28^th where multiple changes to the bill are expected to be introduced. If the legislature wants to implement true reform around the data center industry, S.867 must be advanced quickly to be considered by the House before legislative session ends.