Oklahoma lawmakers consider limiting tax incentives and possibly pausing new data centers amid infrastructure concerns

Proposals target incentives, utility impacts and water use as data center growth accelerates

Oklahoma legislators are weighing a new set of policy tools that could reshape how large-scale data centers are recruited, approved and served by utilities, including proposals to curb tax benefits and to temporarily halt new projects while state regulators study long-term impacts.

One of the most far-reaching measures filed for the 2026 regular session is Senate Bill 1488, which would impose a statewide moratorium on the construction of new data centers until Nov. 1, 2029. The bill would also direct the Oklahoma Corporation Commission to conduct a comprehensive study of how large data centers affect water supplies, utility rates, property values within a three-mile radius of proposed facilities, and other issues the commission determines relevant.

Separately, lawmakers are also reviewing how Oklahoma’s existing incentive structure applies to data-center-style operations. State law and administrative rules currently allow certain computer services and data processing businesses to qualify for sales and use tax exemptions on machinery and equipment purchases if they meet out-of-state revenue thresholds and other conditions.

• Sales and use tax exemptions in statute and administrative rules can apply to purchases of computers, data processing equipment and related peripherals by qualifying establishments primarily engaged in computer services and data processing.
• Eligibility depends in part on the percentage of annual gross revenues derived from out-of-state buyers or consumers, with different thresholds for specified classifications.

In the House, a separate measure filed in early February, HB 4424, would amend Oklahoma’s ad valorem tax exemption framework for manufacturing facilities by modifying the definition of “manufacturing facilities” to exclude certain establishments engaged in computer services and data processing, with a transition tied to whether a facility is in operation before Jan. 1, 2027.

Other proposals focus on how major new electricity loads are handled in rate design and system planning. Among the measures discussed publicly is HB 3397, which would create a separate electricity service classification for large energy-use facilities—an approach intended to distinguish high-load customers, such as data centers, from other commercial and industrial users for tariff purposes.

SB 1488 would pause new data centers and require a statewide review of impacts on water supplies, utility rates and nearby property values.

Together, the measures reflect growing attention to the practical effects of rapid data center growth: electricity demand that can require grid upgrades, questions about whether costs are allocated to the customers driving new infrastructure, and concerns about water use and siting in areas served by constrained local systems.

All proposals remain subject to the legislative process, including committee review, potential amendments and floor votes in both chambers before any changes could take effect.