Maryland Gov. Moore Imposes Strict New Regulations on Data Center Development, Moves to Repeal Tax Exemption

Maryland Governor Wes Moore issued an executive order on September 23, 2026, establishing strict new guidelines for data center development across the state. The move introduces a comprehensive framework for transparent and accountable growth, while simultaneously announcing the governor's intent to work with the General Assembly to repeal a state tax exemption for data centers, originally enacted in 2020. This dual action signals a significant shift in Maryland's approach to attracting and regulating the rapidly expanding data infrastructure industry, aiming to balance economic development with environmental, community, and ratepayer protections.

The executive order, which codifies a new development framework, targets large data centers covering 25 megawatts or more, subjecting them to a single, unified review process and public record as soon as they seek any state action, including permits, incentives, or letters of support. This centralized oversight is designed to ensure that future projects align with the state's broader objectives.

For small and mid-sized businesses operating in or considering expansion into Maryland's tech and real estate sectors, these new regulations and the proposed tax repeal introduce a layer of complexity that demands proactive strategic planning. What might appear as a straightforward regulatory update actually creates significant financial and operational considerations. We've seen clients grapple with shifting incentive landscapes and increased compliance burdens, and our view is that this environment necessitates robust financial risk management strategies. The potential loss of sales and use tax and personal property tax exemptions could materially impact the financial viability of new projects, altering investment calculations and potentially making Maryland a less attractive location compared to neighboring states with more favorable tax structures. Companies involved in the data center supply chain, from construction to specialized services, will need to reassess their business models and projections. Navigating these changes effectively requires a deep understanding of both regulatory requirements and their financial implications, and C&S Finance Group LLC is well-equipped to assist businesses in developing resilient strategies for this evolving landscape. To learn more about how we can help with financial risk management and other advisory services, contact C&S Finance Group LLC at csfinancegroup.com.

The core of Governor Moore's executive order is the establishment of the Maryland Data Center Task Force, housed within the Governor’s Office. This task force is charged with a multi-faceted mission: reviewing every proposed data center project, publishing clear rules in advance, maintaining a public Data Center Dashboard for transparency, and providing essential support to local governments navigating these complex developments. Its membership will draw expertise from various state departments, including the Maryland Energy Administration and the Departments of Commerce, Labor, Environment, Natural Resources, Agriculture, and Planning, ensuring a holistic review process.

Under the new framework, each large data center project will be evaluated against five critical principles: the protection of ratepayers and the state's energy grid, the generation of tangible economic benefits for Marylanders, the amplification of community voice in development decisions, stringent environmental protections, and a commitment to transparency and accountability throughout the process. Following review, projects will receive a public determination from the task force, categorizing them as "Aligned," "Conditionally Aligned," or "Not Aligned" with the state's objectives. This structured assessment aims to provide clarity for developers while empowering the state to steer development towards projects that offer the greatest public good.

The announcement regarding the repeal of the Data Center Sales and Use Tax Exemption marks another significant policy shift. This exemption, originally passed in 2020, provided a substantial incentive for data center operators by exempting them from state sales and use taxes, and also personal property taxes, according to Pluribus News. Governor Moore's commitment to work with the General Assembly in the upcoming legislative session to revoke these breaks suggests a reevaluation of the state's economic development priorities, moving away from broad tax incentives towards a more regulated, principle-based approach. For businesses involved in constructing, equipping, or operating data centers, the loss of these tax benefits could significantly increase operational costs and project expenses, potentially influencing investment decisions and the overall competitiveness of Maryland as a location for new data infrastructure.

This regulatory tightening in Maryland mirrors a broader trend seen in some neighboring jurisdictions. For instance, Prince William County in Virginia, a major hub for data center development, has also largely moved to end by-right data center development, indicating a regional pivot towards more controlled growth in response to concerns over energy consumption, land use, and community impact. The Maryland task force's mandate to coordinate with neighboring states suggests an awareness of this regional dynamic and a desire to harmonize approaches where possible, or at least understand the competitive landscape.

The implications for small and mid-sized businesses extend beyond direct data center operators. Companies providing construction services, specialized IT support, security, maintenance, and other ancillary services to data centers may face altered demand patterns or increased cost pressures if development slows or shifts. Local communities, often eager for the economic benefits that data centers can bring, will now have a more formalized voice through the "community voice" principle, which could lead to more tailored demands on developers regarding local hiring, infrastructure improvements, or environmental mitigation efforts. Businesses seeking to engage with these projects will need to demonstrate their contribution to these broader community and economic benefits.

The requirement for "one standard, one review process, and one public record" for large data centers is intended to streamline what can often be a fragmented and opaque approval process. While this could ultimately reduce some administrative burdens by centralizing information, the "strict guardrails" and detailed evaluation criteria mean that the bar for approval will be higher. Developers and their partners will need to prepare more comprehensive proposals that explicitly address the five core principles, demonstrating not just technical feasibility but also clear societal and environmental benefits.

As the Maryland Data Center Task Force begins its work and the General Assembly prepares for the legislative session, the industry will closely watch how these new regulations are implemented and how the proposed tax exemption repeal progresses. The state's ability to balance its desire for responsible development with its competitiveness in attracting high-tech investment will be a key factor in shaping Maryland's economic landscape for years to come.