AZ — State Policy Updated 2026-07-17

Arizona

State computer data center tax relief 2026 incentive repeal, pause, and modification proposals Statewide Local zoning and water constraints Project-specific local decisions in 2026 Water Constraints

1) Incentive programs

State computer data center tax relief

Arizona’s core state-level data center incentive remains the Computer Data Center Program administered by the Arizona Commerce Authority (ACA). The program exempts qualifying owners, operators, and qualified colocated tenants from transaction privilege tax and use tax on purchases of certified data center equipment, including servers, networking gear, power infrastructure, cooling equipment, security systems, and software used directly in data center operations. The governing statute is A.R.S. Section 41-1519, with related state and municipal tax provisions in A.R.S. Sections 42-5061, 42-5159, and 42-6004 (Arizona Commerce Authority, accessed 2026-06-10; Arizona Legislature, current as of 2026-06-10; Arizona Legislature, current as of 2026-06-10; Arizona Legislature, current as of 2026-06-10; Arizona Legislature, current as of 2026-06-10).

Eligibility is tied to location, investment, and use. A qualified facility must be certified by ACA, and the minimum new capital investment is lower in counties with populations below 800,000 than in larger counties. Arizona’s program also provides a longer exemption period when a certified facility meets sustainability requirements in A.R.S. Section 41-1519, including energy-efficiency and water-conservation criteria (Arizona Commerce Authority, accessed 2026-06-10; Arizona Legislature, current as of 2026-06-10).

As of July 17, 2026, the statutory program had not been repealed, but Laws 2026, Chapter 140 (HB 4168) barred ACA from accepting applications for new computer data centers, and barred new data centers from qualifying, from July 1, 2026 through June 30, 2029. The law did not terminate relief already awarded to certified facilities; the disposition of applications filed immediately before July 1 was not yet known at the cutoff (Arizona Legislature, Laws 2026 Chapter 140, 2026-06-13; KJZZ, 2026-07-14).

2026 incentive repeal, pause, and modification proposals

Arizona enacted two broad data center policy changes in June 2026. HB 2756 did not repeal the tax incentive but created a state framework for “extra high load factor customers” served by public power entities and electric utilities. The bill was signed by Governor Katie Hobbs on June 4, 2026, and authorizes the Arizona Corporation Commission to establish service characteristics such as minimum bills, minimum contract terms, early-termination provisions, collateral or guarantees, and customer payment for infrastructure improvements; it also requires covered utilities and large public-power entities to report semiannually on new extra-high-load-factor interconnection requests and completed interconnections. On request, those entities must also file cost-of-service studies showing the allocation of costs to new extra-high-load-factor customers (Arizona Legislature, Laws 2026 Chapter 111, 2026-06-04; LegiScan HB 2756 status, 2026-06-04).

Arizona’s June 2026 bipartisan budget enacted the pause through taxation omnibus HB 4168, signed June 13 as Laws 2026, Chapter 140. Section 31 provides the exact July 1, 2026-through-June 30, 2029 application and qualification moratorium and repeals the temporary language after June 30, 2029 (Arizona Legislature, Laws 2026 Chapter 140, 2026-06-13; Governor Hobbs, 2026-06-13). ACA received 113 applications between June 15 and June 30, compared with 123 applications from the program’s 2013 launch through June 14; because not every application is approved, the number that will ultimately qualify remains uncertain (Axios Phoenix, 2026-07-08; KJZZ, 2026-07-14).

Other standalone 2026 bills targeted the incentive or proposed energy, water, planning, and fiscal conditions. The session adjourned without enacting any of them:

Governor Hobbs had also proposed a data-center water-use fee for a Colorado River Protection Fund in her January budget agenda. The enacted June budget omitted that fee, and the session ended without a statewide data-center water-use fee or water-reporting mandate (Governor Hobbs, 2026-01-12; Axios Phoenix, 2026-06-10).

2) Restrictions and moratoriums

Statewide

Arizona had no enacted statewide data center siting moratorium as of July 17, 2026. The enacted three-year restriction is a pause on new tax-relief applications and qualification, not a construction or land-use ban; HB 2756 separately governs utility service to extra-high-load-factor customers (Arizona Legislature, Laws 2026 Chapter 140, 2026-06-13; LegiScan/AZ Legislature HB 2756 text, 2026-06-04).

HB 2452, which failed on House third reading on February 27, would have added electric power production and demand, including small modular reactors and data centers, to county comprehensive planning requirements (LegiScan HB 2452, 2026-02-27; Arizona Legislature HB 2452 engrossed text, 2026-02-27). HB 4009, which failed on House third reading on February 26, would have required the State Land Department to map potential data center and electric-generation sites and update those maps at least every 10 years (LegiScan HB 4009, 2026-02-26; Arizona Legislature HB 4009 engrossed text, 2026-02-26).

Local zoning and water constraints

Arizona’s data center controls remain largely local and project-specific. Land-use approvals, special-use permits, water-service decisions, dust-control enforcement, and utility service agreements are the principal mechanisms shaping projects in Pima, Pinal, Maricopa, and other counties.

Several local controls that predate the 2026 session remain important background. Marana requires principal-use data centers to proceed through a specific plan or specific plan amendment, requires power, water, noise, and design information with applications, imposes noise and site-design standards, and bars Marana Water from providing potable water for data center cooling, humidity control, or similar operations (Town of Marana Code Section 17-6-13, current 2026 supplement). Chandler’s data center ordinance, approved December 5, 2022, and effective January 5, 2023, limits primary data center use to PAD zoning designations and requires resident notification, baseline sound studies, mitigation, annual sound studies for five years, and backup-generator testing limits (City of Chandler, 2023-01-11). Phoenix adopted Ordinance G-7396 on July 2, 2025, adding data centers to the zoning ordinance through a special-permit framework in specified commercial and industrial districts with performance standards for siting, noise, design, and public-safety impacts (City of Phoenix Legistar, 2025-07-02; City of Phoenix, 2025-07-02). Mesa adopted Ordinance 5957 on July 8, 2025, defining data centers, allowing principal data centers in GI/HI districts only through a Planned Area Development overlay approved by City Council, and adding standards for development, screening, parking, and noise (City of Mesa Ordinance 5957, 2025-07-08). Tucson’s large-quantity-water-user code requires sustainable water service applications and water conservation plans for users projected at 10,000 ccf, or 7.48 million gallons, or more per month, with Mayor and Council review and ongoing conservation-plan obligations (City of Tucson Code Section 27-20, current as of 2026-06-10; City of Tucson, 2026-02-19).

Cochise County did not adopt the 120-day moratorium recommended 5-4 by its Planning and Zoning Commission because county officials determined that the evidentiary and procedural requirements for a moratorium under A.R.S. Section 11-833 had not been met. Instead, the Board of Supervisors adopted Ordinance 26-09 on April 7, establishing the county’s first data-center definition, requiring special-use authorization in designated zoning districts, and adding water, infrastructure, site-design, and long-term-management standards; the county said it had no active data-center applications when it clarified the process (Cochise County, 2026-04-03; Cochise County Ordinance 26-09, 2026-04-07; Cochise County, 2026-04-09).

Flagstaff and Tucson were still developing new rules rather than enforcing new bans as of July 17. Flagstaff’s City Council directed staff on May 5 to continue work on a zoning text amendment addressing data centers; the city emphasized that no data-center application or code decision was before the council at that meeting (City of Flagstaff, 2026-04-03; City of Flagstaff, 2026-05-05). Tucson’s Planning Commission held a June 3 hearing on a proposed large-scale-data-center Unified Development Code amendment and continued discussion on June 17; the city still listed the standards as a proposed amendment, not an enacted ordinance, at the cutoff date (City of Tucson, updated 2026-06-17).

Florence chose study rather than a moratorium. On June 29, the Town Council unanimously authorized advertising for a five-member Data Center Facility Ad Hoc Advisory Committee to examine environmental, infrastructure, public-service, socioeconomic, land-use, and economic effects and advise the council; the committee has no permitting or regulatory authority. A requested moratorium was discussed but not adopted (Town of Florence special-meeting agenda packet, 2026-06-29; Pinal Post, 2026-07-01). Sahuarita likewise had not received a data-center application, pre-application, or permit request by the cutoff. The town said an August 2025 interpretation applied only to part of the Park Industrial area in the Rancho Sahuarita Specific Plan and that it was drafting industrial-zone standards for data centers, with public outreach anticipated in fall 2026 (Town of Sahuarita FAQ, accessed 2026-07-17).

Project-specific local decisions in 2026

Pima County’s Project Blue moved from 2025 land-use approval into 2026 litigation, utility-rate litigation, construction, and water and dust-control controversy. Attorney General Kris Mayes appealed the Arizona Corporation Commission’s approval of Tucson Electric Power’s special energy agreement for the project on February 19, arguing that the agreement improperly let TEP and Beale Infrastructure set electricity rate schedules without Commission ratemaking authority (Arizona Attorney General, 2026-02-19). A Pima County Superior Court judge dismissed opponents’ lawsuit challenging the county rezoning process in April, but construction activity and community opposition continued (AZPM, 2026-04-13; AZ Luminaria, 2026-04-24). Tucson then revoked a temporary water meter after finding that Project Blue contractors had used city drinking water for dust control outside the city service area, Pima County issued a fugitive-dust notice of violation, and ADWR approved two groundwater wells tied to a developer affiliate after technical reviews concluded that the proposed pumping would not cause unreasonable increasing damage to surrounding wells (AZPM, 2026-05-06; KGUN 9, 2026-05-13; AZPM, 2026-05-28). The ACC appeal remained unresolved as of July 17.

In Pinal County, the La Osa/Vermaland proposal near Eloy remained active but unresolved. The proposal was announced in 2025 as a $33 billion, 3,300-acre data center industrial park with up to 3 GW of planned capacity (PR Newswire, 2025-07-31). The Pinal County Planning and Zoning Commission recommended rezoning and planned-area-development approvals in April 2026, but the Board of Supervisors continued the cases on May 27 after public opposition; local reporting said the applicant then offered to shrink the plan to roughly 1 GW, no more than 11 data center buildings, and one gas plant before an August 26 hearing (Pinal County Planning & Zoning Commission action summary, 2026-04-16; Pinal County BOS agenda item, 2026-05-27; Pinal Post, 2026-06-01; KJZZ, 2026-05-28).

In Maricopa County, Project Baccara advanced through both state generation siting and county compatibility review. The ACC voted 5-0 on February 4 to grant a Certificate of Environmental Compatibility for the campus’s proposed 700.2 MW natural-gas plant; on May 6 the Board of Supervisors approved the required military compatibility permit 4-1 for the 160-acre, two-data-center proposal near Luke Air Force Base. Air-quality, construction, military, and other permits remained outstanding (Arizona Corporation Commission, 2026-02-06; Maricopa County, 2026-05-06; Axios Phoenix, 2026-05-06).

In Marana, opponents submitted referendum petitions in February seeking a public vote on the town’s January approval of a roughly 600-acre Luckett Road data-center campus. The town clerk rejected the petitions, and a judge upheld that decision in early May, leaving the rezoning in effect and no ballot vote scheduled (Town of Marana, 2026-02-18; AZPM, 2026-05-04). HB 2873, which would have changed referendum-withdrawal rules retroactively and arose from the Marana dispute, passed both legislative chambers but Governor Hobbs vetoed it in June (Arizona Legislature HB 2873 Senate-engrossed fact sheet, 2026-04-15; Arizona Luminaria, 2026-07-01). A separate Ranch House data-center rezoning application remained under town and utility review as of June 26 and had not been approved by July 17 (Arizona’s Family, 2026-06-26). The dispute also became a local election issue: more than 100 residents attended a June 30 information session hosted by mayoral and council challengers to discuss data-center impacts and town decision-making (AZPM, 2026-06-30).

Phoenix produced two contrasting project decisions. Vintage Partners abandoned a proposed 63-acre Laveen data-center plan in early March and reverted to a mixed-use concept after the city’s 2025 standards and SRP’s clustered large-load queue increased the project’s mitigation and grid-upgrade burden (AZBEX, 2026-03-03; Data Center Dynamics, 2026-03-05). On March 25, however, the City Council adopted Ordinance S-52717 approving a binding waiver for Aligned Data Centers’ Behrend Drive campus from specified G-7396 special-permit provisions, subject to project-specific fire, hazardous-materials, energy, water, noise, and design mitigation requirements (City of Phoenix Legistar, adopted 2026-03-25).

In Yuma, developer interest discussed by economic-development officials prompted April public comment about water, power, heat, jobs, and tribal consultation, but no site, contract, or builder was publicly identified. Local reporting said the immediate concept was no longer moving forward by April 7, so it should be recorded as community debate rather than an active project (Arizona’s Family, 2026-04-06; KYMA, 2026-04-07).

3) Local governance and community opposition

Arizona’s early 2026 debate shifted from general incentive eligibility to four recurring local governance questions:

  • Who pays for generation, transmission, substations, and other dedicated utility infrastructure for very large loads. HB 2756 authorizes the ACC to establish minimum bills, minimum contract terms, collateral, guarantees, and infrastructure-payment requirements for regulated utilities serving extra-high-load-factor customers. The law separately requires reporting and, on request, cost-of-service studies from covered utilities and large public-power entities (Arizona Legislature, Laws 2026 Chapter 111, 2026-06-04).
  • Whether large campuses can secure water, dust-control, and environmental compliance without shifting costs or risk to nearby residents. Project Blue’s temporary water-meter revocation and fugitive-dust violation made this issue concrete in Pima County during May 2026 (AZPM, 2026-05-06; KGUN 9, 2026-05-13).
  • Whether local zoning approvals are moving faster than regional planning for generation, water, transmission, and military compatibility. Pinal County’s La Osa continuance and Maricopa County’s Project Baccara compatibility-permit debate illustrate that local review is now a major policy venue, not just a ministerial approval step (Pinal Post, 2026-06-01; Fox 10 Phoenix, 2026-05-06).
  • Whether waste heat creates an unregulated neighborhood impact. An Arizona State University field study at four Phoenix-area facilities measured average downwind warming of about 0.7-0.9 degrees C and a maximum of 2.2 degrees C, framing data-center heat plumes as an emerging urban thermal hazard that current zoning and environmental reviews seldom quantify (Arizona State University, 2026-05-18; ASU research record, 2026-05-18).

The late-2025 Chandler vote remains important historical context for the 2026 debate. Chandler City Council voted 7-0 in December 2025 to reject a proposed AI data center after public opposition focused on noise, quality of life, water, and local-benefit concerns, despite lobbying support for the project (AZFamily, 2025-12-11; E&E News/Politico, 2025-12-12).

4) Legislative activity (2024-2026)

Arizona entered 2026 with an existing state tax incentive and no statewide moratorium. The 2026 session produced a larger data center bill set than previous years, and the outcomes diverged:

  • Enacted: HB 2756, the extra-high-load-factor customer and utility cost-allocation framework, signed June 4, 2026 (LegiScan HB 2756 status, 2026-06-04).
  • Enacted: HB 4168, Laws 2026, Chapter 140, pausing new ACA data-center applications and qualifications from July 1, 2026 through June 30, 2029 (Arizona Legislature, Laws 2026 Chapter 140, 2026-06-13).
  • Failed: HB 2452, county comprehensive planning for power demand including data centers and small modular reactors, failed on House third reading on February 27 (LegiScan HB 2452, 2026-02-27).
  • Failed: HB 4009, State Land Department mapping of data center and generation sites, failed on House third reading on February 26 (LegiScan HB 4009, 2026-02-26).
  • Failed: HB 2388, which would have appropriated $100,000 for an ACA study of the economic benefits of small modular reactors and data centers, failed House final passage 23-29-7 on March 11 (Arizona Legislature HB 2388 engrossed text, 2026-03-11; LegiScan HB 2388, 2026-03-11). HB 2456, a nuclear-ready-community planning bill that evolved from an SMR/data-center co-location proposal, failed final passage 28-27-5 on June 9 (LegiScan HB 2456, 2026-06-09).
  • Died without enactment: HB 2119, HB 2467, HB 2631, HB 2702, HB 2738, HB 2820, HB 2949, SB 1463, SB 1467, and SB 1799, which would have shortened, repealed, redirected, studied, or conditioned the tax incentive or assigned large-load costs (Arizona Capitol Times, 2026-07-09). A House amendment to broader local-rate moratorium HB 4030 would also have assigned large-data-center energy costs to those customers; the amendment failed 21-31-7 on March 11 and HB 4030 died in the House (LegiScan HB 4030, 2026-03-11).
  • Vetoed: HB 2873, the referendum-withdrawal measure associated with the Marana data-center dispute (Arizona Luminaria, 2026-07-01).

5) Notable projects and operators

  • Mesa / Google Redhawk: Google announced its first Arizona data center in Mesa’s Elliot Road Technology Corridor in 2021, with a reported $600 million investment and a local Government Property Lease Excise Tax agreement; the project remains part of the state’s established data center pipeline (GPEC, 2021-06-01; Data Center Dynamics, 2021-07-02).
  • Mesa / Meta: Meta’s Mesa data center represents an approximately $1 billion investment and is described by the company as supporting about 200 operational jobs and roughly 2,000 peak construction jobs (Meta, accessed 2026-06-10).
  • Goodyear / Vantage: Vantage announced a $1.5 billion Goodyear campus in 2022, and the city described the project as a major long-term economic development win for the West Valley (Vantage Data Centers, 2022-07-19; City of Goodyear, 2022-07-19).
  • Greater Phoenix / Microsoft: Microsoft operates data centers in El Mirage and Goodyear, and its Arizona community page identifies both as part of the Greater Phoenix data center footprint (Microsoft Local, accessed 2026-06-10).
  • Mesa / Edged: Edged opened a 36 MW Mesa facility on April 2 using a closed-loop, waterless cooling design; the company estimates the design avoids about 138 million gallons of water use annually compared with conventional evaporative cooling (Edged US, 2026-04-02).
  • Avondale / Prime Data Centers: Prime broke ground on the first three buildings of a planned five-building, 240 MW campus on May 21 and described the full campus as an investment exceeding $3 billion (Prime Data Centers, 2026-05-21).
  • Goodyear / Microsoft: Microsoft paid about $131 million for roughly 100 acres adjacent to its existing campus in a transaction recorded May 29, expanding its potential West Valley footprint without disclosing incremental MW or a construction schedule (CoStar, 2026-06-08; Data Center Dynamics, 2026-06-11).
  • Mesa / EdgeCore and NTT: Mesa approved EdgeCore’s revised two-building plan in March after the developer reduced it by about 800,000 square feet to approximately 1.2 million square feet. The Planning and Zoning Board recommended NTT’s separate up-to-seven-building, approximately 2.26-million-square-foot campus on May 13, but City Council action remained pending at the July 17 cutoff (Phoenix Business Journal, 2026-03-10; The Real Deal, 2026-03-17; Phoenix Business Journal, 2026-05-14).
  • Peoria / Aligned Data Centers: Aligned filed plans for two buildings totaling about 916,000 square feet on a 95-acre site; the proposal remained in planning and public sources had not disclosed investment or MW by July 17 (Phoenix Business Journal, 2026-05-28; The Real Deal, 2026-05-29).
  • Phoenix / Aligned Behrend and Vintage Laveen: Phoenix approved a binding waiver with project-specific mitigation conditions for Aligned’s Behrend campus on March 25, while Vintage Partners canceled its separate 63-acre Laveen data-center plan in early March and returned to mixed-use planning (City of Phoenix Legistar, adopted 2026-03-25; AZBEX, 2026-03-03).
  • Pima County / Project Blue: Beale Infrastructure’s Project Blue remained the state’s highest-profile contested 2026 project, with a special energy agreement appeal, dismissed rezoning litigation, active construction protests, water-service enforcement, and dust-control enforcement all occurring between February and May 2026 (Arizona Attorney General, 2026-02-19; AZPM, 2026-04-13; AZ Luminaria, 2026-04-24; AZPM, 2026-05-06; KGUN 9, 2026-05-13).
  • Pinal County / La Osa: Vermaland’s proposed La Osa data center industrial park remained pending after a May 27 continuance, with the applicant reportedly offering to reduce the plan from a previously announced up-to-3-GW concept toward a smaller roughly 1-GW configuration (PR Newswire, 2025-07-31; Pinal Post, 2026-06-01; KJZZ, 2026-05-28).
  • Maricopa County / Project Baccara: Project Baccara advanced through a military compatibility-permit vote in May 2026 but still required additional approvals; the proposal remained controversial because of its on-site power component and nearby community concerns (Data Center Dynamics, 2026-04-13; Maricopa County, 2026-05-06; Fox 10 Phoenix, 2026-05-06).

6) Notes and uncertainties for future updates