Overview
Maryland courts data centers with a sales and use tax exemption that runs 10 years for qualifying projects and extends to 20 years for investments above $250 million. The state exempts equipment from taxation but not the electricity to run it. Chapter 411 (SB 474, 2024) designated data centers as critical infrastructure and streamlined permitting for onsite emergency backup generation, while 2026 legislative discussions signal possible new statewide oversight including PSC operating certificates and peak demand curtailment requirements.
Incentives
Sales and Use Tax Exemption (10-20 years)
Maryland’s primary data center incentive exempts qualified personal property from sales and use tax for 10 years, with annual renewal required.[1][2][3]
- $2 million minimum investment in Tier 1 Areas; $5 million elsewhere
- Five qualified positions required, each paying at least 150% of state minimum wage
- 20-year exemption available if business invests at least $250 million in qualified data center personal property within ten years of initial application
- Electricity purchases remain taxable — only equipment is exempt
- Requires Commerce eligibility certificate and Comptroller exemption certificate, renewed annually
Local Personal Property Tax Reductions
State law authorizes counties and municipalities to reduce or eliminate the assessment percentage for data center personal property.[1] Implementation and terms vary by jurisdiction.
Energy Efficiency Grants
The Maryland Energy Administration’s FY23 Data Center Energy Efficiency Grant Program offers funding for clean energy projects in data centers, subject to available funds and program guidelines.[4]
Requirements and Conditions
Job and Wage Standards
Qualified positions must be full-time, net new to Maryland, and pay at least 150% of the state minimum wage.[1][2][3] The business must maintain these positions throughout the benefit period.
Annual Renewal and Compliance
The sales and use tax exemption requires annual renewal with the Department of Commerce and Comptroller.[1][3] Failure to maintain investment or employment thresholds jeopardizes the exemption.
Emergency Generator Restrictions
Chapter 411 (SB 474, 2024) exempts onsite emergency backup generation from PSC Certificate of Public Convenience and Necessity (CPCN) requirements only when:[5]
- Equipment includes anti-islanding safeguards preventing export to the grid
- The project has obtained an MDE permit to construct
- Use is limited to emergency backup and testing
Utility and Grid Rules
Statewide Oversight Proposals (2026)
January 2026 reporting indicates lawmakers are drafting proposals for statewide oversight, including a PSC operating certificate requirement for large data centers.[8] These proposals also include measures to encourage peak demand curtailment and battery storage use as conditions of expansion.
Emergency Backup Generation
The 2024 Critical Infrastructure Streamlining Act exempted onsite emergency backup generators from PSC oversight if limited to emergency backup and testing and subject to MDE permitting.[5][8]
Local Zoning
Baltimore County Bill 54-24
Baltimore County enacted Bill 54-24 (effective July 1, 2024) to define data centers and establish zoning standards.[7] The ordinance sets:
- Definitions for data centers and energy storage devices
- Zoning conditions specifying where data center use is permitted
- Bulk, landscaping, and site requirements for qualifying developments
Local zoning authority remains decisive for data center approvals. Other counties and municipalities may adopt similar regulations or use existing conditional use permit procedures.
What to Watch
- PSC operating certificate proposal — 2026 legislative session may introduce mandatory certification for large data centers, giving the Public Service Commission oversight authority
- Peak demand curtailment requirements — proposals to condition data center expansion on commitments to curtail load during grid stress events and deploy battery storage
- Local zoning ordinances — additional counties may follow Baltimore County’s model and adopt data center-specific zoning standards
Sources
[1] Maryland Department of Commerce, “Data Center Maryland Sales and Use Tax Exemption Incentive Program,” n.d., https://commerce.maryland.gov/fund/data-center-maryland-sales-and-use-tax-exemption-incentive-program (accessed 2026-01-08).
[2] Maryland Department of Commerce, “Maryland Accepting Applications for New Data Center Tax Incentive Program,” September 29, 2020, https://commerce.maryland.gov/media/maryland-accepting-applications-for-new-data-center-tax-incentive-program (accessed 2026-01-08).
[3] Maryland Comptroller, “Business Tax Tip #28: Sales and Use Tax Exemption for Personal Property Used to Establish or Operate Data Centers,” n.d., https://www.marylandtaxes.gov/content/dam/mdcomp/tax/legal-publications/tips/business/bustip28.pdf (accessed 2026-01-08).
[4] Maryland Energy Administration, “FY23 Data Center Energy Efficiency Grant Program,” n.d., https://energy.maryland.gov/business/Pages/incentives/DCEEG.aspx (accessed 2026-01-08).
[5] Maryland General Assembly, “Chapter 411 (Senate Bill 474): Certificate of Public Convenience and Necessity and Related Approvals – Definition of Generating Station (Critical Infrastructure Streamlining Act of 2024),” 2024, https://mgaleg.maryland.gov/2024RS/Chapters_noln/CH_411_sb0474e.pdf (accessed 2026-01-08).
[6] Maryland General Assembly, Department of Legislative Services, “Fiscal and Policy Note, House Bill 905: Sales and Use Tax Exemption – Qualified Data Center Personal Property – Eligibility,” 2024, https://mgaleg.maryland.gov/2024RS/fnotes/bil_0005/hb0905.pdf (accessed 2026-01-08).
[7] Baltimore County Council, “Bill 54-24: Zoning Regulations – Data Centers and Energy Storage Devices,” July 1, 2024, https://countycouncilweb.s3.amazonaws.com/Bills%202024/b05424.pdf (accessed 2026-01-08).
[8] Bethesda Magazine (Maryland Matters), Christine Condon, “More state regulations for data centers could be coming in 2026,” January 6, 2026, https://bethesdamagazine.com/2026/01/06/state-regulations-data-centers/ (accessed 2026-01-08).