{"database": "openregs", "table": "crs_reports", "rows": [["IF13306", "Congressional Authority to Regulate Data Centers", "2026-09-03T04:00:00Z", "2026-09-10T13:38:05Z", "Active", "Resources", "Andrew S. Coghlan", "Artificial Intelligence, Electricity Generation & Power, Commerce Clause, Cloud Computing, Congressional Power, Environmental Law, Takings Clause", "Data centers are facilities that house computer systems for managing and transmitting digital information. They are integral components in the development and use of artificial intelligence (AI), and large-scale investment in AI has led to rapid buildout of \u201chyperscale\u201d data centers that consume large amounts of electricity and water. Concerns about those resource impacts, and related financial impacts on ratepayers, have sparked opposition to data center development and prompted calls for increased regulation, including state-level moratoriums on new data centers. \nConstruction and operation of data centers and their associated infrastructure can trigger requirements under existing federal environmental laws, such as the Clean Air Act and Clean Water Act. However, \u201c[r]egulation of land and water use lies at the core of traditional state authority,\u201d and private development on nonfederal land is primarily regulated by state and local governments. Retail water and electricity rates are also established through state and local proceedings. Thus, at present, debates about data center development and mitigating impacts of that development largely implicate nonfederal legal regimes. \nIf desired, Congress could assert a greater federal role in regulating data centers\u2019 environmental and economic impacts by acting pursuant to its constitutional powers under Article I, Section 8\u2019s Commerce, Taxing, and Spending Clauses. This In Focus briefly summarizes those powers and illustrates their application using examples of proposed data-center-related legislation introduced in the 119th Congress.\nThe Commerce Power\nThe Commerce Clause authorizes Congress to \u201cregulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.\u201d According to the Supreme Court, this grant of authority gives Congress power over (1) \u201cchannels of interstate commerce,\u201d (2) \u201cinstrumentalities of interstate commerce, or persons or things in interstate commerce,\u201d and (3) activities that \u201csubstantially affect interstate commerce.\u201d\nWhile no court has directly addressed the issue, case law strongly suggests that data centers would fall within all three categories. Lower courts have widely held that the internet is both \u201can instrumentality\u201d and a \u201cchannel\u201d of interstate commerce because it \u201cenables information to be quickly, conveniently, and inexpensively disseminated to hundreds of millions of individuals worldwide.\u201d The same is arguably true of data centers, which perform vital functions in the \u201cinternational network of interconnected computers\u201d that comprise the internet. \nEven if data centers are not themselves channels or instrumentalities of commerce, their construction and operation are major drivers of national economic growth, and thus substantially affect interstate commerce. Based on current precedent, a court would likely find that data centers are likely regulable under the Commerce Clause for that reason alone.\nActing under its Commerce power, Congress could directly regulate data center design, siting, construction, and operation. Proposed bills in the 119th Congress would do this by, among other things, barring new construction of AI-related data centers, requiring data centers to obtain electricity from off-grid sources, and requiring data centers to obtain water from sources other than their local utilities.\nThe Taxing Power\nCommerce Clause aside, Congress could shape data center development through its authority to \u201clay and collect . . . Duties, Imposts and Excises.\u201d This power allows Congress to impose \u201cindirect taxes\u201d on activities, transactions, and income. Such taxes must be uniform, but unlike direct taxes on real property, they need not be apportioned among the states based on population. \nThe Supreme Court has declared Congress\u2019s authority to regulate private conduct through taxation to be \u201cbeyond serious question.\u201d Thus, Congress could impose indirect taxes that \u201cdiscourage[], or even definitely deter[]\u201d data center developers from engaging in certain practices\u2014so long as those taxes \u201coperate[d] with the same force and effect in every place where the subject of [the taxes] is found,\u201d and so long they were not, in effect, penalties on conduct that Congress could not otherwise regulate under another enumerated power. Conversely, Congress could create incentives in the form of tax credits or deductions to encourage data center developers to take certain actions.\nBills introduced in the 119th Congress employ all these approaches. For instance, proposed bills would create tax credits for facilities (including data centers) that invest in water reuse projects, tax electricity that data centers consume, and eliminate existing tax benefits for AI data centers that do not meet specified environmental criteria or do not enter into legally binding community benefit agreements.\nThe Spending Power\nCongress could also shape data center buildout through its authority to spend federal funds. For instance, Congress can subsidize favored forms of regulation or development, as in one proposed bill in the 119th Congress that would provide grants to assist state regulators in developing new electric utility rate structures that allocate certain costs to data centers. \nCongress can also encourage or discourage certain actions by attaching conditions to federal funding that require recipients to comply with statutory directives. To do so, Congress must provide \u201cunambiguously\u201d clear notice of any funding conditions, and those conditions must generally relate to the purpose of the relevant spending, must advance the \u201cgeneral Welfare,\u201d and cannot themselves violate the Constitution or induce unconstitutional action.\nSubject to constitutional constraints discussed below, Congress can, and frequently does, use funding conditions to induce state and local governments that receive federal funds to behave in certain ways. For instance, Congress has made certain federal highway funds contingent on states\u2019 adoption of a 21-year minimum drinking age and has barred federal funding recipients from (among other things) adopting land-use regulations that \u201csubstantially burden\u201d religious exercise. In a similar vein, one proposed bill in the 119th Congress would require state regulators to certify, as a condition for receiving certain Department of Energy grant funds, that their electricity rates for residential and small business customers do not reflect costs of meeting data centers\u2019 electricity demand.  \nConsiderations for Congress\nThe Anti-Coercion and Anti-Commandeering Doctrines\nWhile Congress can use federal funding conditions to influence state and local government behavior, the Supreme Court has held that those conditions cannot be unduly \u201ccoercive\u201d and must leave states with a legitimate option of forgoing funding rather than acceding to funding conditions. \nThe Court has justified this \u201canti-coercion\u201d doctrine as a necessary tool to safeguard the constitutional system of dual federal-state sovereignty, which generally withholds from Congress the power to directly regulate states and reserves to states certain powers not specifically granted to Congress.\nSimilar concerns about the federal-state balance of power animate the Court\u2019s \u201canti-commandeering\u201d doctrine, which forbids Congress from ordering state legislators or executive branch officials to act or refrain from acting in certain ways. That said, under the Court\u2019s precedents, Congress can require state and local governments to \u201cconsider\u201d within a given time frame whether to adopt specified policies in order to continue regulating in an area. Several proposed bills in the 119th Congress would use this approach to direct state regulators to consider revising rate structures to ensure that large electricity consumers, such as data centers, bear the costs of meeting their electricity demand.\nPreemption and Cooperative Federalism\nBecause the Constitution makes federal law supreme, federal law can override (i.e., \u201cpreempt\u201d) state laws. While courts generally presume that federal statutes coexist with, rather than preempt, overlapping state and local laws, Congress can rebut that presumption through statute. Thus, Congress can not only decide what role the federal government will play in data center regulation, but also what role, if any, state and local authorities can play. \nCongress has exercised its preemptive power in various ways. For instance, Congress sometimes broadly preempts state regulatory action that is \u201crelated to\u201d a given subject, as in the Airline Deregulation Act, which the Supreme Court described as \u201cconfer[ring] on private entities (i.e., covered carriers) a federal right to engage in certain conduct subject only to certain (federal) constraints\u201d on \u201crates, routes, or services.\u201d Congress could employ a similarly broad preemption clause if it wished to remove state and local constraints on data center build-out and operations.\nIn other statutes, Congress has more narrowly preempted state and local laws, barring them only to the extent that they are \u201cin addition to, or different than\u201d federal statutes. As interpreted by the Supreme Court, this language permits state and local requirements that are substantially similar to, but not necessarily identical to, federal requirements.  \nRather than preclude state action, Congress sometimes promotes joint federal-state implementation of national policies. The Clean Air Act and Clean Water Act exemplify this \u201ccooperative federalism\u201d approach. Those laws authorize states to implement federal policies through federally approved state air and water programs. They also set minimum federal requirements but expressly preserve states\u2019 authority to adopt air and water regulations that go beyond the federal requirements. \nTakings Clause Implications\nThe Fifth Amendment\u2019s Takings Clause requires the federal government to provide \u201cjust compensation\u201d if it takes \u201cprivate property for public use.\u201d Regulation of data center development may implicate the Takings Clause, depending on the nature and extent of federal intervention.\nAccording to the Supreme Court, a taking occurs when the government physically appropriates property \u201cfor itself or someone else,\u201d such as when it acquires land through its power of eminent domain. The Court has also held that a taking occurs even absent physical appropriation if a government restriction on property use \u201cgoes too far.\u201d \nHow far is too far? The Court has given two answers. First, when a regulation deprives \u201can owner of all economically beneficial us[e]\u2019 of her property,\u201d the Court has held that the \u201celiminat[ion] of value\u201d effects a \u201cper se\u201d taking. Second, when a regulation diminishes, but does not eliminate, a property\u2019s economic value, the Court has looked to the \u201cthe economic impact of the regulation, its interference with reasonable investment-backed expectations, and the character of the government action\u201d to determine whether a diminution of value effects a taking. This fact-bound inquiry entails \u201ccareful examination and weighing of all the relevant circumstances.\u201d \nDiminution-in-value takings cases are, in the words of one jurist, \u201camong the most litigated  . . . in current law,\u201d and strict federal restrictions on data center development\u2014particularly construction moratoriums\u2014would likely lead to takings suits. Success in those suits would entitle litigants to payment but would not invalidate the restrictions giving rise to the claims. As the Supreme Court has explained, the Takings Clause \u201cdoes not prohibit the taking of private property, but instead places a condition on the exercise of that power.\u201d Thus, the ordinary remedy for a Takings Clause violation is compensation, not an injunction.", "https://www.congress.gov/crs_external_products/IF/PDF/IF13306/IF13306.3.pdf", "https://www.congress.gov/crs_external_products/IF/HTML/IF13306.html"]], "columns": ["id", "title", "publish_date", "update_date", "status", "content_type", "authors", "topics", "summary", "pdf_url", "html_url"], "primary_keys": ["id"], "primary_key_values": ["IF13306"], "units": {}, "query_ms": 0.4149782471358776, "source": "Federal Register API & Regulations.gov API", "source_url": "https://www.federalregister.gov/developers/api/v1", "license": "Public Domain (U.S. Government data)", "license_url": "https://www.regulations.gov/faq"}