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HF1277 (Legislative Session 94 (2025-2026))

Data centers sales and use tax exemption modified.

Related bill: SF769

AI Generated Summary

This bill modifies the sales and use tax exemption for certain data centers in Minnesota. Specifically, it updates provisions in Minnesota Statutes §297A.68, subd. 42, and §297A.75, subd. 1, concerning tax exemptions for enterprise information technology equipment and computer software used in qualified data centers.

Key Provisions:

  1. Exemptions for Qualified Data Centers:

    • Purchases of enterprise information technology equipment and computer software for use in qualified data centers, refurbished data centers, or large-scale data centers remain tax-exempt. However, computer software maintenance agreements are exempt only for purchases made after June 30, 2013.
    • For qualified data centers and refurbished data centers, the tax must be imposed and collected first, then refunded.
    • For large-scale data centers, the exemption applies at the time of purchase, subject to certain conditions.

  2. Electricity Exemption:

    • Electricity used in the operation of a qualified data center, refurbished data center, or large-scale data center is tax-exempt.

  3. Definition Changes and Requirements for Qualified Facilities:

    • Qualified data centers must be at least 25,000 square feet, have a construction or refurbishment investment of at least $30 million within 48 months, and meet high-security and energy-efficiency standards.
    • Qualified refurbished data centers must meet similar criteria but require a $50 million investment within 24 months.
    • Qualified large-scale data centers must have at least 25,000 square feet, be connected by fiber, and involve a $250 million investment within a 60-month period starting after June 30, 2025.

  4. Time Limits on Exemptions:

    • The tax exemption can be claimed for up to 20 years from the first qualifying purchase or until June 30, 2042, whichever is earlier.

  5. Certification and Compliance:

    • The Minnesota Department of Employment and Economic Development (DEED) must certify whether a data center meets the necessary investment and operational criteria before tax exemptions apply.
    • DEED must notify the Department of Revenue annually about anticipated qualifying data centers.

  6. Prevailing Wage Requirement:

    • Workers constructing or refurbishing data centers must be paid prevailing wages as defined in Minnesota labor laws.

  7. Sustainability Certification for Large-Scale Data Centers:

    • Within three years of operation, large-scale data centers must attain certification under recognized green building standards such as LEED, Energy Star, or BREEAM.

  8. Repayment Clause for Non-Compliance:

    • If a qualified large-scale data center fails to meet sustainability certification requirements, the tax exemption must be repaid.

Summary:

This bill expands tax benefits for data centers while imposing stricter eligibility criteria, wage requirements, and sustainability mandates. It ensures that only data centers making significant investments and meeting green building standards qualify for sales tax exemptions.

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
February 19, 2025HouseFloorActionIntroduction and first reading, referred toTaxes
February 26, 2025HouseFloorActionAuthor added
March 05, 2025HouseFloorActionAuthor added

Citations

 
[
  {
    "analysis": {
      "added": [
        "Defines electricity used by data centers as exempt from tax."
      ],
      "removed": [
        "None"
      ],
      "summary": "This bill modifies the tax exemption for certain data centers under section 297A.68, subdivision 42.",
      "modified": [
        "Clarification that the exemption applies at the time of purchase for large-scale data centers with certain conditions."
      ]
    },
    "citation": "297A.68, subdivision 42"
  },
  {
    "analysis": {
      "added": [
        "None"
      ],
      "removed": [
        "None"
      ],
      "summary": "This bill refers to the refund procedures as detailed in section 297A.75 relevant to tax exemptions for data centers.",
      "modified": [
        "Clarification on the process for refunds of taxes paid on exempt purchases."
      ]
    },
    "citation": "297A.75"
  },
  {
    "analysis": {
      "added": [
        "Requirement for wages to meet the prevailing rate."
      ],
      "removed": [
        "None"
      ],
      "summary": "This bill requires prevailing wage rates for laborers and mechanics in construction projects for data centers as defined in section 177.42, subdivision 6.",
      "modified": [
        "None"
      ]
    },
    "citation": "177.42, subdivision 6"
  },
  {
    "analysis": {
      "added": [
        "None"
      ],
      "removed": [
        "None"
      ],
      "summary": "This bill applies the requirements and enforcement provisions for construction work, referring to sections 177.27, 177.30, 177.32, and 177.41 to 177.45.",
      "modified": [
        "Applicability of enforcement provisions for construction labor."
      ]
    },
    "citation": "sections 177.27, 177.30, 177.32, and 177.41 to 177.45"
  },
  {
    "analysis": {
      "added": [
        "Repayment conditions if large-scale data centers do not meet certification requirements."
      ],
      "removed": [
        "None"
      ],
      "summary": "This bill entails potential repayment requirements under section 289A.38, subdivision 1 if certain conditions are not met by data centers.",
      "modified": [
        "Clarifies the consequences and repayment obligations if conditions are not met."
      ]
    },
    "citation": "289A.38, subdivision 1"
  }
]

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