SF5231

Purpose

• Repeal the sales and use tax exemption for data centers.
• Repeal a contingent reduction in special education aid appropriations.
• Update statutes to clearly define what counts as a “Qualified largescale data center” for related purposes.

Main Provisions and Actions

• Data center sales tax exemption repealed: Data centers will no longer receive the sales tax exemption and will be subject to standard sales and use tax rules.
• Contingent reduction in special education aid repealed: The bill removes a planned or contingent reduction to special education funding.
• New statutory definition for data centers: Adds a new subdivision to the state’s sales tax law (216B.02, subdivision 12) to define “Qualified largescale data center.”
  • Criteria for qualification:
  • A facility in Minnesota composed of one or more buildings connected by fiber and related equipment.
  • At least 25,000 square feet in aggregate.
  • Located in one physical location or in multiple locations.
  • The total cost of construction or refurbishment investment in enterprise information technology equipment and computer software is at least $250,000,000, counted collectively for the facility and its tenants.
  • The $250 million investment must occur within a 60-month period beginning after June 1, 2025.
• Repeals of related provisions: Repeals Minnesota Statutes 2025 Supplement section 297A.68, subdivision 42, and repeals 297A.75, subdivisions 1–3.
  • The effect is to remove existing incentives or programs tied to those provisions (specific incentives are not described in this summary).

Key Changes to Law

• Clarifies what constitutes a “Qualified largescale data center” for potential future regulatory or tax purposes, by laying out specific size, location, fiber connectivity, and investment thresholds.
• Eliminates the data center sales tax exemption and the contingent reduction in special education aid appropriations, shifting fiscal and policy implications in those areas.
• Applies changes to statutes as of the specified dates, with the data center investment window starting after June 1, 2025.

Effective Dates and Timing

• The new definition of a qualified largescale data center takes effect as part of the amended 216B.02, subdivision 12.
• The large-scale data center investment threshold (60-month window) begins after June 1, 2025.
• Repeals of certain sections (297A.68(42) and 297A.75(1-3)) apply as specified in the bill, based on the statutory sections targeted for repeal.

Significance

• The bill shifts tax treatment for data centers by removing the exemption, potentially affecting the cost structure and competitiveness of data centers in Minnesota.
• It introduces a formal, numeric definition of what qualifies as a large-scale data center, which could influence eligibility for any related programs or future policy decisions.
• The repeal actions remove certain existing incentives and could impact how special education funding and other related programs are funded in the future.

Relevant terms data center, sales tax exemption, data centers, Qualified largescale data center, Minnesota Statutes, 216B.02, subdivision 12, enterprise information technology equipment, computer software, fiber, square feet, 25,000 square feet, investment, $250,000,000, 60-month period, June 1, 2025, 297A.68 subdivision 42, 297A.75 subdivisions 1-3, contingent reduction in special education aid, appropriations.