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Senate approves 20-year sales-tax exemption for data centers with new oversight and guardrails
Summary
Senate Bill 98 passed after conference, authorizing a 20-year sales-tax exemption for qualifying data centers that invest at least $250 million and adding conditions on power, water conservation, supply-chain security and state oversight; the measure passed 26-8.
The Kansas Senate on April 11 approved a conference committee report on Senate Bill 98 that offers a 20-year sales-tax exemption for qualifying data centers while adding new limits and security reviews, the bill sponsor said.
Senator Rick Owens (Harvey), the floor sponsor, summarized changes from earlier versions and said the conference amendments add multiple guardrails. "To be clear, to be a data center investment has to be at least $250,000,000. And in exchange for at least a $250,000,000 investment, they receive a 20 year sales tax exemption," Owens said on the floor.
Key changes included in the conference report and described by the sponsor:
- A single 20-year sales-tax exemption for any qualified data center investing at least $250 million (the prior draft had tiered terms for larger investments). - The exemption does not apply to electric generation equipment if a facility chooses to build its own on-site power. - Telecommunication, wireless and video service providers are excluded from the definition of a qualified firm; modular or preassembled components are also excluded. - The law prohibits public utilities from authorizing economic-development electric-rate discounts to these facilities (discounts that previously lowered utility bills dramatically and carried a large fiscal note). - Qualified firms must purchase electricity for 10 years from the public utility that provides retail service (a provision the sponsor said helps preserve expected tax revenue). - Facilities must commit to water-conserving, reuse and replacement practices. - The Kansas Intelligence Fusion Center board must review and approve security concerns related to imports or equipment from countries of concern before benefits are awarded.
"Long story short, I believe that it actually makes this a better bill," Owens said, summarizing the added protections.
Senators expressed concerns about fiscal costs, energy and water use, and national-security implications; supporters said the amendments reduce fiscal risk and add needed oversight. The Senate passed the conference report on SB 98 by a roll call of 26 yeas to 8 nays.
Why it matters: The measure creates a significant state tax incentive to attract large data center investments while imposing conditions intended to protect state revenue, energy systems and supply-chain security. The combination of a long sales-tax exemption and prohibitions on utility discounts was a focal point of debate.
