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Data‑center tax change sparks lengthy committee debate over fiscal cost, energy use and open-ended subsidy risk
Summary
House File 12 77 would convert a refund-based sales-tax exemption for qualified data‑center equipment into an upfront exemption and create a separate, non‑sunsetting category for very large new facilities, prompting extended committee debate.
Committee members devoted extended time to House File 12 77, a proposal to change the timing and scope of Minnesota's existing sales-tax exemption for data-center machinery and equipment. The bill would move certain qualified data-center costs from a refund-based mechanism to an upfront exemption and would add a definition for "large" new facilities that, as drafted, would not carry a statutory sunset.
Chair Gomez led a lengthy policy statement, noting national and industry trends and citing published reporting that projects significant growth in data-center power demands. "One of the hard things about our state that makes us appealing...is our temperature," Gomez said, noting that cooler ambient air reduces cooling energy needs for data centers. Gomez nonetheless flagged concerns about uncapped corporate subsidies and the shift from a refund process the state can track to an upfront exemption the committee may not be able to measure precisely.
Joanna Behrs, legislative director for the Minnesota Department of Revenue, told the committee the agency had no formal position but identified concerns about the tracking and auditing implications of an upfront exemption and said the department is working to streamline refund processing for businesses under current law.
Representative Smith and other members raised environmental and budgetary concerns. Smith cited an industry report referenced earlier that showed modern data centers can draw from tens to hundreds of megawatts—examples included a smaller center drawing roughly 18 megawatts, larger new centers drawing 100 to more than 200 megawatts, and fully built campuses potentially exceeding 1,000 megawatts—and warned about the effect on other electricity customers and long‑term state obligations.
Committee members also discussed that the bill would eliminate a sunset for the proposed large-data-center exemption while keeping sunsets for other categories; members observed the change would make this a potentially uncapped, long‑term corporate tax expenditure.
Action: Committee members renewed a motion to lay House File 12 77 over for possible inclusion in the omnibus tax bill. The bill was laid over for future consideration. Department staff said they will continue working on refund-processing improvements and will provide additional information on fiscal implications.
Why it matters: The bill touches on fiscal transparency and long-term revenue exposure for a rapidly expanding industry. Proponents said an upfront exemption accelerates certainty for investors and may encourage construction and jobs; opponents warned it creates an uncapped subsidy whose full cost the state will not easily track.
What's next: The measure was laid over for possible omnibus inclusion. Committee members requested additional fiscal detail and clarification from the Department of Revenue on sunset provisions and revenue tracking.
