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Montana committee hears bill to clarify data‑center tax class, extend build window and require emergency grid support
Summary
Sponsor Rep. Katie Zolnikov told the House Taxation Committee HB 424 would extend the construction window for data‑center communications infrastructure, clarify what equipment qualifies for a reduced Class 17 property tax rate, and require qualified data centers to make most on‑site generation available to local grids during declared electrical emergencies.
Representative Katie Zolnikov introduced House Bill 424 to revise the state's Class 17 property tax classification for qualified data centers, extend the period for dedicated communications infrastructure from 15 to 25 years (sunset moved to 2037) and clarify which behind‑the‑meter electrical generation and storage systems count as on‑site, facility‑side assets.
Zolnikov said the bill aims to provide predictability that will help Montana attract large data‑center investments while promoting grid resiliency. "If a data center uses 80% of the energy that they are also not creating but the energy system that they have'that 80% threshold'that's what they have to meet and then if the governor declares an electrical generation emergency that 80% requirement is no longer going to be serving that data center'that will be going on to the local grid," she told the committee.
Industry proponents said the bill clarifies existing law and would encourage companies to build on‑site generation and storage. Mark Taylor of Sabey Data Centers told the committee Montana's cool, dry climate and potential for low power usage effectiveness make the state attractive and that stable tax language helps secure multibillion‑dollar investments. "We're not increasing or decreasing the tax rate. We're just doing some things to clarify what is eligible for that tax rate," he said.
Proponents said on‑site generation can reduce strain on utilities and speed local relief during emergencies. Taylor cited examples at other Sabey sites where on‑site assets helped local customers in outage conditions, and argued clarifying "behind the meter" language would encourage developers to provide generation and fiber infrastructure that benefits communities.
Opponents urged caution. Anne Hedges of the Montana Environmental Information Center warned of potential competition between data centers and residential customers for limited energy and said the Montana Public Service Commission has opened an inquiry into projected data‑center load. Hedges suggested an amendment to ensure only new generation built after the bill's effective date qualifies for the favorable classification, to avoid shifting existing local generation to lower tax treatment.
Department of Revenue industrial unit manager Jill Gallagher appeared as an informational witness and offered to follow up on technical revenue impacts. Committee members pressed sponsors and proponents on water use for cooling, how backup generation would keep data centers operating if on‑site output is redirected, and whether the bill could be drafted to avoid retroactive tax benefits for existing generation.
Sponsor Zolnikov and proponents signaled they are open to amendment language to make clear the bill incentivizes new generation and to address county and regulator concerns. The committee closed the hearing without a vote; the sponsor asked members for a do‑pass recommendation after working on clarifying amendments.
