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Commission calls for modification of data-center equipment tax exemption after heated debate
Summary
After prolonged discussion about fiscal costs, transparency and environmental impacts, the Tax Expenditure Review Commission voted to recommend modification — not continuation — of the data-center equipment sales-and-use-tax exemption.
The Tax Expenditure Review Commission on June 17 voted to recommend the Legislature modify the sales-and-use-tax exemption for data-center equipment, after members raised repeated concerns about its budgetary cost, limited evidence of continuing benefit, and local nondisclosure practices.
LBO staff summarized the exemption as an estimated $95 million annual revenue loss that was adopted in 2011. Several members questioned whether the exemption meets its original objectives now that Minnesota is no longer competing solely on tax incentives for site selection. Senator Clark said the policy’s value has waned as market conditions changed and called for closer scrutiny; Senator Graham urged repeal or deeper legislative action. Chair Gomez described national examples and cautioned that uncapped exemptions have grown into substantial fiscal liabilities in other states.
Representative Davids moved that the commission recommend modification rather than continuation; members approved the motion on roll call. LBO will incorporate member comments into its formal evaluation and suggested performance metrics and return this work to the commission and the Legislature for consideration.
The commission’s recommendation is advisory; any statutory change would require action by the Minnesota Legislature. LBO will publish the evaluation and related member comments for legislative and public review.
