HF5125

Purpose

• Repeal the data center sales and use tax exemption and the related contingent reduction in special education aid appropriations.
• Establish a formal, detailed definition of what counts as a “Qualified large-scale data center” for purposes of state law and future policy.

Main Provisions

• Amends Minnesota statutes to add a new subdivision defining “Qualified large-scale data center” and ties it to criteria found in another statute.
• Repeals specific provisions that previously granted an exemption for data centers (data center sales tax exemption) and a contingent reduction mechanism tied to special education funding.
• Aligns changes with prior laws noted in the 2025 Special Session packages (e.g., references to 297A.68, 297A.75) and a defined effective timeframe starting after June 1, 2025.

Key Definitions Introduced

• Qualified large-scale data center:

  • Must be a facility in Minnesota consisting of one or more buildings connected by fiber with associated equipment.
  • Must comprise at least 25,000 square feet in total.
  • Can be located in one location or multiple locations.
  • The total cost of construction or refurbishment investment in enterprise information technology equipment and computer software must reach at least $250,000,000, collectively by the facility and its tenants, within a 60-month period beginning after June 1, 2025.
  • The definition references the meaning given in Minnesota Statutes 297A.68, subdivision 42, paragraph e.

• Other cross-referenced terms:

  • Enterprise information technology equipment
  • Computer software
  • Related to the prior data center exemption framework and its thresholds

Changes to Law

• Repeals the data center sales and use tax exemption, removing the preferential tax treatment previously available to data centers.
• Repeals the contingent reduction in special education aid appropriations, removing that funding mechanism tied to data center activity.
• Adds a new subdivision to 216B.02 to define “Qualified large-scale data center” with specific size, location, and investment criteria.
• Repeals or modifies related provisions in 297A.68 subdivision 42 and possibly associated sections (as indicated by the bill’s cross-references), and references to 297A.75 subdivisions 1–3.
• References to statutes and past laws from the 2025 Special Session are retained as the framework for these changes.

Effective Dates and Implementation

• The investment and qualification thresholds are tied to a 60-month period beginning after June 1, 2025, establishing the window for meeting the data center investment criteria.
• Repeals and amendments affect the statutory framework going forward, altering how data centers are treated under sales/use tax and how funding adjustments for special education are structured.

Implications

• For data center developers and tenants: removal of the sales tax exemption may affect project economics unless offset by other incentives or market conditions.
• For state budget and education funding: removal of the contingent reduction in special education aid could alter projected funding levels and budgeting processes.
• For policymakers: the new definition of a “Qualified large-scale data center” creates a precise threshold (size, space, investment) that could influence future eligibility and regulatory treatment.

Relevant Terms - Qualified large-scale data center - data center exemption - sales and use tax exemption - enterprise information technology equipment - computer software - 25,000 square feet - $250,000,000 - 60-month period - June 1, 2025 - Minnesota Statutes 216B.02 - Minnesota Statutes 297A.68 subdivision 42 - 297A.75 subdivisions 1–3 - special education aid appropriations - repeal - contingent reduction - data center investment thresholds