Bill HF5125, SF5231

1.1          A bill for an act
1.2          relating to taxation; sales and use; repealing the exemption for data centers;
1.3          repealing the contingent reduction in special education aid appropriations;amending
1.4          Minnesota Statutes 2024, section 216B.02, by adding a subdivision; Minnesota
1.5          Statutes 2025 Supplement, sections 216B.02, subdivision 12; 297A.75, subdivisions
1.6          1, 2, 3; repealing Minnesota Statutes 2025 Supplement, section 297A.68,
1.7          subdivision 42; Laws 2025, First Special Session chapter 10, article 7, section 8.
1.8          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.9          Section 1. Minnesota Statutes 2025 Supplement, section 216B.02, subdivision 12, is
1.10       amended to read:
1.11                       Subd. 12.Qualified large-scale data center. "Qualified large-scale data center" has the
1.12       meaning given in section 297A.68, subdivision 42, paragraph (e). means a facility in
1.13       Minnesota:
1.14       (1) that is comprised of one or more buildings connected to each other by fiber and
1.15       associated equipment that consist in the aggregate of at least 25,000 square feet, and that
1.16       are located in one physical location or multiple locations; and
1.17       (2) for which the total cost of construction or refurbishment, investment in enterprise
1.18       information technology equipment, and computer software is at least $250,000,000
1.19       collectively by the facility and its tenants within a 60-month period beginning after June
1.20       30, 2025.

1.21       EFFECTIVE DATE. This section is effective July 1, 2026.

2.1          Sec. 2. Minnesota Statutes 2024, section 216B.02, is amended by adding a subdivision to
2.2          read:
2.3                          Subd. 13.Enterprise information technology equipment. "Enterprise information
2.4          technology equipment" means computers and equipment supporting computing, networking,
2.5          or data storage, including servers and routers necessary for the maintenance and operation
2.6          of the qualified large-scale data centers.

2.7          EFFECTIVE DATE. This section is effective July 1, 2026.

2.8          Sec. 3. Minnesota Statutes 2025 Supplement, section 297A.75, subdivision 1, is amended
2.9          to read:
2.10                       Subdivision 1.Tax collected. The tax on the gross receipts from the sale of the following
2.11       exempt items must be imposed and collected as if the sale were taxable and the rate under
2.12       section 297A.62, subdivision 1, applied. The exempt items include:
2.13       (1) building materials for an agricultural processing facility exempt under section
2.14       297A.71, subdivision 13;
2.15       (2) building materials for mineral production facilities exempt under section 297A.71,
2.16       subdivision 14;
2.17       (3) building materials for correctional facilities under section 297A.71, subdivision 3;
2.18       (4) building materials used in a residence for veterans with a disability exempt under
2.19       section 297A.71, subdivision 11;
2.20       (5) elevators and building materials exempt under section 297A.71, subdivision 12;
2.21       (6) materials and supplies for qualified low-income housing under section 297A.71,
2.22       subdivision 23;
2.23       (7) materials, supplies, and equipment for municipal electric utility facilities under
2.24       section 297A.71, subdivision 35;
2.25       (8) equipment and materials used for the generation, transmission, and distribution of
2.26       electrical energy and an aerial camera package exempt under section 297A.68, subdivision
2.27       37;
2.28       (9) commuter rail vehicle and repair parts under section 297A.70, subdivision 3, paragraph
2.29       (a), clause (10);
2.30       (10) materials, supplies, and equipment for construction or improvement of projects and
2.31       facilities under section 297A.71, subdivision 40;
3.1          (11) enterprise information technology equipment and computer software for use in a
3.2          qualified data center, qualified large-scale data center, or qualified refurbished data center
3.3          exempt under section 297A.68, subdivision 42;
3.4          (12) (11) materials, supplies, and equipment for qualifying capital projects under section
3.5          297A.71, subdivision 44, paragraphs (a) and (b);
3.6          (13) (12) items purchased for use in providing critical access dental services exempt
3.7          under section 297A.70, subdivision 7, paragraph (c);
3.8          (14) (13) items and services purchased under a business subsidy agreement for use or
3.9          consumption primarily in greater Minnesota exempt under section 297A.68, subdivision
3.10       44;
3.11       (15) (14) building materials, equipment, and supplies for constructing or replacing real
3.12       property exempt under section 297A.71, subdivisions 49; 50, paragraph (b); and 51;
3.13       (16) (15) building materials, equipment, and supplies for qualifying capital projects
3.14       under section 297A.71, subdivision 52;
3.15       (17) (16) building materials, equipment, and supplies for constructing, remodeling,
3.16       expanding, or improving a fire station, police station, or related facilities exempt under
3.17       section 297A.71, subdivision 53; and
3.18       (18) (17) building materials, equipment, and supplies for constructing, remodeling, or
3.19       improving a sustainable aviation fuel facility exempt under section 297A.71, subdivision
3.20       54.

3.21       EFFECTIVE DATE. This section is effective July 1, 2026.

3.22       Sec. 4. Minnesota Statutes 2025 Supplement, section 297A.75, subdivision 2, is amended
3.23       to read:
3.24                       Subd. 2.Refund; eligible persons. Upon application on forms prescribed by the
3.25       commissioner, a refund equal to the tax paid on the gross receipts of the exempt items must
3.26       be paid to the applicant. Only the following persons may apply for the refund:
3.27       (1) for subdivision 1, clauses (1), (2), and (13) (12), the applicant must be the purchaser;
3.28       (2) for subdivision 1, clause (3), the applicant must be the governmental subdivision;
3.29       (3) for subdivision 1, clause (4), the applicant must be the recipient of the benefits
3.30       provided in United States Code, title 38, chapter 21;
4.1          (4) for subdivision 1, clause (5), the applicant must be the owner of the homestead
4.2          property;
4.3          (5) for subdivision 1, clause (6), the owner of the qualified low-income housing project;
4.4          (6) for subdivision 1, clause (7), the applicant must be a municipal electric utility or a
4.5          joint venture of municipal electric utilities;
4.6          (7) for subdivision 1, clauses (8), (11), and (14) (13), the owner of the qualifying business;
4.7          (8) for subdivision 1, clauses (9), (10), (12), (16), and (17) (11), (15), and (16), the
4.8          applicant must be the governmental entity that owns or contracts for the project or facility;
4.9          (9) for subdivision 1, clause (15) (14), the applicant must be the owner or developer of
4.10       the building or project; and
4.11       (10) for subdivision 1, clause (18) (17), the applicant must be the owner or developer
4.12       of the sustainable aviation fuel facility.

4.13       EFFECTIVE DATE. This section is effective July 1, 2026.

4.14       Sec. 5. Minnesota Statutes 2025 Supplement, section 297A.75, subdivision 3, is amended
4.15       to read:
4.16                       Subd. 3.Application. (a) The application must include sufficient information to permit
4.17       the commissioner to verify the tax paid. If the tax was paid by a contractor, subcontractor,
4.18       or builder, under subdivision 1, clauses (3) to (12) (11) or (14) (13) to (18) (17), the
4.19       contractor, subcontractor, or builder must furnish to the refund applicant a statement including
4.20       the cost of the exempt items and the taxes paid on the items unless otherwise specifically
4.21       provided by this subdivision. The provisions of sections 289A.40 and 289A.50 apply to
4.22       refunds under this section.
4.23       (b) An applicant may not file more than two applications per calendar year for refunds
4.24       for taxes paid on capital equipment exempt under section 297A.68, subdivision 5.

4.25       EFFECTIVE DATE. This section is effective July 1, 2026.

4.26       Sec. 6. REPEALER.
 4.27      (a) Laws 2025, First Special Session chapter 10, article 7, section 8, is repealed.
4.28       (b) Minnesota Statutes 2025 Supplement, section 297A.68, subdivision 42, is repealed.

4.29       EFFECTIVE DATE. This section is effective July 1, 2026.

APPENDIX

Repealed Minnesota Statutes: 26-08520

297A.68 BUSINESS EXEMPTIONS.Subd. 42.Data centers.

(a) Purchases of enterprise information technology equipment and computer software for use in a qualified data center, a qualified refurbished data center, or a qualified large-scale data center are exempt, except that computer software maintenance agreements are exempt for purchases made after June 30, 2013. The tax on purchases exempt under this paragraph must be imposed and collected as if the rate under section 297A.62, subdivision 1, applied, and then refunded after June 30, 2013, in the manner provided in section 297A.75. This exemption includes enterprise information technology equipment and computer software purchased to replace or upgrade enterprise information technology equipment and computer software in a qualified data center, a qualified refurbished data center, or a qualified large-scale data center.

(b) For purposes of this subdivision, "qualified data center" means a facility in Minnesota:

(1) that is comprised of one or more buildings that consist in the aggregate of at least 25,000 square feet, and that are located on a single parcel or on contiguous parcels, where the total cost of construction or refurbishment, investment in enterprise information technology equipment, and computer software is at least $30,000,000 within a 48-month period. The 48-month period begins no sooner than July 1, 2012, except that costs for computer software maintenance agreements purchased before July 1, 2013, are not included in determining if the $30,000,000 threshold has been met;

(2) that is constructed or substantially refurbished after June 30, 2012, where "substantially refurbished" means that at least 25,000 square feet have been rebuilt or modified, including:

(i) installation of enterprise information technology equipment; environmental control, computer software, and energy efficiency improvements; and

(ii) building improvements; and

(3) that is used to house enterprise information technology equipment, where the facility has the following characteristics:

(i) uninterruptible power supplies, generator backup power, or both;

(ii) sophisticated fire suppression and prevention systems; and

(iii) enhanced security. A facility will be considered to have enhanced security if it has restricted access to the facility to selected personnel; permanent security guards; video camera surveillance; an electronic system requiring pass codes, keycards, or biometric scans, such as hand scans and retinal or fingerprint recognition; or similar security features.

In determining whether the facility has the required square footage, the square footage of the following spaces shall be included if the spaces support the operation of enterprise information technology equipment: office space, meeting space, and mechanical and other support facilities. For purposes of this subdivision, "computer software" includes, but is not limited to, software utilized or loaded at a qualified data center, qualified refurbished data center, or qualified large-scale data center, including maintenance, licensing, and software customization.

(c) For purposes of this subdivision, a "qualified refurbished data center" means an existing facility that qualifies as a data center under paragraph (b), clauses (2) and (3), but that is comprised of one or more buildings that consist in the aggregate of at least 25,000 square feet, and that are located on a single parcel or contiguous parcels, where the total cost of construction or refurbishment, investment in enterprise information technology equipment, and computer software is at least $50,000,000 within a 24-month period.

(d) For purposes of this subdivision, "enterprise information technology equipment" means computers and equipment supporting computing, networking, or data storage, including servers and routers. It includes, but is not limited to: cooling systems, cooling towers, and other temperature control infrastructure; power infrastructure for transformation, distribution, or management of electricity used for the maintenance and operation of a qualified data center or qualified refurbished data center, including but not limited to exterior dedicated business-owned substations, backup power generation systems, battery systems, and related infrastructure; and racking systems, cabling, and trays, which are necessary for the maintenance and operation of the qualified data center, qualified refurbished data center, or qualified large-scale data center.

(e) For purposes of this subdivision, "qualified large-scale data center" means a facility in Minnesota:

(1) that is comprised of one or more buildings connected to each other by fiber and associated equipment that consist in the aggregate of at least 25,000 square feet, and that are located in one physical location or multiple locations; and

(2) for which the total cost of construction or refurbishment, investment in enterprise information technology equipment, and computer software is at least $250,000,000 collectively by the facility and its tenants within a 60-month period beginning after June 30, 2025.

(f) A qualified data center, qualified large-scale data center, or qualified refurbished data center may claim the exemptions in this subdivision for purchases made within 35 years of the date of its first purchase qualifying for the exemption under paragraph (a).

(g) The exemption in this subdivision is allowed for qualified data centers, qualified large-scale data centers, and qualified refurbished data centers that were certified under paragraph (h) before July 1, 2042.

(h) The commissioner of employment and economic development must certify to the commissioner of revenue, in a format approved by the commissioner of revenue, when a qualified data center has met the requirements under paragraph (b), a qualified refurbished data center has met the requirements under paragraph (c), or a qualified large-scale data center has met the requirements under paragraph (e). The certification must provide the following information regarding each qualified data center or qualified refurbished data center:

(1) the total square footage amount;

(2) the total amount of construction or refurbishment costs and the total amount of qualifying investments in enterprise information technology equipment and computer software;

(3) the beginning and ending of the applicable period under paragraph (b), (c), or (e) in which the qualifying expenditures and purchases under clause (2) were made, but in no case shall the period begin before July 1, 2012; and

(4) the date upon which the qualified data center first met the requirements under paragraph (b), a qualified refurbished data center first met the requirements under paragraph (c), or a qualified large-scale data center first met the requirements under paragraph (e).

(i) Any refund for sales tax paid on qualifying purchases under this subdivision must not be issued unless the commissioner of revenue has received the certification required under paragraph (h) issued by the commissioner of employment and economic development.

(j) The commissioner of employment and economic development must annually notify the commissioner of revenue of the qualified data centers that are projected to meet the requirements under paragraph (b), the qualified refurbished data centers that are projected to meet the requirements under paragraph (c), and the qualified large-scale data centers that are projected to meet the requirements under paragraph (e), in each of the next four years. The notification must provide the information required under paragraph (h), clauses (1) to (4), for each qualified data center, qualified refurbished data center, or qualified large-scale data center.

(k) Laborers and mechanics performing work to construct or refurbish qualified large-scale data centers must be paid the prevailing wage rate for the work as defined in section 177.42, subdivision 6. Work performed to construct or refurbish qualified large-scale data centers is subject to the requirements and enforcement provisions of sections 177.27, 177.30, 177.32, and 177.41 to 177.45. For purposes of this paragraph, "refurbish" does not include maintenance or equipment refreshment or replacement. The commissioner of employment and economic development must not certify a qualified large-scale data center under paragraph (h) unless the entity seeking an exemption certifies to the commissioner of employment and economic development that it has complied with this paragraph for all covered work after June 30, 2025.

(l) Within three years after being placed in service, a qualified large-scale data center must certify to the commissioner of commerce that the facility has attained certification under one or more of the following sustainable design or green building standards:

(1) BREEAM for new construction or BREEAM in-use;

(2) Energy Star;

(3) Envision;

(4) ISO 50001-energy management;

(5) LEED for building design and construction or LEED for operations and maintenance;

(6) green globes for new construction or green globes for existing buildings;

(7) UL 3223; or

(8) other reasonable standards approved by the commissioner of employment and economic development.

(m) Notwithstanding section 289A.38, subdivision 1, the amount of the exemption allowed to a qualified large-scale data center must be repaid to the commissioner of revenue if the commissioner of commerce determines that a qualified large-scale data center has not met the requirements under paragraph (l). Nothing in this paragraph prohibits the commissioner of revenue from making an assessment of tax, interest, or penalties if the commissioner of revenue determines that sales to and purchases made by a qualified large-scale data center do not qualify for the exemption under this subdivision.

Repealed Minnesota Session Laws: 26-08520

Laws 2025, First Special Session chapter 10, article 7, section 8
Sec. 8. DIRECTION TO COMMISSIONER OF MANAGEMENT AND BUDGET; CONTINGENT REDUCTION IN SPECIAL EDUCATION AID APPROPRIATIONS.

(a) When preparing the forecast for state revenues and expenditures under Minnesota Statutes, section 16A.103, the commissioner of management and budget must assume a $250,000,000 reduction in the appropriations for special education aid for the biennium beginning July 1, 2027, and for each subsequent biennium, until the end of the legislative session that enacts a budget for the Department of Education for the biennium beginning July 1, 2027.

(b) Upon enactment of a budget for the Department of Education for the biennium beginning July 1, 2027, the legislature must identify enacted provisions that were recommended by or based on the recommendation of the Blue Ribbon Commission on Special Education.

(c) To the extent the net savings attributable to the provisions in paragraph (b) are less than $250,000,000 for the biennium beginning July 1, 2027, and for each subsequent biennium, the commissioner of education must reduce the special education cross subsidy aid factor under Minnesota Statutes, section 125A.76, subdivision 2e, paragraph (b),  as necessary to reduce biennial appropriations for special education aid by an amount equal to the difference between the savings identified in paragraph (b) and the $250,000,000 of biennial savings assumed in paragraph (a). The commissioner of education must notify the chairs and ranking minority members of the legislative committees with jurisdiction over kindergarten through grade 12 education of any reduction in the cross subsidy aid factor under this paragraph.