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SF 5231

Data centers tax exemption repeal; contingent reduction in special education aid appropriation repeal

2025-2026 Regular Session Introduced by Liz Boldon and 1 co-sponsor

The bill repeals Minnesota’s data center tax exemption and the contingent special education aid reduction, replacing them with new definitions and a repeal-effective framework star

Author added Boldon
#educationandeducationdepartment #taxation-salesanduse #telecommunicationsandinformationtechnology
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Bill Summary · SF 5231

Summary of SF 5231 (2025-2026) – Minnesota

Purpose and intent

SF 5231 aims to:
- repeal the data center sales tax exemption and the contingent reduction in special education aid appropriations (the Blue Ribbon Commission-related savings mechanism),
- update related definitions and provisions to reflect the changes,
- repeal a previously enacted exemption framework and its associated statutory sections.

In short, the bill shifts away from targeted tax incentives for data centers and removes a contingent mechanism that would reduce special education aid if certain savings targets were not met.

Key provisions and changes

Section 1 — Data center tax exemption (repeal and redefinition)

  • Repeals the current exemption for data centers previously allowing exemptions for purchases of enterprise information technology equipment and computer software used by qualified data centers, qualified refurbished data centers, or qualified large-scale data centers.
  • Removes the eligibility framework tied to Minnesota Statutes 2025 Supplement, section 297A.68, subdivision 42, and related provisions.
  • Establishes a new definition for “Qualified large-scale data center” and ties its qualification to a high minimum investment and project scale:
    • At least 25,000 square feet of facilities.
    • Total costs (construction/refurbishment, enterprise IT equipment, and software) of at least $250,000,000 within a 60-month period starting after June 30, 2025.
  • Effective date for these changes: July 1, 2026.

Section 2 — New term: “Enterprise information technology equipment”

  • Adds a definition for enterprise information technology equipment, covering computers, servers, networking gear, data storage, and related components necessary for operating the data center.

Section 3 — Taxability and refund implications (partial alignment with existing exemptions)

  • Recasts the treatment of certain exempt items for sales tax, notably including enterprise IT equipment and software used in qualified data centers, aligned with the repeal of the exemption.
  • Expands or clarifies which items qualify for refund under the broader 297A.75 framework when the exemption is in effect (to be repealed, but the section codifies the refund mechanism transition details).

Section 4–5 — Refund procedures and application requirements

  • Maintains refund procedures for exempt items, specifying eligible applicants, information required, and documentation to verify taxes paid.
  • Caps or structures refunds by specified categories of purchasers (purchasers, governmental entities, owners of qualifying projects, etc.).
  • Effective date: July 1, 2026.

Section 6 — Repealer

  • Repeals:
    • Laws 2025, First Special Session chapter 10, article 7, section 8 (the contingent reduction in special education aid).
    • Minnesota Statutes 2025 Supplement, section 297A.68, subdivision 42 (the data center exemption framework).
  • Effective date: July 1, 2026.

Who/what is affected

  • Data centers and related developers/owners in Minnesota will be impacted, particularly those planning or operating qualified data centers, refurbished centers, or large-scale centers.
  • Purchasers of enterprise information technology equipment and computer software used in data centers will be affected by the repeal of the exemption (and the related refund processes for eligible purchases).
  • Minnesota Department of Revenue and Department of Employment and Economic Development (DEED) will administer definitional changes, certifications, and, for large-scale centers, required compliance and potential recycling of exemptions.
  • School districts and special education funding structures could be affected indirectly by the removal of the contingent reduction in special education aid, removing this anticipated cross-subsidy mechanism.

Procedural and timeline notes

  • Effective date for the substantive changes and definitions: July 1, 2026.
  • Repeal of the prior exemption and the contingent special education savings mechanism takes effect concurrently on July 1, 2026.
  • The bill was introduced and referred to the Taxes committee on April 27, 2026.

Compiled from official sources — confirm details with the bill’s official record.

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