Bill
HB 5790
The bill expands and later phases out data center tax exemptions by tying them to green standards, job/capital thresholds, and certification, with a certification sunset after 2029
HB 5790 (2025-2026) — Michigan Enterprise Data Centers: Financing and Exemption Rules
Overview
- Purpose: Amend the General Sales Tax Act to modify sales tax exemptions for data center equipment and establish a framework for incentives tied to enterprise data centers (EDCs) and related brownfield properties. The bill creates certification, reporting, environmental, and energy requirements tied to eligibility for exemptions, and sets sunset/certification timelines.
Key Provisions and Changes
1) Sales Tax Exemption Scope
- Data center equipment sales exemptions (from the sales tax) apply to:
- The owner/operator of a qualified data center or a colocated business for equipment used in the data center.
- A person constructing/improving real estate where the equipment becomes a structural part of a qualified data center.
- Effective window for initial exemption: January 1, 2016 through December 31, 2050 (with later subsections expanding exemptions under specific conditions).
2) Certification Thresholds for Continuation of Exemption (Subsections (2) and (3))
- To continue exemptions after January 1, 2022 and after January 1, 2026, the local economic development corporations must certify and report aggregated data center jobs (data center industry jobs and related jobs) in Michigan:
- By 2022: At least 400 such jobs since Jan 1, 2016.
- By 2026: At least 1,000 such jobs since Jan 1, 2016.
- The Michigan Strategic Fund (MSF) must report figures to the Legislature.
3) Expanded Exemption for Enterprise Data Centers (Subsection (4))
- Beginning on the effective date (April 17, 2025) through Dec 31, 2065 (for certain sites), or through Dec 31, 2050 for other sites, exemptions may apply to:
- A qualified enterprise data center (EDC) or its affiliates.
- A contractor whose work affixes data center equipment to the enterprise data center.
- Applies to facilities subject to a certificate issued by MSF, located on brownfield sites or on former power-plant industrial sites, with certain geographic/property constraints.
4) Certificate Process and Compliance (Subsection (6))
- Application to MSF for an EDC certificate must include an affirmation of meeting EDC criteria and a six-year (max) timeframe to achieve those criteria.
- MSF or its designees must decide within 120 days of a complete application.
- Certificates specify timeframes for meeting each criterion; MSF must provide a copy to the state department.
5) Reporting and Privacy (Subsection (6)(b))
- The facility/entity must report annual data to MSF on exempt purchases, employment, withholding, capital investment, and other data needed to determine continued qualification.
- MSF must share copies with the state department and maintain aggregate information; individual disclosures must be non-identifying.
6) Certification Requirements and Green Building / Energy Provisions (Subsection (6)(c))
- Within 3 years of placement in service, facilities must certify green building certification (e.g., LEED, ENERGY STAR, etc.).
- When claiming exemptions, facilities must certify compliance with energy, water, and environmental standards, including:
- Clean energy procurement up to 90% of forecasted electricity usage (via various mechanisms).
- Use of municipal water with sufficient capacity.
- Direct steps to mitigate environmental impacts (energy efficiency, water conservation, etc.).
- Provisions for how electricity rates and tariff considerations affect eligibility.
7) Revocation and Financial Implications (Subsection (6)(d))
- MSF may revoke an EDC certificate if the facility no longer qualifies.
- If revoked within 10 years of issuance, entity must repay the total tax exemption amount plus interest; after 10 years, MSF may require up to 50% (minimum 50%) of exempt amounts, with some exceptions if exemptions are tied to other policies (e.g., property tax benefits).
8) Fees and Compliance (Subsection (6)(e))
- MSF may charge administrative fees to administer the program.
9) Repayment and Annual Reporting (Subsection (7))
- Contractors claiming exemptions must submit annual summaries detailing purchasers and sales, with retention of supporting invoices for four years.
10) Sunset for New Certificates (Subsection (8))
- MSF may not issue new EDC certificates after December 31, 2029 (existing certificates remain in effect).
11) Definitions (Subsection (9)/(10))
- Defines terms: affiliate, certificate, colocated business, data center equipment, enterprise data center, brownfield plan, qualified data center, qualified entity, etc.
- Key thresholds for “enterprise data center” include:
- Location in Michigan, 1+ buildings, housing data center equipment, and minimum aggregate capital investment of $250 million.
- Creation/maintenance of at least 30 qualified new jobs at wages of 150%+ of the Prosperity Region median wage (through 2050/2065, depending on site).
- No state/local property tax benefits unless approved by governing bodies, except certain brownfield and other allowable arrangements.
- Green-building certifications and substantial commitments to renewable energy (90% of forecasted usage) and environmental practices.
Effective Dates and Related Timing
- Introduced April 14, 2026; referred to Government Operations.
- Primary changes to exemptions and MSF-certification framework begin in 2025 with a sunset on new certificates after 2029 (existing certificates unaffected).
Impact and Stakeholders
- Eligible entities: Data center owners/operators, colocated businesses, and contractors involved in constructing or upgrading data center facilities, particularly those pursuing enterprise data center status.
- Government and agencies: Michigan Strategic Fund, Michigan Economic Development Corporation (via MSF), local economic development corporations, and state departments that administer tax policy and environmental standards.
- Local governments: Potential property tax considerations and brownfield plan interactions.
Notes
- The bill ties tax exemptions to job creation, capital investment, environmental standards, and green-building certification.
- It introduces robust reporting and potential clawback provisions if the facility loses ED C status.
- It places a near-term cap on new EDC certificates (post-2029), signaling a managed pace for incentives.
Compiled from official sources — confirm details with the bill’s official record.
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