Bill
HB 5787
The bill confines data center tax exemptions to Michigan facilities meeting job thresholds (400 by 2022, 1,000 by 2026) and strict reporting, audits, and environmental standards.
HB 5787 (Michigan, 2025-2026) – Summary
Purpose and overall intent
- This bill amends the General Sales Tax Act to modify sales tax exemptions related to data centers, including data centers that are enterprise data centers, and to tighten and govern compliance with the Enterprise Data Center Construction Labor Act.
- It ties the bill’s enactment to three related bills (HBs 5785 and 5786) as a package.
Key provisions and changes
1) Data center sales tax exemption framework (section 4ee)
- General exemption window: Beginning 2016 through 2050, data center equipment sold for use in a qualified data center or when being used in constructing/altering/repairing a data center remains exempt from Michigan sales tax.
- Post-2022 condition (subsection 2): The exemption persists after 2022 only if local economic development corporation data show (and Michigan Strategic Fund reports) that, since 2016, the combined data center and related jobs meet thresholds:
- By 2022 threshold: at least 400 data center industry jobs or related jobs in aggregate.
- By 2026 threshold: at least 1,000 data center industry jobs or related jobs in aggregate.
- Reporting: The Michigan Strategic Fund must produce a report by specified deadlines (April 1 of 2022 and 2026) summarizing job totals for the relevant period.
2) Extended exemption for enterprise data centers (subsection 4)
- Expanded exemption window: Beginning on the effective date of the act’s amendatory provisions and continuing through 2050 for standard enterprise data centers; through 2065 for certain Brownfield or power-plant redeveloped sites.
- Eligible entities: Qualified entities or their affiliates, and contractors, for assembly, use, or integration of data center equipment in an enterprise data center; and contractors involved in construction/alteration/repair/improvement of the related real estate.
- Certificate-based exemption: An exemption requires a certificate issued by the Michigan Strategic Fund (MSF) and in good standing.
- Reporting and audits: Enterprises seeking the exemption must report purchases, employment, and other information to MSF; MSF shares reports with the Department of Treasury and conducts audits, with confidentiality protections for non-aggregated data.
3) Certification, compliance, and enforcement (subsections 5-6)
- Certificate process: MSF reviews complete applications within 120 days and issues or denies a certificate, specifying a time frame to meet enterprise data center criteria (up to 6 years, or as stated by the applicant).
- Ongoing compliance: Qualifying facilities must certify green building standards, energy/water use, and clean energy procurement as part of exemption eligibility.
- Revocation provisions: MSF may revoke a certificate if the facility no longer meets definitions of an enterprise data center; there are procedures for notice and opportunities to respond; revocation triggers clawbacks of exemptions, with potential payment of the exemptions’ total value plus interest, subject to certain scaling rules.
- Sanctions for noncompliance: If construction fails to comply with the Enterprise Data Center Construction Labor Act, MSF may impose sanctions, potentially suspending exemptions and requiring repayment with interest.
4) Data and transparency protections (subsection 7)
- Annual summary reporting: Entities claiming exemptions must provide annual summaries of purchases and sales, and maintain supporting documents for four years after purchases.
5) Environmental and energy considerations (subsection 8)
- The bill encourages practices to mitigate environmental impacts, including renewable power sourcing, energy efficiency improvements, and water conservation and reuse.
6) Implementation timeline and sunset
- MSF cannot issue new enterprise data center certificates after December 31, 2029 (existing certificates may continue).
- The act is contingent on the passage and enactment of HB 5785 and HB 5786.
Who is affected
Significant procedural/timeline highlights
Notes
- The bill is designed to tie tax exemptions to economic development thresholds and environmental/energy standards for large-scale data centers.
- It establishes detailed governance around certification, reporting, and enforcement, with confidentiality safeguards for sensitive information.
Compiled from official sources — confirm details with the bill’s official record.
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