Bill
HB 5791
Michigan uses data center tax exemptions tied to job creation, capital investment, and green standards, with annual reporting and potential revocation penalties.
Purpose
- Amend the Use Tax Act to modify exemptions related to data centers, with a focus on qualifying enterprise data centers and data center construction/conversion activities.
- Establish criteria, timeframe, reporting, and oversight mechanisms tied to data center exemptions and related environmental and economic requirements.
Key Provisions and Changes
1) Data Center Use Tax Exemption Framework (Sec. 4cc)
- Initial exemption window: Data center equipment stored, used, or consumed tax-free if sold to:
- The owner/operator of a qualified data center or a colocated business for use in the data center operations; or
- A person constructing/altering/repairing real estate for others if equipment will be affixed as a structural part of a qualified data center.
- Effective period for exemption: January 1, 2016 through December 31, 2050 (with later amendments conditioned by job thresholds).
2) Job-Driven Qualification and Continuation of Exemption
- Subsection (2): Exemption after Jan 1, 2022 depends on meeting job thresholds in aggregate since 2016 (data center industry jobs or related jobs; excludes “qualified new jobs” as defined later).
- Target: 400 combined data center jobs (as of April 2022 reporting to the Michigan Strategic Fund).
- Subsection (3): Exemption continuation after Jan 1, 2026 requires aggregate achievement of 1,000 data center or related jobs since 2016, with a 2026 reporting deadline.
3) Enterprise Data Center Exemption (Sec. 4cc(4)-(6))
- New exemption (from April 2, 2025 through Dec 31, 2050) for data center equipment sold to:
- A qualified entity or affiliates for assembly/use in an enterprise data center (certificate-based program).
- A contractor for real estate work that will become a structural part of the enterprise data center.
- Certificates: Must be issued by the Michigan Strategic Fund (MSF) within 120 days of a complete application and include a timetable for meeting enterprise criteria (up to 6 years, or as proposed by the applicant).
- Reporting: Certified facilities must annually report purchases, employment, tax withholding, capital investment, etc., to MSF; MSF shares a copy with the Department of Treasury. Reports are audit-able but exempt from tax remittance details disclosure beyond aggregated data.
- Certification prerequisites: Facility must meet green building standards, energy/water efficiency, and clean energy requirements, with ongoing compliance confirmed by MSF.
- Use and duration of exemption: Certificates specify the time frame for meeting criteria, with an eventual limit on new certificates after Dec 31, 2029 (existing certificates remain in effect).
4) Compliance, Revocation, and Penalties (Sec. 4cc(6)-(6)(d))
- MSF may revoke a certificate if the facility ceases to meet enterprise data center criteria.
- Revocation process: 60 to 180 days’ notice with an opportunity to demonstrate continued eligibility.
- Post-revocation consequences: If revoked within 10 years of issuance, former entities repay the total tax exemptions plus interest; after 10 years, repayment is the total exemptions plus interest or a discretionary lesser amount (not less than 50% in some cases), per MSF guidelines. During revocation, exemption claims must cease.
5) Administrative Provisions
- MSF may charge reasonable administrative fees.
- Data center-related reporting by construction/alteration contractors to be summarized annually, with detailed record-keeping requirements for four years post-purchase.
6) Defined Terms (key concepts)
- Enterprise data center: Michigan-based facility meeting MSF-determined criteria (location, multi-building, centralization of data, minimum aggregate capital investment of $250 million, and creation/maintenance of 30+ qualified new jobs at 150%+ of the prosperity region median wage through 2050/2065, depending on site type).
- Qualified data center: A facility meeting MSF criteria and earning revenue primarily from colocated businesses not affiliated with the owner.
- Colocated business: A party contracting to use data center equipment within the facility for at least one year.
- Data center equipment: Comprehensive list including servers, networking gear, racks, cabling, power and environmental systems, and related construction materials used in data center construction/modification.
Timelines and Sunset Provisions
- New enterprise data center certificates: Applications reviewed within 120 days; certificates may set a maximum 6-year qualifying period (or as proposed).
- No new MSF certificates under subsection (6)(a) after December 31, 2029.
- Existing certificates remain in effect according to their terms.
- Eligibility reporting required through at least 2065 for certain brownfield or power-plant sites; otherwise, 2050.
Impact and Stakeholders
Notes
- The bill requires a multi-year, data-driven assessment of job creation to retain exemptions.
- It blends tax incentives with performance-based criteria and revocation penalties to ensure ongoing compliance.
Compiled from official sources — confirm details with the bill’s official record.
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