Today the MN House Committee on Taxes discussed HF1277, a bill to extend and increase tax exemption. Actually, they heard from testifiers and will come back on Tuesday to ask questions.  The bill is laid over for possible inclusion.

HF1277(Davids)
Data centers sales and use tax exemption modified.

Bill description

• Adding a new type of super large data centers
• There is a certification program to qualify
• Upfront tax exemptions for software, equipment and electricity
• Extends exemptions has no sunset date

Testimony

Barbara Comstock (NetChoice)

• Support the bill
• I was a legislator in Virginia and helped pass a similar bill that brought tons of money and jobs into the state
• This is a $100B market – MN has good characteristics for attracting data centers they just need a bill like this
• 90 percent of investment in VA would not have occurred without tax exemption

Bartlett Cleland (NetChoice)

• I want to address counter views – you can see my other comments in writing
• People who oppose the bill do not state facts – there are exemptions in legislature in other part of MN industry – this kind of discrimination is not helpful
• Taxpayers are not being denied anything with the tax change
• Iowa has done well with tax exemptions
• Our members are leaders in sustainability

Q: You mention a VA report that says – energy costs will increase and will impact all residents – not just data centers. What do you say?
VA is the largest data center hub. There’s a reason. And they have not had that problem yet. We don’t agree with the expectation. We use solar, wind and nuclear. We deal with this with al industries.

Sounds like power needs will double (maybe triple by 2040) because of data centers. But you aren’t talking about that.

Q: On the map it looks like we have minimal or no comprehensive program – and that seems negative. Why?
You are falling into an argument trap. You are talking about what has happened in VA and we want to talk about what could happen. We don’t think these things will happen – even though the report says they are on track to happen.
MN gets low scores because it no longer has a 20 year tax exemption.

Q: Our exemption goes for 17 years. What is exempted in other state?
No.
Well – I can and they are not exempting as much as is recommending in this bill.
But you exempt a lot for other industries.

It would be nice to have more nuance to this conversation – not just your marketing materials

Q: About the structure of the sales tax – you think we’re discrimination against data centers. And you say one issue here is timing – refund verses exemption. We want to gather data on how data centers are spending. If we rely on exemptions – we lose that ability. We’d have to lean on modeling.

Andy Campo (Pipe Association)

• I represent workers likely to get jobs from data centers – for building and maintaining the buildings
• I support this bill

Q: If your org afraid that without this bill data centers won’t be built here.
Absolutely.

Q: Seems like all the tradespeople are excited about this. This is a project that takes a long time.
Yes

Tanner Fritsigner (MN Association of Pro State Employees)

• Oppose the bill
• Puts tax cuts to private business above health of general fund
• Consider about increased energy and water needs and environmental impact
• Uncontrolled growth in this area without support to regulators is dangerous

Arron Clems (MN Center for Environmental Advocacy)

• Opposes the bill
• In 2011, when the bill originally came up the tax impact was expected to be $5M annually; but this change is a much larger number
• Money spent here, means money spent in other places such as schools

Q: Do you know if data centers recycle building materials?
NO really.

Q: How does MN water quality compare to others?
MN has a lot of ground water but they are not limitless.

Aurora Vautrin (100 Percent)

• Strongly opposed
• Like to have the definition of large data center
• We need all options and information on the table going into the future to know what ROI is or isn’t.
• Data center impact on community is large

Gavin Hanson (MN Business Partnership)

• Supports the bill
• Being able to exempt bills rather than fill out forms and pre-pay is easier
• This will mean lots of jobs

Q: You talk about paying taxes is unwelcome burden for these businesses – but isn’t it what we all do? And these guys probably do have accountants. It’s part of doing business

Sara Mauradian (CURE)

• Works with small towns
• Opposes the bill
• Right now data centers must report in on expenses to get refunded; this bill would remove that check/balance from the process for the very largest data centers. This isn’t about timing; this is about transparency. It helps counter fraud and abuse.

Avonna Stark (Cleanwater Action)

• Opposes the bill
• Data centers use a ton of water and use lots of chemicals. If we tax billionaires, we might be able to help clean up water.
• Data centers cost Minnesota money. Large companies can pay their fair share.

Q: What do you mean “fair share” of taxes?
I’d have to look at what business are typically taxes.

Angela Capp (childcare provider)

• Opposes the bill
• The tax exemption for data centers will grow and grow and we need that tax base for things like childcare

Zach Martin (MN Power)

• Supports the bill
• We like data centers for rural areas because they don’t require a large workforce

Q: Do you think other companies would NOT come here without this new exemption?
We need to keep up with WI, IA, ND.

Q: We have a good quality of life in MN. It’s hard to believe that we aren’t competitive when we do get other companies coming here. Are we sure we really want these uber large data centers?

Patty O’Keefe (Vote Solar)

• Oppose bill
• We need to address climate change – bringing data centers to MN will mean much more power use
• Data centers are being used as an excuse to keep fossil fuels going
• This giveaway is too egregious to ignore
• Data centers do not employ many people; once build these data centers are not great for the economy

Sarah Wolf (MN Interfaith Power and Light)

• Opposes the bill
• We all pay 6.8 percent tax for power in our homes. Why don’t data centers pay?
• We don’t’ need tax cuts for billionaires

Peter Wagenius (Sierra Club)

• Oppose the bill
• This is an uncapped giveaway to corporations
• Google does not need our tax cuts and MN companies do not qualify for the exemptions
• We cannot bring in businesses thinking that MN can protect the environment – MN doesn’t and the feds are no longer here to help

Eric Bernstein (We Make MN)

• Dedicated to fair tax code
• Opposes bill
• We are concerned about loss of revenue and transparency
• Industry research shows that growth of these exemptions could lead to a loss of $730M taxes by 2031
• What corporations call burdensome; MN residents find comforting
• MN is 1 of 8 states that exempts software, equipment and energy

Q: The bill talks about qualified large business – is there a risk that this bill could bring in more data centers?
Both small scale and large scale will be able to access to advantages – although only large centers are exempt. But also yes – fear of more data centers.

Adam Thompson IBEW

• Taxes – We have income tax here. When people come from Texas to build the data centers, they pay income tax.

Joel Johnson IBEW

• We support the bill
• Lots of our members will get jobs if this goes through and they can work and eat at home at night if data centers come to MN

Q: Research shows that a data center employs 1000 people, which means the income tax will not match the tax cuts.

Q: Sounds like many of the workers building the data centers will not be Minnesotans?
Yup – that could be. We have MN workers who travel too.