Minnesota is making notable changes to its Data Center Program starting June 30, 2025. These updates reflect the state’s evolving approach to attracting large-scale data center development while ensuring local environmental standards are upheld. The amended statute (Minnesota Statute 297A.68) introduces a mix of expanded benefits and new requirements, all aimed at fostering long-term, sustainable growth in this sector.

What’s Changing?

No More Sunset Clause

One of the most significant updates is the removal of the program’s sunset date. Previously set to expire in 2042, the sales tax refund program is now open-ended. That means qualifying data centers can claim refunds on enterprise IT equipment and software for up to 35 years. This long-term incentive provides a level of certainty that could make Minnesota more competitive in attracting long-term data infrastructure projects.

Electricity Is No Longer Eligible

Electricity purchases will no longer qualify for the sales tax refund. This shift aligns with broader goals around energy regulation and sustainability. Instead, separate requirements and associated fees will now apply to electricity usage in data center operations.

New Tier for Large-Scale Data Centers

A new category has been introduced for what the state defines as “large-scale” data centers. To qualify, facilities must meet the following criteria:

  • Size: At least 25,000 square feet
  • Investment: A minimum of $250 million within a 60-month period
  • Labor: All workers must be paid the prevailing wage
  • Sustainability: Within three years of opening, facilities must achieve certification from at least one approved green building standard. Options include LEED, Energy Star, BREEAM, UL 3223, Envision, or others approved by the commissioner.

These changes suggest a clear direction from the state by encouraging major investment but do so responsibly. Minnesota is putting environmental, and labor standards front and center, signaling that development should not come at the expense of the communities hosting these projects.

What This Means for Developers

For companies considering a data center project in Minnesota, these changes present both opportunity and new compliance considerations. The extended refund timeline could significantly improve return on investment, but the updated environmental and labor requirements will require careful planning from the outset. If your business is evaluating the tax implications of a data center build—or working to ensure compliance with the new rules—our team at KE Andrews can help you navigate the program’s updates and evaluate how they impact your project timeline and bottom line.