Reform Taxes on Data Centers

 

The purpose of this bill is to eliminate current tax incentives for data centers/AI centers in MN and raise the taxes on

them. The taxes would be raised for each center depending on their negative effects on the environment that they need to

assist in rectifying. Additionally, this bill intends to utilize the monetization from raised taxes and put it towards

the environment. It will do this by giving the money to the DNR.

 

Minnesota currently has many tax incentives in place for data centers that qualify. These tax breaks make it so the data

centers don’t give the government their proper amount of taxes, so the MN government is not getting the money they

could. According to Minnesota Women’s Press, they are missing out on $137 million in potential tax revenue. This is

money that is then taken away from other government funded institutions such as public education, state and local

government operations, and healthcare and food assistance. On top of that, these companies are only getting these tax

incentives because the government believes that data centers are creating more jobs when they come to Minnesota. This is

true, but they should still not be in place because they only create jobs while they are being built or refurbished, and

require very few personnel otherwise. As reported by Rest of World on filings across 17 projects (2012-2024), the amount

of jobs during construction was 4,900, compared to a miniscule 1,547 for operation. Furthermore, according to Data

Center Knowledge, “Once a data center is up and running, it usually requires some on-site technicians to handle tasks

like setting up and managing IT equipment. Typically, however, the total data center staff number is only several

dozen.”

Besides the money issues, these centers should be required to rectify the damage that they have done to the environment.

This is important because as the computers in data centers are using a huge amount of energy–especially for AI–the

computers can overheat and need to be cooled down. Here’s where the big problem comes in. The way that they cool down

these computers is by using water. Water is a very important resource, especially freshwater, which is what humans need,

and what these centers use. After using the freshwater to cool down these computers, most of it evaporates, about 60%,

and the rest is waste water(that which we cannot drink) aka the last 40%. (Clean Water Action)

 

Data Centers are physical facilities that house corporate computers, networks, storage, and other IT equipment. The

computers in a data center can contain or facilitate applications, services, or data. Data centers can come in any size-

from a closet space to a warehouse- and some companies choose to rent server space so that others maintain the center

for them.

Negative effects on the environment can be determined by finding the carbon footprint, water footprint, and ecological

footprint of each data center.

Tax incentives, otherwise known as tax exemptions or tax breaks, are certain articles that make it so certain

people/companies have reduced taxes, no taxes, or only taxes on certain things. In this instance, these tax exemptions

make it so the businesses wouldn’t have to pay certain sales or use taxes.

 

Funding is not needed for this bill, but money for the DNR will come from the data centers.

 

If a data center refuses to pay taxes they will be penalized with already existing tax resistance penalties.

 

This bill will be in effect the date that it is passed.