Bill Summary – FastDemocracy

SESSION OF 2024
  SUPPLEMENTAL NOTE ON SUBSTITUTE FOR HOUSE
                BILL NO. 2450
           As Recommended by House Committee on
          Commerce, Labor and Economic Development

Brief*
     Sub. for HB 2450 would create a sales tax exemption for
certain sales associated with qualified data centers.

Exempt Sales
    The bill would provide exemptions for the following sales
associated with qualified data centers:
     ●     Sales of property or services purchased for the
           purpose of constructing, reconstructing, enlarging,
           or remodeling a qualified data center, including the
           use of project exemption certificates;
     ●     Sales and installation of data center machinery and
           equipment;
     ●     Sales of eligible data center costs, which would
           include costs of land, buildings, site improvements,
           modular data centers, computer data center
           equipment acquisition and permitting, lease
           payments, site characterization and assessment,
           and engineering and design used directly and
           exclusively for a qualified data center;
     ●     Sales of electricity used by the qualified data
           center; and
____________________
*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
http://www.kslegislature.org
     ●    Sales of labor services to install and maintain data
          center equipment.
Qualified Data Centers
      The bill would provide for the exemption to be available
to businesses subject to the Kansas income tax and engaged
in data processing, storage, and dissemination that make an
investment of at least $600.0 million in the first five years
following beginning construction of a qualified data center and
create and maintain at least 20 new jobs in the data centers
within two years of beginning operations.
      “Qualified data center” would be defined to mean one or
more buildings that are constructed, reconstructed, enlarged,
or remodeled to house a group of networked computer
servers in Kansas to centralize the storage, management,
and dissemination of data and information pertaining to a
particular business, taxonomy, or body of knowledge.
      Businesses making an investment of at least $600.0
million would be entitled to the exemption for 30 years.
Businesses making an investment of at least $800.0 million
would be entitled to the exemption for 40 years. Businesses
making an investment of at least $1.0 billion would be entitled
to the exemption indefinitely.
     Businesses seeking the exemption would be required to
submit an application to, and enter into an agreement with,
the Secretary of Commerce, committing to make the required
investment and begin construction within 10 years of the
agreement. The agreement would be required to include a
provision providing for the Secretary of Commerce to require
repayment of all or a part of the sales tax exemption in the
event of a breach of the agreement that is uncured after 60
days. Businesses receiving the exemption would also be
required to cooperate with any audit undertaken by the
Secretary of Revenue and provide relevant information for

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economic incentive transparency databases and annual
reports.
      Confidential information or trade secrets that are
obtained by the Secretary of Commerce pursuant to an
application and agreement under the provisions of the bill
would be excluded from the Kansas Open Records Act until
July 1, 2028, but would be available to the Legislative
Division of Post Audit upon request.
     The Secretary of Commerce would be required to
conduct a review every five years of exempt businesses to
ensure good standing and compliance with the provisions of
the agreement. The Secretary of Commerce would also be
required to certify to the Secretary of Revenue when
businesses have met the conditions to receive the sales tax
exemption.
     The Secretaries of Commerce and Revenue would be
authorized to implement rules and regulations to implement
the provisions of the bill.

Background
     The bill was introduced by the House Committee on
Taxation at the request of Representative Bergkamp.

House Committee on Commerce, Labor and Economic
  Development
     In the House Committee hearing on March 14, 2023,
proponent testimony was provided by representatives of
Kansans for Lower Electric Rates, Kansas Industrial
Consumers Group, and NetChoice. The proponents generally
stated the bill would make Kansas more attractive to data
centers, and data centers can lower the cost of electricity for
all consumers by spreading the fixed costs of electricity
across more consumption.

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       No other testimony was provided.
     The House Committee made technical amendments to
the bill and recommended a substitute bill be passed.

Fiscal Information
     According to the fiscal note prepared by the Division of
the Budget on the bill, as introduced, the Department of
Revenue indicates enactment of the bill has the potential to
reduce state revenues by indeterminate amounts.
     The Kansas Department of Transportation, Kansas
Association of Counties, and League of Kansas Municipalities
also indicate enactment of the bill could reduce sales tax
revenues.
      Any fiscal effect associated with enactment of the bill is
not reflected in The FY 2025 Governor’s Budget Report.
Tax; sales tax; exemption; data center


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Statutes affected: 
As introduced: 79-3606
Sub: 79-3606
Version 2: 79-3606