Legislative Analysis
Phone: (517) 373-8080
ENTERPRISE DATA CENTERS
http://www.house.mi.gov/hfa
House Bill 4905 as reported from committee
Analysis available at
Sponsor: Rep. Alabas Farhat http://www.legislature.mi.gov
House Bill 4906 as reported from committee
Sponsor: Rep. Joey Andrews
Committee: Tax Policy
Complete to 10-25-23
SUMMARY:
House Bills 4906 and 4906 would amend the Use Tax Act and the General Sales Tax Act,
respectively, to exempt from sales and use taxes the sale or the storage, use, or consumption of
data center equipment under specific conditions related to the equipment’s use in an enterprise
data center (defined in the bills). The exemption would begin 90 days after the applicable bill
is enacted and continue through December 31, 2050. For properties on brownfields or former
electric power plants, the exemption would expire December 31, 2065.
The bills are described together below. Their provisions are identical except that the sales tax
bill applies to the sale of data center equipment and the use tax bill applies to its storage, use,
or consumption.
Description of exemptions
Under each bill, from the bill’s effective date through December 31, 2050, the sale of data
center equipment to either of the following (or the storage, use, or consumption of data center
equipment that is sold to either of the following) would be exempt from the tax imposed by the
applicable act:
• A qualified entity or its affiliates for assembly, use, or consumption in the operations
of an enterprise data center subject to a certificate.
• A person engaged in the business of constructing, altering, repairing, or improving real
estate for others, to the extent that the data center equipment is to be affixed to or made
a structural part of an enterprise data center subject to a certificate.
For an enterprise data center subject to a certificate that is located on a property included in a
brownfield plan under the Brownfield Redevelopment Financing Act, 1 or on property that was
once an industrial site used primarily as a power plant to generate electricity for sale, the
exemptions would apply through December 31, 2065
For purposes of the above, data center equipment would mean only computers,
servers, routers, switches, peripheral computer devices, racks, shelving, cabling,
wiring, storage batteries, back-up generators, uninterrupted power supply units,
environmental control equipment, other redundant power supply equipment, and
prewritten computer software used in operating, managing, or maintaining the
enterprise data center. Data center equipment also would include any construction
materials used or assembled for the construction or modification of an enterprise data
1
http://legislature.mi.gov/doc.aspx?mcl-Act-381-of-1996
House Fiscal Agency Page 1 of 5
 center, including building materials, infrastructure, machinery, wiring, cabling,
devices, tools, and equipment that would otherwise be considered a fixture or related
equipment.
Qualified entity would mean an applicant that is issued a certificate for a particular
enterprise data center project and that complies with the requirements described below.
Certificate would mean a document issued by the Michigan Strategic Fund (MSF) to
an applicant that certifies or otherwise establishes that the facility identified in that
document, which is or is to be developed, owned, and operated by the applicant or an
affiliate of the applicant, qualifies as an enterprise data center.
Enterprise data center would mean a facility that MSF determines either meets all of
the following requirements or is expected to meet all of the following requirements
within the time frame set forth in the certificate (and would not include a facility that
MSF determines no longer meets these requirements or is no longer expected to meet
them within the applicable time frame):
• The facility consists of one or more buildings (or an array of interconnected
buildings) and is located in Michigan.
• The facility is primarily designed and intended to house, and does actually
house, data center equipment to centralize the storage and processing of the
qualified entity’s own data or the data of any of its affiliates.
• The facility is developed, owned, and operated by a qualified entity or any of
its affiliates for the exclusive use of the qualified entity or its affiliates (which
could include use by contractors for or on behalf of the qualified entity or its
facilities).
• The qualified entity, and any of its affiliates that will develop, own, and operate
the facility, makes an aggregate capital investment of at least $250.0 million
in the facility.
• The qualified entity and any of its affiliates create and maintain an aggregate
annual compensation of not less than $1.0 million to qualified employees at the
facility on or before the fifth anniversary of the issuance of a certificate of
occupancy for the facility.
Aggregate capital investment would mean capital investment made and maintained in
the facility to the extent that the investment increases the total capital investment
maintained in Michigan by the qualified entity and its affiliates, in the aggregate, when
compared to the total capital investment the applicant and its affiliates, in the aggregate,
maintained in Michigan before the certificate was issued, as determined and verified
by MSF.
Qualified employee would mean an employee at the facility created by the qualified
entity or its affiliates earning a wage of at least 120% of the county average wage.
County average wage would mean the average annual wage for the county where the
facility is located based on the most recent data made available by the Michigan Bureau
of Labor Market Information and Strategic Initiatives. The county average wage of a
facility located in more than one county would be based on the county with the highest
average annual wage.
House Fiscal Agency HBs 4905 and 4906 as reported Page 2 of 5
 Certificates
To claim an exemption described above, the qualified entity would have to have a certificate
for that facility that is in good standing at the time the data center equipment is sold to the
purchaser. All of the following also would apply:
• A person seeking a certificate for an enterprise data center would have to apply to MSF
on a form and in a manner prescribed by MSF. The application would have to include
a signed affirmation that the applicant expects the facility to meet the enterprise data
center criteria and the expected time frame for doing so. MSF would have to review
the application and issue a certificate or provide reasons for its denial within 120 days
after receiving a complete and correct application. The certificate would have to specify
a time frame for the facility to satisfy each of the criteria in the definition of enterprise
data center (see above). MSF would have to provide a copy of each certificate issued
to the Department of Treasury.
• A qualified entity to which a certificate was issued would have to report to MSF all
information required by MSF regarding purchases for which a sales or use tax
exemption was claimed and to determine whether the facility continues to qualify as
an enterprise data center. This report would be subject to audit and would have to be
made on an annual basis after issuance of the certificate. The report could not include
any remittance for tax and would not constitute a tax return.
• If MSF determined that a facility no longer met the criteria to qualify as an enterprise
data center, it would have to revoke the certificate. At least 60 days and up to 180 days
before revocation, MSF would have to provide written notice to the qualified entity
and the Department of Treasury of its preliminary revocation determination, providing
the entity an opportunity to demonstrate, within a time period prescribed in the notice,
that the facility continues to qualify. During that time period, all persons would have
to cease claiming an exemption stemming from the certificate. If at the end of the time
period MSF determines that the facility does not qualify, MSF would have to revoke
the certificate and notify the Department of Treasury within five days after doing so.
The former qualified entity would have to pay to the Department of Treasury an amount
equal to the entire amount of the tax exemptions stemming from the certificate that
have been received by all persons, plus interest (as specified in 1941 PA 122) calculated
from January 1 of the year the exemption was received until the amount is paid.
However, for a revocation occurring more than 10 years after issuance of the certificate,
MSF could determine under published guidelines, after evaluating the circumstances,
that a lesser payment amount is appropriate—although this lesser amount could not be
less than 50% of the entire amount of the exemptions stemming from the certificate
that have been received by all persons.
Annual summary report
On or before January 1 of each year, a person engaged in the business of constructing, altering,
repairing, or improving real estate for others that has claimed an exemption for a particular
facility would have to submit a summary report to the qualified entity or former qualified entity
to which a certificate for that facility was issued that provides at least information sufficient to
identify the person who made the purchases and the purchase price of all items purchased each
month of that year. For four years after the date of purchase, the person also would have to
maintain all invoices, bills of sale, or similar documents for all claimed exempt purchases that
indicate the date of purchase, the items purchased, and the purchase price of the property
identified in the summary report.
House Fiscal Agency HBs 4905 and 4906 as reported Page 3 of 5
 Qualified data centers
The sections the bills would amend now provide for an exemption for data center equipment
that is sold to, or used by, a qualified data center (as defined in the act), as long as the qualified
data center maintains a specified number of data center industry jobs or data center industry
related jobs. 2
The bills would add that, for purposes of those provisions, “data center industry jobs” and “data
center industry related jobs” do not include jobs held by qualified employees as that term is
defined under the bills.
Each bill would take effect 90 days after its enactment.
HB 4905 (use tax): MCL 205.94cc
HB 4906 (sales tax): MCL 205.54ee
BRIEF DISCUSSION:
Supporters of the bills argued that bills present an opportunity for Michigan to take advantage
of the growing importance of data centers in the modern economy and draw large investments
into the state. They argued that without the exemptions provided by the bills, Michigan would
not be competitive for any such projects.
Opponents of the legislation raised concerns about the potential impact on revenue sharing for
local governments. Supporters countered that data centers would not come to Michigan without
the bills, the sales exempted by the bills would not exist without them.
FISCAL IMPACT:
To the extent that an entity qualifies as an enterprise data center, sales and use tax revenue
would decline relative to current law. However, without knowing the amount of capital
investment that would qualify under the bills, the extent of the revenue loss cannot be
determined. As a frame of reference, for a $250.0 million investment (the minimum
requirement under the bills), the corresponding sales/use tax revenue loss would be $15.0
million.
About 73% of sales tax revenue is earmarked to the School Aid Fund, and an additional 10%
is dedicated to constitutional revenue sharing. The remainder accrues to the general fund.
Similarly, one-third of use tax revenue is earmarked to the School Aid Fund, while the
remainder accrues to the general fund. It is anticipated that most of the revenue loss would be
sales taxes as opposed to use taxes.
The stipulation that wages must exceed the average county wage by at least 120% is unlikely
to have a significant economic impact. The highest average county wage in the 4th quarter of
2022 was $77,532 (Oakland County), the lowest was $30,316 (Keweenaw County), and the
statewide average was $66,248. In contrast, the statewide average wage for workers employed
in computer systems design and related services (NAICS 5415) was almost 50% higher than
2
This exemption was added by 2015 PAs 251 and 252. See: http://legislature.mi.gov/doc.aspx?2015-SB-0616
House Fiscal Agency HBs 4905 and 4906 as reported Page 4 of 5
 120% of the average statewide annual wage. While some specific employees might benefit
from this provision, it would not be expected to have wide-ranging effects.
POSITIONS:
Representatives of the following entities testified in support of the bills:
• Net Choice (10-11-23)
• Cornerstone Alliance (10-18-23)
• Franklin Partners (10-11-23)
The following entities indicated support for the bills:
• DTE (10-11-23)
• Detroit Regional Chamber (10-11-23)
• Michigan Regional Council of Carpenters and Millwrights (10-11-23)
• Michigan Laborer District Council (10-11-23)
• ITC (10-11-23)
• Construction Association of Michigan (10-11-23)
• Data Center Coalition (10-11-23)
• Grand Rapids Chamber (10-11-23)
• Ann Arbor Spark (10-11-23)
• General Motors (10-18-23)
• Consumers Energy (10-18-23)
• Economic Development Leaders for Michigan (10-18-23)
• Indiana Michigan Power Company (10-18-23)
The Mackinac Center for Public Policy indicated opposition to the bills. (10-11-23)
Legislative Analyst: Alex Stegbauer
Fiscal Analysts: Ben Gielczyk
Jim Stansell
■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their
deliberations and does not constitute an official statement of legislative intent.
House Fiscal Agency HBs 4905 and 4906 as reported Page 5 of 5


Statutes affected:
House Introduced Bill: 205.94
As Passed by the House: 205.94