Legislative Analysis
Phone: (517) 373-8080
ENTERPRISE DATA CENTERS
http://www.house.mi.gov/hfa
House Bill 4906 (S-10) as passed by the Senate Analysis available at
Sponsor: Rep. Joey Andrews http://www.legislature.mi.gov
Senate Bill 237 (S-11) as passed by the Senate
Sponsor: Sen. Kevin Hertel
House Committee (HB 4906): Tax Policy
House Committee (SB 237): [Placed on second reading]
Senate Committee: Finance, Insurance, and Consumer Protection
Complete to 5-20-24
SUMMARY:
House Bill 4906 and Senate Bill 237 would amend the General Sales Tax Act and the Use 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 (BRFA), 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,
1
http://legislature.mi.gov/doc.aspx?mcl-Act-381-of-1996
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 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
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 the
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 meets, or is
expected to meet within the time frame set forth in the certificate, all of the following
requirements:
• The facility is located in this state.
• The facility is composed of one or more buildings.
• The facility is designed and intended for housing, and does house, data center
equipment to centralize the storage and processing of data.
• The aggregate capital investment in the facility made by the qualified entity,
and any of its affiliates that will develop, own, and operate the facility, is not
less than $250.0 million.
• The qualified entity and any of its affiliates, in the aggregate, create and
maintain a minimum of 30 qualified new jobs in Michigan with an annual wage
that is equal to 150% or more of the prosperity region median wage through
the applicable date.
• Unless approved by a resolution of the governing body each affected local unit
of government, the facility does not receive and, through the applicable date,
will not receive any state or local property tax benefit, including property tax
benefits available under the General Property Tax Act, 2 the Michigan
Renaissance Zone Act, 3 and 1974 PA 198. 4
• Not later than three years after being placed in service, the facility will attain
certification under, and the qualified entity of the facility will certify to MSF
that the facility has obtained certification under, one or more of the following
green building standards:
o BREEAM for New Construction or BREEAM for In-Use.
o ENERGY STAR.
o Envision.
o ISO 50001 – energy management.
2
https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-Act-206-of-1893
3
https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-Act-376-of-1996
4
https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-Act-198-of-1974
House Fiscal Agency HB 4906 and SB 237 as passed by the Senate Page 2 of 7
 o LEED for Building Design and Construction or LEED for Operations
and Maintenance.
o Green Globes for New Construction or Green Globes for Existing
Buildings.
o UL 3223.
• Before the start of operations, the facility will use municipal water or, if the
facility cannot use municipal water before the start of operations, the facility
will develop a plan to convert to using municipal water within five years after
the start of operations.
Enterprise data center would not include a facility that MSF determines no longer
meets, or is no longer expected to meet within the time frame set forth in the certificate,
the requirements described above.
Aggregate capital investment would mean the capital investment made and maintained
in the facility to the extent that investment results in an increase in the total capital
investment that the qualified entity and its affiliates, in the aggregate, maintain in
Michigan when compared to the total capital investment that the applicant and its
affiliates, in the aggregate, maintained in Michigan before issuance of the certificate,
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.
Qualified new job would mean a full-time job created by the qualified entity or its
affiliates at the facility that is in excess of the number of full-time jobs that the applicant
and its affiliates maintained in Michigan before issuance of the certificate, as
determined and verified by MSF.
Prosperity region median wage would mean the median annual wage for the prosperity
region 5 where the facility is located based on the most recent data made available by
the Michigan Bureau of Labor Market Information and Strategic Initiatives.
Applicable date would mean the following:
• For a facility that is located on the property included in a brownfield plan under
the BRFA, or on property that was once an industrial site used primarily as a
power plant to generate electricity for sale, December 31, 2065.
• For any other facility, December 31, 2050.
Local unit of government would mean a city, village, township, or county.
Property tax benefit would mean any benefits that reduce the property tax burden on
the facility for purposes of encouraging economic development, such as property tax
exemptions, millage rate or valuation reductions, and property tax capture, other than
5
https://www.michigan.gov/-
/media/Project/Websites/mdhhs/Folder3/Folder39/Folder2/Folder139/Folder1/Folder239/Prosperity_Map1_430346_
7.pdf?rev=4b907ee644814b6397163752b0c3807e
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 property tax capture under a brownfield plan that has been approved by the governing
board under the BRFA and that is in effect at the time of the application under the bills.
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, which could not exceed six
years. MSF or its designees 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). The time
frame would have to be the lesser of six years or the time frame specified on the
application. 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
information regarding purchases for which a sales or use tax exemption was claimed
and employment, tax withholding, capital investment, and other information required
by MSF 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. MSF would have to provide a copy of each
report to the Department of Treasury but otherwise could not disclose any information
from the reports that is not aggregated or could be used to identify a specific person or
data center.
• Within three years after a facility is placed in service, the qualified entity of the facility
would have to certify to MSF (in a form and manner prescribed by MSF) that the
facility has attained under one or more of the green building standards described above.
• If MSF determines that a facility no longer meets 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
House Fiscal Agency HB 4906 and SB 237 as passed by the Senate Page 4 of 7
 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.
Except as otherwise provided in the bill, MSF could not disclose any information from the
reports that is not aggregated or could be used to identify a specific person or data center.
Fees
The bills would authorize MSF to charge and collect reasonable administrative fees to
effectuate their purposes.
Environmental encouragement
The bills would state that the legislature encourages a person claiming an exemption under the
bills to take direct steps to adopt practices to mitigate negative environmental impacts resulting
from expanded use of data centers, including through all of the following:
• To the extent possible, procuring or contracting for power from renewable sources.
• Adopting practices to improve the energy efficiency of existing data centers, including
through upgrading and consolidating technology, managing data center airflow, and
adjusting and improving heating, ventilation, and air conditioning systems.
• Taking actions to conserve, reuse, and replace water, including at least all of the
following:
o Using water efficient fixtures and practices.
o Treating, infiltrating, and harvesting rainwater.
o Recycling water before discharging.
o Partnering with local water utilities to use discharged water for irrigation and
other water conservation purposes.
o Using reclaimed water where possible for data center operations.
o Supporting water restoration in local watersheds.
Sunset
MSF would be prohibited from issuing any new certificates after December 31, 2029. The
sunset would not affect existing certificates in effect before this date.
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
House Fiscal Agency HB 4906 and SB 237 as passed by the Senate Page 5 of 7
 data center maintains a specified number of data center industry jobs or data center industry
related jobs. 6
The bills would add that, for purposes of those provisions, “data center industry jobs” and “data
center industry related jobs” do not include qualified new jobs as that term is defined under the
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