As states compete to attract data infrastructure investment, Minnesota has used its sales tax exemption for data centers as a key incentive tool. The exemption was enacted in 2011 and codified in Minn. Stat. §297A.68, subd. 42, offering a 20-year refund-based exemption for purchases of qualifying IT equipment and software used in certified data centers. To qualify, a facility originally had to meet a $50 million investment threshold, include 30,000 square feet, and complete the investment within 24 months, with a start date of June 30, 2012, and a sunset of July 1, 2042. In 2013, the statute was amended to reduce the square footage requirement to 25,000, lower the investment threshold for new facilities to $30 million, and extend the timeline to 48 months. That same year, the definition of software was broadened to include software utilized or loaded at the data center, including licensing, maintenance, and customization.

Minnesota expanded the exemption again in 2025 by creating a new category for qualified large-scale data centers, defined as facilities with $250 million in investment over 60 months. This category also requires payment of a prevailing wage and obtaining a sustainability certification, but it notably does not require features like an uninterruptible power supply, fire suppression systems, or enhanced security, and it eliminates the requirement that the facility be located on a single or contiguous parcel. These changes were designed to accommodate the scale and flexibility needed by major operators while preserving core investment and labor standards. At the same time, Minnesota eliminated the exemption for electricity and removed the stated purpose of job creation from the statute.

Of additional note, the Minnesota House introduced HF 2928 in 2025, proposing a suite of new regulatory measures for large-scale data centers. These included environmental review thresholds, water usage oversight, and a requirement for hourly carbon-free energy sourcing by 2030. The bill also proposed an annual fee on data centers, with proceeds directed toward energy conservation programs for low-income households. While specific dollar amounts were mentioned in some public commentary and legislative summaries, they were not included in the bill text itself. The proposal further empowered the Public Utilities Commission to establish a dedicated tariff structure and required backup generators exceeding 50 megawatts to obtain a Certificate of Need. Though the bill was not enacted, it reflects growing legislative interest in regulating the infrastructure and environmental impacts of data center development.

Despite several legislative proposals over the years to scale back the exemption, the only enacted changes — aside from the removal of the electricity exemption — have actually made the program more accessible or extended its duration. In 2025, Minnesota repealed the original sunset date and extended the exemption period from 20 to 35 years, signaling a renewed effort to attract long-term investment. As of early 2024, Minnesota has certified 41 qualified data centers. There is reserved optimism that the 2025 expansion will help Minnesota compete for large-scale projects, but success will depend on whether the legislature can maintain a stable and predictable policy environment that earns corporate trust.