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MI — State Policy Updated January 2026

Michigan

Statewide incentives and constraints, plus key utility regulation and active policy debate.

Sales and Use Tax Exemptions (Qualified Data Centers) Enterprise Data Center Tax Exemptions (Certificate-Based) Enterprise Capital and Jobs Thresholds Green Building Certification Municipal Water Requirement 90% Clean Energy Procurement Rate Protections for Residential Customers Utility Regulation Water Constraints

Overview

Michigan offers two sales and use tax exemption programs for data centers, both running through December 31, 2050. The newer “enterprise data center” program requires at least $250 million in capital investment, municipal water sourcing, 90% clean energy procurement, and protections to prevent cost shifts onto residential ratepayers. The Michigan Public Service Commission (MPSC) has begun approving large-load contracts with safeguards, while the state’s water withdrawal law requires approval for new withdrawals that could harm streams and rivers.

Incentives

Sales and Use Tax Exemptions (Qualified Data Centers)

Michigan exempts sales and use tax on qualifying data center equipment for qualified data centers and colocated businesses through December 31, 2050.[1][2]

  • The exemption continues only if statewide job totals reach 400 jobs by 2022 and 1,000 jobs by 2026, verified by the Michigan Strategic Fund (MSF).
  • MSF is required to report annually on job thresholds and program compliance.

Enterprise Data Center Tax Exemptions (Certificate-Based)

The state offers a separate exemption for enterprise data centers that receive an MSF certificate, with exemptions running through December 31, 2050, or 2065 for projects on approved brownfield sites or former power plant sites.[1][2]

  • MSF cannot issue new enterprise data center certificates after December 31, 2029 (existing certificates can continue).
  • Certificates require compliance with strict capital, jobs, water, energy, and rate-protection conditions.

Requirements and Conditions

Enterprise Data Center Qualification Standards

Enterprise data center certificates require meeting multiple thresholds to ensure economic and environmental benefits. These conditions apply for the life of the tax exemption and can trigger clawbacks if violated.[1][2]

  • Capital investment: At least $250 million in aggregate capital investment.
  • Jobs: At least 30 qualified new jobs with wages at 150% or more of the prosperity region median wage.
  • Green building certification: Certification under one or more green building standards (e.g., LEED, ENERGY STAR, BREEAM, ISO 50001, UL 3223) within 3 years of being placed in service.
  • Water sourcing: Must use municipal water from a system with available capacity.
  • Clean energy: Must procure 90% clean energy based on annual forecasted usage, using approved methods; utilities are required to identify or develop tariffs or contract mechanisms to support compliance.

Rate Protections and Property Tax Limits

The enterprise data center law includes provisions to prevent cost-shifting and limit property tax breaks.[1][2]

  • Rate restrictions: Enterprise data centers cannot take service under certain MPSC-approved tariff rates (U-21160, U-21163, U-21646), or any rate that shifts costs onto residential customers; the long-term industrial load rate is restricted unless tied to new resources and not below average industrial rates.
  • Property tax benefit limits: Enterprise data centers generally cannot receive state or local property tax benefits unless each affected local government approves by resolution.

Certificate Compliance and Clawback

MSF can revoke certificates for noncompliance, with tax exemption clawbacks (including interest) and a staged notice process.[1][2]

Utility and Grid Rules

MPSC Large-Load Contracts and Rate Safeguards

In Case No. U-21990, the MPSC conditionally approved DTE Electric special contracts to serve the proposed Saline Township data center, with safeguards to prevent costs shifting to other ratepayers.[3]

  • The order required a 19-year contract term, 80% minimum billing demand, early termination payments, and load-shedding priority for the data center during emergencies.
  • The MPSC directed DTE to file a large-load customer tariff and to update planning filings (IRP/CEP — integrated resource plan and clean energy plan, capacity demonstration, energy waste reduction) to reflect the data center load.
  • The Commission emphasized its authority covers rates and contract terms, not siting or water permits.

Water and Environmental Rules

Water Withdrawal Assessment and Approval

Michigan requires the Water Withdrawal Assessment Tool (WWAT) for new or increased large-quantity withdrawals, and state law prohibits withdrawals that create an Adverse Resource Impact (ARI) to streams and rivers.[4]

  • Approval is required for new or increased withdrawals using pumps capable of 70 gallons per minute or more; approval is based on a no-ARI determination and results in a state registration.
  • A large-quantity withdrawal is defined as 100,000 gallons per day or more (30-day average), and approvals must be used within 18 months.

What to Watch

  • Track whether MSF publishes certificate counts or job-threshold reports under the statute in 2026.
  • Monitor any 2026 legislative amendments to enterprise data center requirements, especially clean-energy or rate-protection rules.
  • Watch for additional MPSC proceedings on large-load customer tariffs and contract standards following the DTE/Saline Township case.

Sources

[1] Michigan Legislature, “MCL 205.54ee — Data center equipment; exemption from tax; conditions; report; definitions,” amended by 2024 PA 207, effective April 17, 2025, https://www.legislature.mi.gov/Home/RenderDoc?objectName=mcl-205-54ee (accessed January 8, 2026).

[2] Michigan Legislature, “MCL 205.94cc — Data center equipment; exemption from tax; conditions; report; definitions,” amended by 2024 PA 181, effective April 2, 2025, https://www.legislature.mi.gov/Home/RenderDoc?objectName=mcl-205-94cc (accessed January 8, 2026).

[3] Michigan Public Service Commission, “MPSC approves DTE Electric energy contracts for data center with conditions to strengthen protections for other customers,” December 18, 2025, https://www.michigan.gov/mpsc/commission/news-releases/2025/12/18/mpsc-approves-dte-electric-energy-contracts-for-data-center (accessed January 8, 2026).

[4] Michigan Department of Environment, Great Lakes, and Energy (EGLE), “Water Withdrawal Assessment Tool,” https://www.michigan.gov/egle/about/organization/geologic-resources-management/water-use/water-withdrawal-assessment-tool (accessed January 8, 2026).

[5] Garret Ellison (mlive.com), “Michigan Approves Tax Breaks for Hyperscale Data Centers,” GovTech, November 15, 2024, https://www.govtech.com/policy/michigan-approves-tax-breaks-for-hyperscale-data-centers (accessed January 8, 2026).