Overview
Minnesota offers a sales and use tax exemption for enterprise IT equipment and software purchased for qualified data centers, with three tiers based on investment levels. Projects over $250 million activated after mid-2025 must pay prevailing wages during construction and obtain green building certification within three years of operation. Environmental review and air permitting requirements create formal public input channels for large projects with significant backup power needs.
Incentives
Sales and Use Tax Exemption for Qualified Data Centers
Minnesota exempts enterprise IT equipment and computer software purchased for use in a qualified data center through a refund mechanism after tax is collected.[1]
The state offers three qualifying tiers:
- Qualified data center: at least 25,000 square feet on a single or contiguous parcel, $30 million in construction/refurbishment plus IT equipment within 48 months (starting no earlier than July 1, 2012), and required infrastructure including UPS/generator backup, fire suppression, and enhanced security.[1]
- Qualified refurbished data center: existing facility meeting size and infrastructure standards, with $50 million in construction/refurbishment plus IT equipment within 24 months.[1]
- Qualified large-scale data center: at least 25,000 square feet (single or multiple connected locations) and $250 million in construction/refurbishment plus IT equipment within 60 months starting after June 30, 2025.[1]
The exemption can be claimed for purchases made within 35 years of the first qualifying purchase. Certification must occur before July 1, 2042.[1]
Requirements and Conditions
Certification and Oversight
The Minnesota Department of Employment and Economic Development (DEED) must certify qualifying data centers to the Department of Revenue before refunds are issued.[1] DEED provides annual notice of projects projected to qualify in the next four years.[1]
Prevailing Wage for Large-Scale Projects
Construction or refurbishment of qualified large-scale data centers (projects over $250 million starting after June 30, 2025) must pay prevailing wage for covered work. DEED cannot certify a large-scale project without compliance documentation.[1]
Green Building Certification for Large-Scale Projects
Within three years of being placed in service, a qualified large-scale data center must obtain certification under one or more recognized standards such as LEED, Energy Star, ISO 50001, BREEAM, Envision, or UL 3223. Failure to comply triggers repayment of the exemption.[1]
Environmental Review
Minnesota requires environmental assessment worksheets (EAWs) or environmental impact statements (EISs) for certain projects based on size, location, or other factors. No permits or approvals may be issued until review is complete.[2] The Environmental Quality Board oversees the process. Public petitions can require an EAW if a project may have significant environmental effects.[2]
Air Permitting for On-Site Power
The Minnesota Pollution Control Agency (MPCA) regulates all sources of air emissions at a facility. Permit requirements depend on a facility’s potential to emit regulated pollutants relative to federal or state thresholds.[3] If a data center’s on-site generators push potential emissions over thresholds, it may need a state permit or Title V permit under federal Clean Air Act rules.[3]
What to Watch
- Local zoning activity: metro exurbs including Farmington, Rosemount, and Becker have seen recent data center proposals, and municipal zoning changes or conditional use permit debates may signal local resistance or accommodation.
- MPCA permit disputes: recent MPCA public notice items related to data center generator permits or air quality reviews could reveal ongoing local controversies over backup power infrastructure.
Sources
[1] Minnesota Legislature (Office of the Revisor of Statutes), “Minnesota Statutes, Section 297A.68 (Business Exemptions), Subdivision 42: Data Centers,” n.d., https://www.revisor.mn.gov/statutes/cite/297A.68 (accessed January 8, 2026).
[2] Minnesota Pollution Control Agency, “Environmental review,” n.d., https://www.pca.state.mn.us/business-with-us/environmental-review (accessed January 8, 2026).
[3] Minnesota Pollution Control Agency, “Air permits,” n.d., https://www.pca.state.mn.us/business-with-us/air-permits (accessed January 8, 2026).