South Dakota

1) Incentive programs

Proposed data-center-specific sales/use tax relief (not enacted)

• 2026 outcome: South Dakota did not enact a new data-center-specific sales/use tax exemption, refund, or expanded Reinvestment Payment Program term during the 2026 session. HB 1005, SB 234, SB 235, and SB 239 all failed after proposing data-center sales/use tax relief or RPP changes tied to data centers. South Dakota Legislature HB 1005 action log, 2026-02-04; South Dakota Legislature SB 234 action log, 2026-02-18; South Dakota Legislature SB 235 action log, 2026-02-18; South Dakota Legislature SB 239 action log, 2026-02-24.
• HB 1005 (2026) would have created a sales/use tax exemption for enterprise IT equipment and software used in qualifying data centers during a July 1, 2026-June 30, 2036 qualifying window, but the House State Affairs Committee deferred it to the 41st legislative day on February 4, 2026. South Dakota Legislature HB 1005 text, 2025-12-26; South Dakota Legislature HB 1005 action log, 2026-02-04.
• SB 234 and SB 235 (2026) would have modified data-center purchasing provisions and, in SB 235, paired purchasing relief with ratepayer, local-control, and water provisions; both were deferred to the 41st legislative day on February 18, 2026. South Dakota Legislature SB 234 text, 2026-02-04; South Dakota Legislature SB 234 action log, 2026-02-18; South Dakota Legislature SB 235 text, 2026-02-04; South Dakota Legislature SB 235 action log, 2026-02-18.
• SB 239 (2026) was a hoghoused RPP bill that would have modified SDCL 1-16G-56 to address data centers and cryptocurrency-related costs; the Senate rejected reconsideration on February 24, 2026 after the bill failed on the floor. South Dakota Legislature SB 239 engrossed text, 2026-02-19; South Dakota Legislature SB 239 action log, 2026-02-24.
• SB 177 (2025) remains historical context: it proposed a state sales/use tax refund for enterprise IT equipment and computer software used for initial furnishment and substantial refurbishment of a qualified data center, excluded municipal taxes, and died in the Senate on February 18, 2025. South Dakota Legislature SB 177 amendment text, 2025-02-18; LegiScan SB 177 status, 2025-02-18.

Existing state/local incentives that can apply to data centers (not data-center-specific)

• Reinvestment Payment Program (RPP): SDCL 1-16G-56 already defines data centers as eligible project types within the RPP framework, with “project” thresholds including new or expanded facilities over $20 million or equipment upgrades over $2 million; the 2026 data-center-specific expansion attempt in SB 239 failed. South Dakota Legislature SDCL 1-16G-56, accessed 2026-07-17; South Dakota Legislature SB 239 action log, 2026-02-24.
• Discretionary property tax reduction for new structures (SDCL 10-6-137): county commissioners may adopt a formula that can include all, part, or none of assessed value for any or all of five tax years after construction for qualifying new commercial or industrial structures and additions. South Dakota Legislature SDCL 10-6-137, accessed 2026-07-17.
• Tax Increment Financing (TIF): South Dakota law provides a tax increment financing district framework in SDCL chapter 11-9, including special-fund treatment for tax increments. South Dakota Legislature SDCL ch. 11-9, accessed 2026-07-17.
• Future Fund: SDCL 61-5-29.1 establishes the Employer’s Investment in South Dakota’s Future Fund for research and economic development uses; SB 1 (2026), a Future Fund oversight bill, was deferred in committee and did not change that framework. South Dakota Legislature SB 1 text, 2025-12-24; KOTA/Dakota News Now, 2026-01-26.
• Corporate income tax: South Dakota does not impose a corporate income tax, so there is no corporate income tax credit or abatement program to tailor for data centers. South Dakota Department of Revenue, accessed 2026-07-17.
• Local incentive pushback: Brookings City Council voted 7-0 on February 24, 2026, to deny Sequitor Edge’s requested $644,280 city sales tax rebate for a proposed small-scale data center in the SDSU Research Park. Brookings Register, 2026-02-27.

2) Restrictions and moratoriums

Statewide moratoriums or restrictions

• No statewide moratorium was enacted, but the 2026 session did enact statewide data-center guardrails. SB 135, signed by the governor on March 24, 2026 and now codified as SDCL chapter 49-50, applies to data centers with peak demand of 10 MW or greater and is titled the “Data Center Bill of Rights for Citizens.” South Dakota Legislature SB 135 session law, 2026-03-24; South Dakota Legislature SDCL 49-50-1, accessed 2026-07-17.
• Ratepayer and stranded-cost protection: SDCL 49-50-2 requires electricity providers to establish separate data-center service terms and conditions requiring data centers to reimburse providers for all costs fairly attributed to service demand and utility consumption, including costs incurred if the data center departs the system or materially reduces load. South Dakota Legislature SDCL 49-50-2, accessed 2026-07-17.
• Local-control protection: SDCL 49-50-3 bars the state from preempting or limiting county, municipal, or other local authority to adopt ordinances or resolutions limiting, prohibiting, or otherwise regulating data-center construction, development, or operation. South Dakota Legislature SDCL 49-50-3, accessed 2026-07-17.
• Water notice and reporting: SDCL 49-50-4 and 49-50-5 require data-center operators, before commencing operation, to notify local water providers of projected water consumption, obtain written compatibility determinations, present those determinations to the Board of Water Management, comply with board allocation limits after residential and essential public service allocations, and submit semiannual public water-use reports. South Dakota Legislature SDCL 49-50-4, accessed 2026-07-17; South Dakota Legislature SDCL 49-50-5, accessed 2026-07-17.
• Failed statewide restriction bills: HB 1301 would have imposed cost-allocation, annual reporting, decommissioning, and a moratorium through June 30, 2027, for large data centers, but it was deferred to the 41st legislative day on February 18, 2026. SB 232 would have imposed a one-year moratorium on hyperscale data-center construction or expansion, but it was tabled on February 18, 2026. South Dakota Legislature HB 1301 text, 2026-02-04; South Dakota Legislature HB 1301 action log, 2026-02-18; South Dakota Legislature SB 232 text, 2026-02-04; South Dakota Legislature SB 232 action log, 2026-02-18.
• Failed siting, nuisance, and transparency bills: SB 127 would have imposed a one-mile residential-area siting limit and 45 dB noise cap for data centers; SB 128 would have required large-use data-center water provisions and quarterly reports; HB 1198 would have required adjacent-jurisdiction conditional-use permits for certain high-energy-use facilities; HB 1246 would have prohibited nondisclosure agreements for data-center construction, development, and location agreements. Each failed in 2026. South Dakota Legislature SB 127 text, 2026-01-25; South Dakota Legislature SB 127 action log, 2026-02-18; South Dakota Legislature SB 128 text, 2026-01-25; South Dakota Legislature SB 128 action log, 2026-02-18; South Dakota Legislature HB 1198 text, 2026-01-29; South Dakota Legislature HB 1198 action log, 2026-02-12; South Dakota Legislature HB 1246 text, 2026-01-31; South Dakota Legislature HB 1246 action log, 2026-02-20.

Local zoning restrictions and siting conditions

• Sioux Falls/Gemini: Sioux Falls approved rezoning for the Gemini Data Center SD, LLC site on January 7, 2026; local coverage reported 200-foot setback conditions and emphasized that Sioux Falls water service was for domestic use, not cooling, while the developer discussed closed-loop cooling. SDPB, 2026-01-07.
• Lincoln County moratorium and follow-up: Lincoln County noticed a February 24, 2026 public hearing on a proposed moratorium on permitting and construction of AI hyperscale data centers, and The Dakota Scout reported on February 25 that commissioners rejected the one-year moratorium after the motion died without a second and then referred regulations to Planning and Zoning on a 3-2 vote. The county later posted a March 30 notice for an April 1 educational meeting on data centers and generative AI for the Board of Commission and Planning and Zoning Commission. Lincoln County notice, 2026-01-30; The Dakota Scout, 2026-02-25; Lincoln County notice of possible quorum, 2026-03-30.
• Yankton County pending moratorium: After discussing a temporary halt on accepting applications or issuing permits for data centers, the Yankton County Commission rejected immediate adoption for lack of a second on July 7 but voted 4-0, with one abstention, to publish proposed Ordinance 26-08 for a July 21 public hearing. The county’s July 10 notice says the commission may adopt the temporary emergency zoning moratorium after that hearing; therefore, no Yankton County moratorium had taken effect by July 17. Yankton County Commission minutes, 2026-07-07; Yankton County public-hearing notice, 2026-07-10.
• Brookings/Sequitor: Brookings officials denied only the requested sales-tax rebate; city coverage reported that the proposed SDSU Research Park site is on state-owned land and that the city had limited planning, zoning, or platting jurisdiction over that land. Brookings Radio, 2026-02-26.

3) Local governance (state vs. local control)

• Municipal zoning authority: South Dakota municipalities retain general authority to regulate location and use of buildings, structures, and land through municipal zoning statutes. South Dakota Legislature SDCL 11-4-1, accessed 2026-07-17; South Dakota Legislature SDCL 11-4-2, accessed 2026-07-17.
• County zoning and conditional uses: South Dakota county zoning statutes require conditional-use ordinances to specify approving authority, districts, criteria, and procedures. South Dakota Legislature SDCL 11-2-17.3, accessed 2026-07-17.
• Preemption update: The previous “no state preemption identified” conclusion is now stronger: SDCL 49-50-3 expressly prohibits state preemption or limitation of local authority to regulate, limit, or prohibit data centers. South Dakota Legislature SDCL 49-50-3, accessed 2026-07-17.
• Community opposition patterns: Local and statewide debates focused on electricity cost-shifting, water compatibility, noise, land use, environmental effects, and incentives, with those issues appearing in Sioux Falls zoning testimony, Lincoln County’s moratorium hearing, Brookings’ rebate denial, and SB 135’s enacted guardrails. SDPB, 2026-01-07; The Dakota Scout, 2026-02-25; Brookings Register, 2026-02-27; Route Fifty/South Dakota Searchlight, 2026-03-25.

4) Legislative activity (2024-2026)

• SB 177 (2025) - data center sales/use tax refund (failed): would have created a state sales/use tax refund for enterprise IT equipment and software for qualified data centers, with a July 1, 2029 qualifying-date deadline; it failed in the Senate on February 18, 2025. South Dakota Legislature SB 177 amendment text, 2025-02-18; LegiScan SB 177 status, 2025-02-18.
• SB 1 (2026) - Future Fund oversight (failed): would have revised approval requirements for Future Fund loans and grants; it was deferred to the 41st legislative day in committee. South Dakota Legislature SB 1 text, 2025-12-24; KOTA/Dakota News Now, 2026-01-26.
• HB 1005 (2026) - data-center sales/use tax exemption (failed): deferred to the 41st legislative day in House State Affairs on February 4, 2026. South Dakota Legislature HB 1005 action log, 2026-02-04.
• HB 1038 (2026) - PUC cost recovery for data-center regulatory review (enacted): signed by the governor on March 24, 2026; it authorizes the PUC to assess a public-utility data-center customer with peak demand of 10 MW or greater for actual costs of processing a contract-with-deviations or other electric-service agreement review. South Dakota Legislature HB 1038 session law, 2026-03-24.
• HB 1198 (2026) - adjacent-jurisdiction conditional-use permits for certain high-energy-use facilities (failed): failed on the House floor on February 12, 2026. South Dakota Legislature HB 1198 action log, 2026-02-12.
• HB 1246 (2026) - data-center agreement nondisclosure ban (failed): failed on the House floor on February 20, 2026. South Dakota Legislature HB 1246 action log, 2026-02-20.
• HB 1301 (2026) - large-data-center cost/risk controls plus moratorium (failed): deferred to the 41st legislative day on February 18, 2026. South Dakota Legislature HB 1301 action log, 2026-02-18.
• SB 127 (2026) - nuisance/siting limits (failed): deferred to the 41st legislative day on February 18, 2026. South Dakota Legislature SB 127 action log, 2026-02-18.
• SB 128 (2026) - large-use data-center water provisions (failed): deferred to the 41st legislative day on February 18, 2026. South Dakota Legislature SB 128 action log, 2026-02-18.
• SB 135 (2026) - Data Center Bill of Rights for Citizens (enacted): signed by the governor on March 24, 2026 and codified as SDCL chapter 49-50. South Dakota Legislature SB 135 session law, 2026-03-24; South Dakota Legislature SDCL ch. 49-50, accessed 2026-07-17.
• SB 232 (2026) - one-year hyperscale data-center moratorium (failed): tabled on February 18, 2026. South Dakota Legislature SB 232 action log, 2026-02-18.
• SB 234, SB 235, and SB 239 (2026) - purchasing/RPP incentive proposals (failed): SB 234 and SB 235 were deferred to the 41st legislative day on February 18, and SB 239 failed after an unsuccessful reconsideration vote on February 24. South Dakota Legislature SB 234 action log, 2026-02-18; South Dakota Legislature SB 235 action log, 2026-02-18; South Dakota Legislature SB 239 action log, 2026-02-24.

5) Notable projects and operators in South Dakota

• Gemini Data Center SD, LLC (Sioux Falls/Minnehaha County): Sioux Falls approved annexation in October 2025 and rezoning in January 2026 for a proposed data center site between Sioux Falls and Brandon; an April 2026 South Dakota Searchlight update reported the Gemini project was “unchanged” after the Legislature rejected incentives and described it as a proposed 500-MW-capable facility that still needed a tenant. SDPB, 2025-10-09; SDPB, 2026-01-07; News From The States/South Dakota Searchlight, 2026-04-02.
• Applied Digital (near Toronto/Deuel County): the proposed Deuel County campus shifted from active prospect to unlikely/stalled after incentive bills failed. Data Center Dynamics reported the proposal as a 430-MW project with two 907,000-square-foot buildings and up to $16 billion in investment, while South Dakota Searchlight later described the plan as a $5 billion, 430-MW campus and reported on April 2 that the company would let its land agreement lapse because the project did not make sense at that time. Data Center Dynamics, 2026-03-17; News From The States/South Dakota Searchlight, 2026-04-02.
• Leola Data Center LLC (near Leola/McPherson County): PUC docket EL24-027 remains active on the electric-provider assignment dispute. The PUC canceled the June 30 summary-judgment hearing on June 26 after staff reported that the parties were pursuing settlement; the docket remained pending on July 17, with additional MDU discovery responses filed July 6. The related Rate 45 electric-service agreement docket EL24-028 remains the public source for the redacted Montana-Dakota Utilities/Leola service agreement. South Dakota PUC EL24-027 continuance order, 2026-06-26; South Dakota PUC EL24-027 docket page, accessed 2026-07-17; South Dakota PUC EL24-028 docket page, accessed 2026-07-17.
• CSRE Properties South Dakota, LLC / Black Hills Power (Rapid City): Black Hills Power filed PUC docket EL26-008 on March 19, 2026, seeking approval of a confidential Blockchain Interruptible Electric Service Agreement with CSRE Properties South Dakota, LLC, whose principal place of business is listed as 490 Deadwood Ave., Rapid City; the PUC still listed the proceeding as pending on July 17 and had issued no order. South Dakota PUC EL26-008 docket page, accessed 2026-07-17; Black Hills Power EL26-008 application, 2026-03-19.
• Sequitor Edge (Rapid City): Sequitor Edge announced a Tier 3 edge-computing center in Rapid City’s Black Hills Industrial Center in February 2026. July reporting revised the planned load to 15 MW, placed construction no earlier than late 2026, and described closed-loop cooling that would require about 65,000 gallons for the initial fill and about 110,000 gallons annually thereafter. The previously announced site and employment figures remain 30,000 square feet on 10 acres and three full-time high-skill jobs averaging $100,000. Elevate Rapid City, 2026-02-11; KOTA, 2026-07-02; KOTA, 2026-07-05.
• Sequitor Edge (Brookings): Sequitor Edge proposed a more than $41 million small-scale co-location data center at the SDSU Research Park; the Brookings City Council denied the requested $644,280 city sales tax rebate, while the developer said the project would continue. Brookings Register, 2026-02-27; Brookings Radio, 2026-02-25.

Gaps / items to verify locally

• County- or city-level ordinances remain in motion. Lincoln County referred data-center regulations to Planning and Zoning and held an April 1 educational meeting, but no final Lincoln County ordinance was identified by July 17. Yankton County published Ordinance 26-08 for a July 21 hearing, which falls after this update window. The Dakota Scout, 2026-02-25; Lincoln County notice of possible quorum, 2026-03-30; Yankton County public-hearing notice, 2026-07-10.
• No statewide data-center-specific environmental permitting program was enacted beyond SDCL 49-50-4 and 49-50-5’s water-notice, Board of Water Management allocation, and semiannual water-use reporting provisions. South Dakota Legislature SDCL 49-50-4, accessed 2026-07-17; South Dakota Legislature SDCL 49-50-5, accessed 2026-07-17.