Data - looks like the state wants them?

SB 98 (2025) creates a targeted 20-year sales and use tax (SUT) exemption for qualified data centers in Kansas, effective for purchases on or after July 1, 2025. It aims to attract large-scale, permanent hyperscale or enterprise data center investments by removing a major tax barrier that previously made Kansas less competitive.

Key Provisions of SB 98

• Exemption Scope: 100% exemption from state and local sales and use taxes on:
  • Eligible data center costs (development, acquisition, construction, operation) — including land, buildings, site improvements, lease payments, engineering/design, site characterization, permitting, etc.
  • Data center equipment (broadly defined: servers, routers, networking gear, racks, cabling, monitoring/security systems, cooling systems/chillers/towers/water management, backup generators, software, fiber/conduit for connectivity, and other essential operational personal property).
  • Labor services to install, apply, repair, service, alter, or maintain data center equipment.
  • Contractor purchases for building or modifying the data center.
• Exclusions: Electricity costs (and electric generation equipment in some clarifications); modular/preassembled components in certain contexts; administrative property.
• Duration: 20 years from the incentive agreement/certification (not scaled by investment size after amendments). The benefit applies to a qualified data center (one or more connected buildings via fiber for redundancy/resiliency).
• Effective Date: July 1, 2025, for qualifying purchases.

Note on the separate property tax exemption you mentioned: This is longstanding Kansas law (K.S.A. 79-223 and related), not part of SB 98. All commercial and industrial machinery and equipment (including data center gear falling under the relevant property tax classification) acquired/purchased/leased or transported into Kansas after June 30, 2006, for business use/expansion is generally exempt from property tax. This continues annually and provides ongoing savings independent of SB 98's sales tax relief.

Eligibility Requirements (Qualified Firm + Qualified Data Center)

To qualify (via application to KS Dept. of Commerce):

• Investment: At least $250 million in eligible data center costs, completed within 5 years of operations commencement.
• Jobs: Create and maintain at least 20 new full-time jobs (Kansas residents, primary work location in KS) within 2 years of operations start.
• Electricity: 10-year purchase agreement with the local certified retail electric utility (no discounted economic development rates allowed for data centers under the bill).
• Water: Adopt a comprehensive conservation/reuse plan (efficient fixtures, rainwater harvesting, recycling, partnerships for beneficial reuse, watershed support, etc.).
• Security Review: Mandatory review by Kansas Intelligence Fusion Center (KIFC) + approval by Fusion Center Oversight Board (assesses equipment, software, ownership, operations for critical infrastructure risks). Can deny high-risk projects.
• Other: Registered/good standing with KS Secretary of State; not a telecom/wireless/video provider; enter binding Incentive Agreement with Commerce; commit to construction start within 10 years of agreement; ongoing compliance/reporting.

Application Process (year-round):

1. Submit application + $1,000 non-refundable fee to Commerce.
2. Provide plans (investment, jobs, electricity, water).
3. Submit security materials directly to KIFC.
4. Commerce + KIFC reviews → Incentive Agreement → Certification to KS Dept. of Revenue (KDOR) for PR-70B exemption certificate.
5. Periodic (every 5 years) reviews by Commerce for compliance.

Enforcement/Clawbacks: Breaches (after 120-day cure period) can lead to partial/full repayment of benefits, suspension, or termination. Audits by KDOR; records must be available.

Background and Context

• Why SB 98? Kansas previously taxed data center equipment (unlike many states and unlike its own ag/manufacturing exemptions), deterring hyperscale projects. SB 98 (which incorporated/amended elements from SB 51) addresses this to compete with states offering similar long-term SUT relief. Proponents (NetChoice, chambers, utilities, economic developers) highlighted job creation, construction activity, and ancillary economic benefits. Opponents raised water/power strain and taxpayer costs.
• Fiscal Impact: Potential significant SUT revenue loss (e.g., estimates around $9-10M+ per large project), but offset by new economic activity, jobs, and property tax base growth (though equipment itself is often property-tax exempt).
• Broader Incentives: Data centers may layer this with other KS tools (e.g., property tax abatements elsewhere, IRBs, etc.), but must comply with all.

Practical Implications for Developers/Topeka Area

This is highly relevant for large-scale projects in Shawnee County or nearby. The $250M threshold targets hyperscale facilities. Combined with the general machinery/equipment property tax exemption, it significantly lowers total tax burden on equipment and construction. Power availability, water resources, fiber connectivity, and local utility partnerships will be key site-selection factors. Security/national interest reviews add a layer (especially for foreign-linked projects).

For official guidance, start with the KS Dept. of Commerce program page (contact Richard Martinez) and guidelines PDF. Consult KDOR for exemption certificates and a tax attorney/consultant for project-specific structuring, as details like "eligible costs" and compliance are agreement-specific.

This positions Kansas more competitively in the data center boom driven by AI/cloud demand, while including safeguards on jobs, utilities, water, and security. Let me know if you want help with a specific project summary, comparison to other states, or drafting related docs!