LEGISLATIVE SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
FISCAL IMPACT STATEMENT
LS 7625 NOTE PREPARED: Feb 18, 2025
BILL NUMBER: HB 1601 BILL AMENDED: Feb 13, 2025
SUBJECT: Quantum Research Tax Incentives.
FIRST AUTHOR: Rep. Soliday BILL STATUS: As Passed House
FIRST SPONSOR: Sen. Holdman
FUNDS AFFECTED:XGENERAL IMPACT: State & Local
XDEDICATED
FEDERAL
Summary of Legislation: The bill amends the state Sales and Use Tax exemption for data centers to include
projects for investments in a quantum computing research, advanced computing, and defense infrastructure
network that result in a minimum qualified investment within five years of at least $50 M.
Effective Date: July 1, 2025; January 1, 2026.
Explanation of State Expenditures: Quantum Research Sales Tax Exemption: The bill requires the Indiana
Economic Development Corporation (IEDC) to review requests for specific transaction award certificates,
and it requires a qualified quantum research operator to enter into an agreement with the IEDC as a condition
of receiving an award certificate. The IEDC may need to modify forms or other documentation to implement
the bill’s requirements. In addition, the IEDC will need to coordinate with and notify the Department of State
Revenue (DOR) regarding new Sales and Use Tax exemptions for quantum computing research equipment.
The IEDC and the DOR should be able to implement the bill’s requirements with no additional
appropriations, assuming near customary agency staffing and resource levels.
Explanation of State Revenues: Quantum Research Sales Tax Exemption: The bill would reduce Sales Tax
revenue by an indeterminable amount beginning in FY 2026. The total amount of exemptions that may be
claimed under this bill depends on the number of businesses certified by the IEDC and the size of their
qualified investments.
For purposes of the exemption, the sale of computing research equipment must be approved by the IEDC.
The exemption covers the purchase or lease of optical gear, transmission equipment, computer equipment,
software, electricity, and other items listed in the bill. An exemption certificate is valid for 50 years if the
investment is $50 M or greater within three years of the issuance of the transaction award certificate, or 25
years if the investment is less than $50 M.
The net revenue impact of exempting sales of computing research equipment depends on the extent to which
revenue from other taxes attributable to the investment is impacted. However, if the investment had occurred
HB 1601 1 in the absence of the exemption, the state would have incurred a revenue loss equal to the Sales Tax
collections forgone due to the exemption.
Sales Tax revenue is deposited primarily in the state General Fund (99.838%), and a small amount is
deposited in the Commuter Rail Service Fund (0.131%) and the Industrial Rail Service Fund (0.031%).
Data Center Sales Tax Exemption: The bill amends the investment threshold related to the expiration of a
specific transaction award certificate. Under current law, the exemption certificate for data centers is valid
for 50 years if the investment is $750 M or more or 25 years if it is less than $750 M. The bill lowers the
threshold to $50 M, potentially enabling more projects to receive exemptions for a longer period of time.
Additional Information - Quantum Research Sales Tax Exemption: Based on McKinsey & Company's 2024
report, U.S. public investments in quantum technology announced before 2023 were $3.8 B. A 2024 report
by Boston Consulting Group projects that the quantum technology is expected to be in noisy intermediate-
scale quantum era (i.e. an early stage in quantum computing technology) until 2030. The actual sales tax
exempt amount for quantum research investment would depend on the technology development, the number
of qualified businesses, and the scale of investment that would be launched.
Explanation of Local Expenditures:
Explanation of Local Revenues: Property Tax Exemption: Under this bill, a county or municipal fiscal body
may enter into an agreement with an eligible business to exempt qualified property from property taxes. To
qualify, a taxpayer and its lessees must invest a total of at least $100 M in real and personal property at
facilities with quantum safe fiber network equipment in Indiana, and the average wage of employees at the
facility must be at least 125% of the county average wage.
The exemption applies to quantum safe fiber network equipment purchased after June 30, 2022, and any
additions or replacements to such property. If currently owned property is exempted, then the tax base will
shrink, tax rates will increase, and revenue losses from tax caps may increase in some places.
The exemption of newly acquired property will not affect the existing tax base. If there is an increase in
development because of the exemption, then other property could be added to the tax base. If the exemption
period set locally is shorter than the life of the property, then the value of new quantum safe fiber network
equipment could eventually be added to the tax base. However, if one assumes that the investment would be
made with or without the exemption, then the granting of the exemption under this bill could, during the
exemption period, eliminate the normal shift of property taxes from all taxpayers to the owners of the new
property that would have otherwise occurred.
State Agencies Affected: Indiana Economic Development Corporation; Department of State Revenue.
Local Agencies Affected: County and municipal fiscal bodies; County auditors; Local civil taxing units and
school corporations.
Information Sources: Legislative Services Agency, 2024 Indiana Tax Incentive Review,
https://iga.in.gov/publications/tax_incentive_review/2024%20Tax%20Incentive%20Evaluation_FINAL.pdf;
Department of Energy, 2024 United States Data Center Energy Usage Report,
https://eta-publications.lbl.gov/sites/default/files/2024-12/lbnl-2024-united-states-data-center-energy-usa
ge-report.pdf;
HB 1601 2 McKinsey & Company, Steady Progress in Approaching the Quantum Advantage, April 2024,
https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/steady-progress-in-approaching-the
-quantum-advantage;
Boston Consulting Group, The Long-Term Forecast for Quantum Computing Still Looks Bright, July 2024,
https://www.bcg.com/publications/2024/long-term-forecast-for-quantum-computing-still-looks-bright.
Fiscal Analyst: Qian Li, 317-232-9671.
HB 1601 3