SESSION OF 2024
SUPPLEMENTAL NOTE ON SENATE BILL NO. 545
As Recommended by Senate Committee on
Commerce
Brief*
SB 545 would provide a sales tax exemption to certain
firms making investments in a qualified data center, as
defined by the bill.
The exemption would be for:
●Purchases for the development, acquisition,
construction, and operation of a qualified data
center made by a qualified firm, including, but not
limited to, costs of:
○Land or site improvements;
○Buildings or modular data centers;
○Data center equipment, including acquisition
and permitting;
○Lease payments;
○Site characterization and assessment; and
○Engineering and design;
●All electricity used by the qualified data center;
●Labor services pertaining to the installation and
maintenance of data center equipment; and
●Purchases made by a contractor for the purposes
of constructing or modifying a qualified data center
for a qualified firm.
____________________
*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
http://www.kslegislature.org The bill would define “qualified data center” as one or
more buildings constructed or modified in Kansas to house
networked computer servers connected by a fiber
transmission network for the purposes of centralizing data
storage, management, and dissemination.
A “qualified firm” would be defined as a business
registered in Kansas that is engaged in data processing,
storage, and dissemination.
Duration
The duration of the sales tax exemption would vary
depending on the size of investment in a qualified data
center. The exemption would be valid:
●For investments of at least $1 billion, indefinitely;
●For investments of at least $800 million, 40 years
after beginning construction; and
●For investments of at least $600 million, 30 years
after beginning construction.
Eligibility
In order to be eligible for the exemption, a qualified firm
would be required to:
●Submit an application as required by the Secretary
of Commerce (Secretary) and enter into an
agreement upon approval;
●Commit to making an aggregate investment of at
least $600 million in a qualified data center to be
completed within 5 calendar years of beginning its
construction;
2- 545 ●Commit to begin construction of the project within
10 years of the agreement with the Secretary; and
●Create and maintain at least 20 new jobs at such
data center within 2 calendar years of beginning
operations.
The Secretary would be required to certify to the
Secretary of Revenue when the qualified firm has met the
conditions to receive the sales tax exemption and to provide
notice if the exemption is modified, suspended, or terminated.
Additional Conditions
As a condition of receiving the exemption, the qualifying
firm would be required to:
●Provide information required by the Secretary for:
○Publication of the economic development
incentive program database provided for in
continuing law;
○The Secretary’s annual report required by
continuing law; and
○Periodic review of standing and eligibility as
described below.
●Cooperate with audits undertaken by the
Department of Revenue or an applicable third party
as requested by the Secretary.
Periodic Review
The Secretary would be permitted to conduct a review
every five years of the activity of a qualified firm to ensure
good standing with the State and compliance with the
requirements of the bill and any pursuant rules or regulations.
The Secretary would be required to certify to the Secretary of
3- 545 Revenue that firms receiving the exemption continue to meet
qualifications for eligibility.
Confidential financial information and trade secrets
necessary to protect legitimate competitive business interests
would not be subject to disclosure, except that it would be
required to be provided to the Legislative Division of Post
Audit upon request.
Books and records pertaining to determination of
eligibility would be required to be available for inspection
during business hours by the Secretary or a duly authorized
agent upon 60 days prior written notice.
Breach of Agreement
If the Secretary determines a breach in the agreement
has occurred, the Secretary would be required to provide
written notice the firm has 120 days to cure the breach. If the
breach is not cured within 120 days, the Secretary could
require the firm to repay all or a part of the amount of the
sales tax exemption received and wholly or partially terminate
the exemption.
Rules and Regulations Authority
The Secretary would be authorized to adopt rules and
regulations pursuant to the implementation of the bill.
Background
The bill was introduced by the Senate Committee on
Assessment and Taxation at the request of a representative
of NetChoice.
4- 545 Senate Committee on Commerce
In the Senate Committee hearing, proponent testimony
was provided by representatives of NetChoice and Polsinelli
PC. The proponents generally stated the bill would incentivize
data center investments in Kansas, which would result in
substantial long-term economic impacts to the state, including
the attraction of firms in economic sectors that rely on
infrastructure provided by the presence of data centers.
Written-only proponent testimony was submitted by a
representative of the Wyandotte Economic Development
Council.
No other testimony was provided.
Fiscal Information
According to the fiscal note prepared by the Division of
the Budget on the bill, the Department of Revenue indicates
enactment of the bill would have the potential to reduce state
revenues to the State General Fund and State Highway Fund
by unknown amounts beginning in FY 2024.
The Department of Commerce indicates administrative
costs associated with enactment of the bill would likely be
accomplished within existing staff levels and resources.
Any fiscal effect associated with enactment of the bill is
not reflected in The FY 2025 Governor’s Budget Report.
Economic development; data centers; tax exemptions; sales tax
5- 545