Montana Legislature amends tax exemption rules for qualified data centers

In a significant move to bolster Montana's technology infrastructure, the state legislature has introduced Senate Bill 540, aimed at incentivizing the establishment of data centers within its borders. Proposed on March 25, 2025, the bill seeks to amend existing tax regulations to provide substantial property tax exemptions for qualified data centers, which are defined as facilities designed to house networked computers and data storage systems.

The primary objective of Senate Bill 540 is to attract large-scale data centers to Montana by offering tax incentives that could lead to significant economic development. Under the bill, a "qualified data center" must meet specific criteria, including a minimum size of 300,000 square feet and an investment of at least $150 million, or a smaller facility of 25,000 square feet with a $50 million investment within a 48-month period. This strategic focus on large investments aims to create jobs and stimulate local economies.

Key provisions of the bill include a mechanism for local governing bodies to recapture previously exempted taxes if a data center fails to comply with the established requirements. This recapture can occur within ten years of the exemption being claimed, ensuring accountability among businesses benefiting from the tax breaks. Additionally, local authorities have the discretion to cancel tax recaptures if they determine that noncompliance was due to circumstances beyond the taxpayer's control.

The introduction of Senate Bill 540 has sparked notable debates among lawmakers and stakeholders. Proponents argue that the bill is essential for positioning Montana as a competitive player in the tech industry, potentially leading to job creation and increased economic activity. Critics, however, express concerns about the long-term implications of such tax incentives, questioning whether they could lead to a disproportionate burden on local taxpayers if data centers do not deliver the promised economic benefits.

The bill's implications extend beyond immediate economic concerns; it reflects a broader trend of states vying for technological investments in an increasingly digital economy. Experts suggest that if passed, Senate Bill 540 could set a precedent for similar legislation in other states, further intensifying competition for tech infrastructure investments.

As the legislative session progresses, the future of Senate Bill 540 remains uncertain. Lawmakers will need to weigh the potential benefits against the risks of tax incentives, making decisions that could shape Montana's economic landscape for years to come. The outcome of this bill will be closely monitored by both supporters and opponents, as it could have lasting effects on the state's ability to attract and retain high-tech industries.