South Dakota 2026 Regular Session Status: In Committee 1 R cosponsors

SB 234 — modify provisions pertaining to the purchasing of goods and services related to data center operations.

Last action — State Affairs Deferred to the 41st legislative day , Passed, YEAS 5, NAYS 4 S.J. 27

  1. ✓
    Introduced
  2. 2
    In Committee
  3. 3
    Passed Senate
  4. 4
    Passed House
  5. 5
    To Executive
  6. 6
    Enacted

This bill is in committee in the Senate. Introduced February 04, 2026. It must pass committee before a floor vote.

Next likely step: a committee vote, then a floor vote in the Senate.

Odds of enactment

Low chance

Based on the sponsor, cosponsors, and committee posture, this bill has a low chance of becoming law.

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Prognosis

Advancing 36% · moderate confidence

  • In Committee

    Current position in the legislative process.

  • 1 sponsor

    1 primary, 0 co-sponsors signed on.

  • Single-party support

    Sponsorship is currently within one party (1 R).

  • Cleared a recorded vote

    Passed 1 recorded vote so far.

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Bill Text

What changed in the latest version

73 added · 189 removed

73 line(s) added, 189 removed.

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234A 101st Legislative Session 234 South Dakota Legislature Senate Bill 234 AMENDMENT 234A FOR THE INTRODUCED BILL Introduced by:
26.990.21 101st Legislative Session 234 South Dakota Legislature Senate Bill 234 Introduced by:
Senator Crabtree This bill has been extensively amended (hoghoused) and may no longer be consistent with the original intention of the sponsor.
Senator Crabtree An Act to modify provisions pertaining to the purchasing of goods and services related to data center operations.
An Act to modify provisions pertaining to the purchasing of goods and services related to data center operations, to protect residents from increased utility costs and utility shortages caused by data centers, and to clarify authority to regulate data centers.
BE IT ENACTED BY THE LEGISLATURE OF THE S TATE OF S OUTH D AKOTA :
B E IT ENACTED BY THE L EGISLATURE OF THE STATE OF SOUTH D AKOTA :
That § 1-16G-56 be AMENDED:
That a NEW SECTION be added to chapter 10-45:
1-16G-56.
The terms used in this Act mean:
Terms used in §§ 1-16G-56 to 1-16G-68, inclusive, mean:
(1) "Computer software," programs and other operating information used solely for the maintenance and operation of a qualified data center;
(1) "Board," the Board of Economic Development;
(2) "Data center," a centralized repository for the storage, management, dissemination, and processing of electronic data and information, except for that which relates to the mining of digital currency;
(2) "Commissioner," the commissioner of the Governor's Office of Economic Development;
(3) "Enterprise information technology equipment," the following products used solely for the maintenance and operation of a qualified data center:
(3) "Completed the project" or "completion of the project," the first date when the project is operational;
(a) Computer hardware, servers, storage arrays, backup systems, disaster recovery equipment, routers, cooling systems, temperature control infrastructure, network equipment, switches, load balancers, firewalls, network cabling, edge devices, network monitoring equipment, water treatment systems, chilled water equipment, economizers, cooling towers, and piping and pump equipment for cooling towers;
(4) "Construction date," the first date earth is excavated or a contractor has initiated work for the purpose of constructing a new or expanded facility or the first date new equipment is located on the project site or existing equipment is removed from the project site for the purpose of equipment upgrades, whichever occurs first;
(b) Power infrastructure for the management of electricity,dedicated distribution equipment, backup power generation systems, battery systems, and construction materials for structures unique to data centers or other related infrastructure excluding primary electric generation service, transmission, or utility distribution infrastructure;
(5) "Cryptocurrency," a digital or virtual currency that is not issued by any central authority, is designed to function as a medium of exchange, and uses encryption technology to regulate the generation of units of currency, to verify fund transfers, and to prevent counterfeiting;
(c) Racking systems, raised flooring, cabling, or trays necessary for the maintenance and operation of a qualified data center;
(6) "Data center," any facility established for the purpose of processing, storage, retrieval, or communication of data;
(6)(7) "Department," the Department of Revenue;
234A 2 234 (8) "Direct payment permit," the permit issued by the department pursuant to § 10- 46-67;
26.990.21 2 234 (d) Security systems, physical access control systems, surveillance systems, biometric scanners, security monitoring equipment, and monitoring systems, environmental monitoring systems, infrastructure management tools, and building management systems;
(7)(9) "Equipment upgrades," the installation of new equipment or the replacement or improvement of existing equipment, which is subject to the sales or use tax imposed by chapters 10-45 or 10-46 or contractor's excise tax imposed by chapters 10-46A or 10-46B.
(e) Testing and diagnostic equipment used for maintenance, commissioning, or troubleshooting;
Equipment upgrades do not include the installation or replacement of consumable, wear, or maintenance items, or the replacement of failed equipment or components done on an ad hoc basis;
(f) Telecommunications and fiber infrastructure, fiber optic cabling, satellite equipment, and internet exchange components;
(8)(10) "GOED," the Governor's Office of Economic Development;
and (g) Air quality systems, and specialized HVAC, filtration, and humidity control equipment;
(9)(11) "New or expanded facility," a new building or structure, or the expansion, renovation, or retrofitting of an existing building or structure, which is subject to the contractor's excise tax imposed by chapters 10-46A or 10-46B;
(4) "Qualified business," the owner, operator, or tenant of a qualified data center or a proposed data center;
(10)(12) "Person," any individual, firm, copartnership, joint venture, association, cooperative, nonprofit development corporation, limited liability company, limited liability partnership, corporation, estate, trust, business trust, receiver, or any group or combination acting as a unit;
and (5) "Qualified data center," a facility located in this state:
(11)(13) "Project," a new or expanded facility with a project cost which exceed twenty million dollars, or equipment upgrades with a project cost which exceed two million dollars.
(a) Comprised of one or more buildings containing a data center;
A project includes laboratory and testing facilities, manufacturing facilities, advanced telecommunications capability, data centers, power generation facilities, power transmission facilities, agricultural processing facilities, wind energy facilities, and facilities defined by GOED as targeted industries.
(b) Where all buildings that contain a data center qualify as real property subject to taxation pursuant to §§ 10-4-1 and 10-4-2;
A project does not include any building or structure:
and (c) Equipped with fire suppression and prevention systems.
(a) Used predominantly for the sale of products at retail, other than the sale of electricity at retail, or the provision of advanced telecommunications capability, to individual consumers;
(b) Used predominantly for residential housing or transient lodging;
(c) Used predominantly to provide health care services;
(d) Used predominantly for the transportation or transmission of natural gas, oil, or crude oil by means of a pipeline;
or (e) That is not subject to ad valorem real property taxation or equivalent taxes measured by gross receipts;
(12)(14) "Project cost," the amount paid by the project owner in money, credits, property, or other consideration associated with a project including, without limitation, land, labor, materials, furniture, equipment, fees, or fixtures.
Project Overstrikes indicate deleted language.
234A 3 234 cost does not include any amount paid as part of a new or expanded facility or equipment upgrades attributable to the processing, storage, retrieval, or communication of data related to cryptocurrency;
(15) "Reinvestment payment permit," the permit issued pursuant to § 1-16G-60;
(16) "Secretary," the secretary of the Department of Revenue;
(13)(17) "Wind energy facility," any new facility or facility expansion that:
(a) Consists of a commonly managed integrated system of towers, wind turbine generators with blades, power collection systems, and electric interconnection systems, that convert wind movement into electricity, and is subject to the tax imposed by §§ 10-35-18 and 10-35-19;
and (b) The construction of which is subject to contractors' excise tax pursuant to chapter 10-46A or 10-46B;
and (14)(18) "Advanced telecommunications capability," without regard to any transmission media or technology, is high-speed, switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology that provides a minimum actual download speed of at least twenty-five megabits per second and actual upload speed of at least three megabits per second.
That a NEW SECTION be added to chapter 1-16G:
That a NEW SECTION be added to chapter 10-45:
If the project cost for a new or expanded facility on or after April 1, 2026, exceeds the amount set pursuant to section 3 of this Act, a person may apply for a reinvestment payment as provided in § 1-16G-57, subject to the following adjustments to the procedures in §§ 1-16G-56 to 1-16G-68, inclusive:
There are specifically exempted from the provisions of this chapter and from the computation of tax imposed by it, gross receipts from the sale of enterprise information technology equipment or computer software to be used in a qualified data center.
(1) The application required in § 1-16G-58 must also include all information required by the department for a direct payment permit.
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The commissioner shall share the relevant portion of the application with the department on a confidential basis.
The department shall review the information as a written application to the secretary for a direct payment permit;
(2) Prior to the board’s review of the application, the department must provide the commissioner with a determination of the person’s eligibility for a direct payment permit.
The appeal provisions of § 10-46-67 do not apply to an application qualified under this section.
A person who is not eligible for a direct payment permit may not receive a reinvestment payment permit on the terms of this section;
Overstrikes indicate deleted language.
234A 4 234 (3) Following its review pursuant to § 1-16G-59, the board may, by two-thirds majority, approve a combined reinvestment payment that is equal to or less than the South Dakota sales and use tax due on the initial project cost of a new or expanded facility, as well as the project costs of any future equipment upgrades in that same facility for a term not to exceed thirty years after the construction date;
(4) A reinvestment payment permit issued to a project described in this section also operates as a direct payment permit for the project applicant;
(5) In addition to the affidavit requirement in § 1-16G-61, the person holding a reinvestment payment permit must also submit an annual affidavit following completion of the project detailing the project cost of any equipment upgrades during that period;
(6) The three-year eligibility period for project costs in § 1-16G-62 is extended to four years for the initial project cost of a project qualified under this section.
In addition, the project will also have a separate eligibility period for the project cost of any future equipment upgrades running from completion of the project until expiration of the reinvestment payment permit;
(7) A reinvestment payment permit extends to a person’s lessee on the same terms and may also be assigned or transferred, but in each case only if the lessee, assignee, or transferee also holds a direct payment permit;
(8) The secretary shall relieve a person holding a direct payment permit of its obligation to accrue and pay the taxes imposed by chapters 10-45 and 10-46, but only to the extent covered by a reinvestment payment permit.
The commissioner must subtract any relief granted by the secretary from the reinvestment fund payment to which that person is otherwise entitled under § 1-16G-63;
and (9) Except as provided in this section, all other provisions of §§ 1-16G-56 to 1-16G- 68, inclusive, continue to apply to projects qualified under this section.
That a NEW SECTION be added to chapter 1-16G:
That a NEW SECTION be added to chapter 10-45:
The board shall adopt a policy setting the minimum project cost required for a project to qualify for purposes of section 2 of this Act.
To be eligible for the exemption provided in section 2 of this Act, a qualified business in a qualified data center, or a qualified business in a proposed qualified data center, shall submit any documentary evidence required by the Department of Revenue to verify the eligibility of the qualified data center or proposed data center.
The board may adopt a new policy changing the minimum project cost, but may not do so within two years of setting a previous policy.
The documentary evidence required by this section is confidential.
The secretary of the Department of Revenue shall determine if the qualified business is eligible.
To be eligible for the exemption provided by section 2 of this Act, a qualified business shall:
(1) Ensure electric service provided to the qualified business by an electric utility is under a written agreement or rate schedule that avoids the shifting of costs to other customers of the electric utility;
and Overstrikes indicate deleted language.
26.990.21 3 234 (2) Provide notice to local water providers to ensure that water consumption is compatible for the location in which the qualified data center is situated.
Upon determining the eligibility of a future qualified business in a proposed qualified data center, the secretary shall provide the business with an exemption certificate for taxes imposed pursuant to this chapter and chapter 10-46.
To retain eligibility for the exemption provided in section 2 of this Act, a qualified business must file an affidavit with the secretary attesting that the data center or the future data center qualifies for the exemption, prior to June first of each year.
That § 1-16G-59 be AMENDED:
That a NEW SECTION be added to chapter 10-46:
Overstrikes indicate deleted language.
There are specifically exempted from the provisions of this chapter, gross receipts from the sale of enterprise information technology equipment or computer software to be used in a qualified data center.
234A 5 234 1-16G-59.
Underscores indicate new language.
The Board of Economic Development shall review an a completed application and make a determination of whether the project is approved or disapproved within ninety days of receiving the application.
The applicant may, by written consent, extend the deadline provided in this section.
The extension must provide a new deadline for the board’s review and determination.
The board shall consider the likelihood that the project would have occurred without the reinvestment payment.
The board may approve a reinvestment payment that is equal to or less than South Dakota sales and use tax paid on the project costs.
The board shall consider the following factors when making that determination:
(1) Has the county or municipality adopted a formula to reduce property taxation for the project for five years under the discretionary formula pursuant to § 10-6-137;
(2) Has the county or municipality approved a tax increment financing district pursuant to chapter 11-9 for the area where the project will be located;
(3) Has the municipality approved a municipal sales tax refund pursuant § 10-52-10;
(4) Economic activity that may occur in the community, area, and state;
and (5) Criteria established by rules promulgated pursuant to § 1-16G-67.
Section 5.
That a NEW SECTION be added to a NEW CHAPTER in title 49:
For purposes of this chapter, "data center" means a centralized repository for the dissemination, management, processing, and storage of electronic data and information with a total design load greater than one hundred megawatts.
Section 6.
That a NEW SECTION be added to a NEW CHAPTER in title 49:
The operator of a data center shall pay for all fair, just, and reasonable costs associated with the provision of electricity to the data center.
A provider of electricity shall establish and maintain separate terms and conditions for electric service applicable to a data center.
The terms and conditions must require that the data center reimburse any provider of electricity for all costs fairly attributed to the data center for service demand and utility consumption, including costs incurred to serve the data center if the data center departs the system or materially reduces its load.
Section 7.
That a NEW SECTION be added to a NEW CHAPTER in title 49:
The state may not preempt or otherwise limit the authority of the governing body of a county, municipality, or other political subdivision to adopt ordinances and resolutions Overstrikes indicate deleted language.
234A 6 234 limiting, prohibiting, or otherwise regulating the construction, development, or operation of data centers.
Section 8.
That a NEW SECTION be added to a NEW CHAPTER in title 49:
Prior to commencing operation in this state, the operator of a data center shall provide notice of projected water consumption to each local water provider in the area in which the data center is proposed to be located.
Each water provider receiving notice pursuant to this section shall determine whether the data center's projected water consumption is compatible with the local water supply and issue that determination in writing to the operator.
The operator shall present a copy of each notice and determination to the Board of Water Management.
If the board receives a determination from each applicable water provider that the data center's projected water consumption is compatible with the local water supply, the board must issue, to the operator and the general public, a written statement that the operator has satisfied the requirements of this section.
Notwithstanding the board's issuance of a written statement pursuant to this section, the data center may not consume an amount of the local water supply exceeding limits established by order of the board, after allocation to residential and essential public services.
In establishing allocation limits under this section, the board shall seek to ensure water availability and prevent disproportionate use of water by data centers.
Section 9.
That a NEW SECTION be added to a NEW CHAPTER in title 49:
The operator of a data center that is authorized to operate in this state pursuant to this chapter, shall, at the time and in the manner prescribed by the Board of Water Management, submit to the board a semi-annual report regarding the data center's water use.
The report must contain average usage data and certify compliance with this section.
The board shall make the usage data contained in the report available to the public.
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Action History

  1. State Affairs Deferred to the 41st legislative day , Passed, YEAS 5, NAYS 4 S.J. 27

  2. State Affairs Motion to amend , Passed, S.J. 27 Amendment 234A

  3. Scheduled for hearing S.J. 1

  4. Referred to Senate State Affairs S.J. 199

  5. First Reading Senate S.J. 180

Sponsors

Sponsorship breakdown

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1 sponsors · 0 co-sponsors · 104 not signed on · 4 voted No

Sponsors (1)

Co-sponsors (0)

None.

Not signed on (104)

104 members have not signed on to this bill.

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"Not signed on" means a member has not sponsored or co-sponsored this bill — it does not imply opposition. Members flagged Voted No have a recorded No vote on this bill.

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Frequently asked questions

Who sponsors SB 234?
SB 234 is sponsored by Casey Crabtree (Republican).
What is the current status of SB 234?
This bill is in committee in the Senate. Introduced February 04, 2026. It must pass committee before a floor vote.
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