Kansas has established a significant new economic development initiative through the Data Center Incentive Program — outlined in Senate Bill 98 (SB-98) — which was signed into law by Gov. Laura Kelly on April 24, 2025, and becomes effective July 1, 2025. This legislation represents Kansas's strategic move to compete nationally for hyperscale data center investment by eliminating sales and use tax barriers on major digital infrastructure projects. The program replaces an earlier proposal (SB-51) and provides a standardized 20-year tax exemption framework for qualifying data centers.
Key Takeaways
- 100% sales and use tax exemption eliminates major cost barriers. The comprehensive 20-year exemption on construction, equipment, and services addresses the primary tax burden for data center developments.
- The program requires substantial investment and job creation commitments. The $250 million minimum investment threshold and 20-job requirement ensure meaningful economic impact while the 10-year utility purchase commitment provides revenue stability for local utilities.
- Water conservation requirements help address environmental concerns associated with data center projects. Mandatory water conservation measures demonstrate proactive environmental stewardship as data center water usage faces increasing scrutiny nationwide.
- Five-year recertification ensures ongoing compliance. Regular eligibility reviews and audit cooperation requirements maintain program integrity while allowing for performance monitoring and adjustment.
- The bill prohibits data centers from receiving discounted economic development rates. Data centers will not be allowed to take advantage of the state law that allows large economic development projects to discount electricity rates by 40% for the first five years and a 20% reduction in the following five years.
Program Structure
| Investment Category | Description |
| Construction and Remodeling | 100% sales and use tax exemption on all construction and remodeling costs for qualified data center facilities. |
| Equipment Purchases | Complete exemption on networked computer servers, infrastructure equipment, and supporting technology systems. |
| Labor Services | Tax exemption extends to labor services related to installation and maintenance of data center equipment. |
Program Timeline and Key Dates
| Milestone | Date/Period | Description |
| Legislative Passage | April 2025 | Senate Bill 98 passed, replacing earlier proposal SB-51. |
| Governor Signature | April 24, 2025 | Kelly signed SB-98 into law. |
| Effective Date | July 1, 2025 | The program officially becomes available to qualified applicants. |
| Construction Timeline | Within 10 years | Firms must begin construction within 10 years of agreement approval. |
| Investment Period | Within five years | $250 million minimum investment must be completed within five years of starting operations. |
| Exemption Duration | 20 years | Tax exemption valid for 20 years from commencement of operations. |
Eligible Projects and Requirements
Eligible applicants must be firms registered in Kansas engaging in the development, operation, or leasing of qualified data centers. A qualified data center is defined as one or more buildings used to house networked computer servers, connected via fiber to support redundancy and resilience.
| Requirement | Description |
| Approval Requirement | Companies must obtain approval from the Kansas Fusion Center Oversight Board, which can reject applications that threaten critical state infrastructure. |
| Application and Agreement | Businesses must submit an application to the Secretary of Commerce and sign an agreement upon approval. |
| Investment and Construction | Companies must invest at least $250 million in a qualified data center within five years of operations and start construction within 10 years of the agreement. |
| Resource and Utility | Companies must follow water conservation, reuse, and replacement practices and purchase electricity from a public utility for 10 years. |
| Job Creation | Businesses must create and maintain at least 20 new jobs at the data center within two years of operations. |
| Location Exemptions | Companies developing on Superfund sites or National Priorities List locations may qualify without meeting payroll thresholds. |
Every five years, the Secretary of Commerce may evaluate the activities done by the qualified company to ensure they are following all the requirements of the agreement. If the Secretary of Commerce determines that a company has breached a term or condition of the agreement, they will allow the company 120 days to fix the issue. If the company does not comply, they may require the firm to repay all or part of the sales tax exemption that they have received, terminate the sales tax exemption, or suspend all or a part of the sales tax exemption until the breach is cured.
How Ankura Can Help
Ankura's team of experts specializes in helping businesses across the United States navigate and secure state incentives to support growth, innovation, and development. Whether you are seeking data center tax incentives, infrastructure development support, or economic development funding for your projects, our team provides tailored support to maximize the value of available programs. Our services include:
- Data Center Incentive Assessment: Evaluating project eligibility for Kansas's SB-98 program and identifying complementary utility incentives and federal opportunities.
- Application Support: Guiding you through the Kansas Secretary of Commerce application process, ensuring compliance with investment and job creation requirements.
- Utility Coordination and Planning: Facilitating coordination with Kansas utilities for energy procurement commitments and grid interconnection planning.
- Infrastructure Development Analysis: Assessing grid capacity requirements, water usage planning, and environmental compliance strategies for large-scale data center projects.
With over $300 million in state incentives secured for our clients in the past year, Ankura is your trusted partner in leveraging programs like Kansas's Data Center Incentive Program to achieve your strategic objectives. Do you want a consultation and an estimate of how much tax savings your data center project might be eligible for? Contact us here.
References
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