House State Affairs Kills 50-Year Tax Break for Data Centers

Am I mistaken, or is the 2026 Legislature giving us an unusual number of reasonable decisions?

Yesterday House State Affairs killed House Bill 1005, rookie Representative Kent Roe’s (R-4/Hayti) proposal to let data centers skip paying sales tax for 50 years. Public testimony pitted a long list of big-money interests against a lot folks speaking up for themselves:

Proponents:

Steve DelBianco, NetChoice (Handout(s) #1, 2)
Jay Grabow, Self
Matt McCaulley, Big Watt Digital, LLC (Handout(s) #3)
Nick Phillips, Applied Digital Corporation
Kevin Kouba, Otter Tail Power Company
Michael Bockorny, Aberdeen Area Chamber of Commerce
Mitch Rave, Greater Sioux Falls Chamber of Commerce
Doug Abraham, South Dakota Retailers Association
Travis Schaunaman, Self
Steve Willard, South Dakota Electric Utility Companies
Scott Larson, Self
Ryan Budmayr, South Dakota Chamber of Commerce & Industry
Gary Dathe, American Legion Post 137
Garth Wadsworth, Elevate Rapid City
Michael Anvar, Gemini Family Office
Jeremy Chicoine, Agar-Blunt-Onida School District

Opponents:

Erik Oftedahl, Self
Mary Nosbush, Self
Chet Ellsworth, Self
Michelle Oftedahl, Self
Melissa McCauley, Dakota Rural Action
Representative Dylan Jordan
Peter Fahlberg, Self
Austin Adee, Self
Sara Steever, Self
Zachary Thompson, Myself
Suzanne Pratt, Self
Michael Boyle, Self [House State Affairs, minutes, 2026.02.04]

And the regular folks prevailed. The committee rejected an amendment from Representative Greg Jamison (R-12/Sioux Falls) to scale the tax break back to 10 or 25 years depending on cost and jobs created, then voted 9–3 to kill the whole bill. The majority bill-killers included the most radical right-wingers on House State Affairs, including Speaker Jon Hansen (R-25/Dell Rapids) and his gubernatorial running mate Rep. Karla Lems (R-16/Canton). Speaker Hansen took the Microsoft position that big tech companies don’t need handouts:

House Speaker Jon Hansen, R-Dell Rapids, said he doesn’t believe the protections for ratepayers in the bill are sufficient, questioning the transparency around implementing the tax breaks and controlling rate increases for customers. He added that South Dakota shouldn’t “give away tax breaks to big techs.”

“They are some of the world’s largest companies and I think we should prioritize the people of our state over the world’s largest tech companies,” Hansen said [Makenzie Huber, “Data Center Tax Break Proposal Fails in South Dakota Legislative Committee,” South Dakota Searchlight, 2026.02.04.

The three Representatives seeking to keep the data center tax breaks alive included Jamison and fellow mainstream Republican Tim Reisch (R-8/Howard). The two Democrats on the committee split, with Rep. Erin Healy (D-10/Sioux Falls) voting correctly and Rep. Eric Emery (D-26A/Rosebud) not.

The Legislature still has a couple other favors for data centers in the hopper. Yesterday Senator Casey Crabtree (R-8/Madison) filed Senate Bill 234 to exempt enterprise information technology equipment and software for data centers from sales tax if the data centers certify that they aren’t shifting utility costs to other customers or using too much water. Senator Crabtree also filed Senate Bill 239 to grant sales tax exemptions to any data center that the Governor’s Office of Economic Development approves for its reinvestment payment tax kickbacks. But there are seven other data center bills pending that would make life tougher for data centers, including a one-year moratorium (SB 232) on data centers with peak electrical demand of 50 megawatts or more, filed yesterday by Senator Taffy Howard (R-34/Rapid City).