Are Michigan’s data center tax breaks ignoring clean energy laws?

Environmental and consumer advocates are urging the Michigan Strategic Fund to revise newly released guidelines for data center tax exemptions, arguing the rules ignore the state’s clean energy requirements.

MSF’s interpretation of the state’s updated sales and use tax laws would allow data centers to qualify for tax breaks without demonstrating that they will meet a mandated 90% clean energy procurement requirement, the Michigan Environmental Council, Natural Resources Defense Council, Sierra Club, and the Citizens Utility Board of Michigan said in a Nov. 13 letter.

The letter, drafted by Troposphere Legal, states the guidelines “are not authorized by law and are contrary to the text of the relevant statutes.”

The Michigan Strategic Fund directs state appropriations for business development.

Michigan amended its tax code earlier this year to provide exemptions for data center equipment if facilities meet specific standards within six years, including compliance with green building rules and the procurement of clean, renewable energy.

Under the law, data centers must show they have obtained — or will obtain — 90% of their power from clean energy sources as defined in the state’s Clean and Renewable Energy Act.

“I can confirm the MSF board has received the letter and it will be included in the packet for their next public meeting in December, just as all written communications to the board are,” Michigan Strategic Fund spokesperson Danielle Emerson told Planet Detroit in an email.

The MSF’s guidance allows facilities to qualify by signing a long-term contract with a regulated utility provider under Michigan’s clean energy framework.

Environmental advocates say this interpretation does not ensure compliance because no Michigan utility currently provides a 90% clean energy portfolio, nor are they required to reach that level within the next six years.

Environmental groups urge clean energy compliance for data centers

In the letter, advocates argue the MSF’s approach “renders the law’s 90-percent clean energy standard meaningless,” noting that utilities are not required to reach an 80% clean energy mix until 2035–2039, well beyond the timeline for data centers to meet the tax exemption threshold.

The groups say MSF must deny or revoke exemptions for facilities that do not meet the 90% requirement as the law directs.

Leaders from the four organizations warn that weak enforcement could increase fossil fuel demand and shift costs onto Michigan residents. They called on the MSF board to “close this loophole” and ensure large new energy users contribute to the state’s clean energy transition.

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