Senate and House leadership lawmakers are teaming up to introduce a new bill they’re calling the “Data Center Bill of Rights.”
President Pro Tem Chris Karr and Speaker of the House Jon Hansen said the bill protects residents from electricity cost increases and water shortages. This comes alongside disagreements between lawmakers over how to handle hyperscale data centers.
Some want to provide sales tax incentives to attract hyperscale centers for the benefits of increased property tax revenue and economic development.
Others, like Hansen, believe the state shouldn’t foot the bill for any incentives.
“It’s not about whether they should come or shouldn’t come. It’s about fairness. You can make that same argument for any business that wants to come and develop a piece of property and develop shop in South Dakota. If you’re going to do that, that’s going to add more money to the property tax base and then thus reduce the burden overall,” Hansen said. “That’s the same for everybody. Anybody can make that argument. So, we’re just saying when it comes to the richest tech companies in the world, we don’t think those people in particular should be given a tax break.”
Many of the data centers proposed in the state have claimed they won’t build without a sales tax incentive. That includes a data center in Toronto and another in Sioux Falls. Hansen's and Karr’s bill, SB 135, prohibits the state government from granting tax exemptions for data centers. The bill leaves the door open for local tax breaks, like Tax Increment Financing — or TIF — districts, and the governor’s office for using current economic development tools. That includes the governor-controlled Future Fund.
The two said the bill language allows local control, so if local communities want to provide tax breaks they can.
Karr pointed to other low tax and business regulations.
“You know, when you start to talk about these other states and what they’re doing it’s not apples to apples. Some of these have corporate income taxes, there’s other fees and taxes that these data centers have to pay,” Karr said. “So, I think you’ve got to look at it in its totality. Would they like this? Sure, they’d like it, but they have to consider some of the other things they’re not paying and some of the incentives in coming to South Dakota and being here versus the other states as well.”
The bill will be heard on the Senate side first. It doesn't ban data centers but requires operators to pay for all costs associated with electricity as well as notify local water providers of water usage and certify that works with local water supplies before. If passed, the state would also be banned from preempting local regulations and restrictions for data centers.
Karr said the bill isn't meant to be "anti-AI hyperscale data centers" but about "putting guardrails in place to protect South Dakota on a new industry."
When asked if he'd support a bill without the sales tax prohibition in it, Karr said if he had to, he would "bring a bill on each one of these [sections]."
"But I think it works, and it's cohesive, and comprehensive to put them all in one place. But yes, the utility portion of this, the water, the natural gas, the electricity, very, very important," Karr said. "That's top of mind on this issue. The economic incentive is also really important to our taxpayers here in South Dakota."
This comes alongside bills to create a sales and use tax exemptions for the centers and another to establish setbacks and limit nuisances, like noises, caused by data centers.
The nickname Hansen and Karr chose for the bill — "Data Center Bill of Rights — is similar to another nickname in recent legislative history. In 2024, backers of SB 201 dubbed it the "Landowner's Bill of Rights." That bill, which both Hansen and Karr opposed, would have preempted some local regulations amid discontent over the Summit Carbon Solutions pipeline. Voters referred and struck down SB 201 during the 2024 election.
Karr said the bill's name has nothing to do with SB 201.
"It's laying out those guardrails very succinctly, like a bill of rights would do, and say, this is what is acceptable, and this is not," Karr said. "And it clearly communicates, regarding our utilities, where we're at on this, and where we're at with any further tax incentives or subsidies."
