Michigan House Bill HB5396

Michigan 2025-2026 Regular Session

• Introduced: 12/17/25
• Refer: 12/17/25

Caption

Sales tax: exemptions; data center exemption; eliminate. Amends sec. 25 of 1933 PA 167 (MCL 205.75) & repeals sec. 4ee of 1933 PA 167 (MCL 205.54ee).

Impact

The passage of this bill is expected to significantly affect state funding structures. Primarily, it is designed to resolve funding shortages in the state school aid fund, where revenues lost due to previous exemptions necessitate compensation. The bill guarantees that revenue flowing from the sales tax is properly allocated to support educational services, thus enhancing the financial stability of local school districts. Additionally, local governments stand to benefit through revenue-sharing provisions structured to ensure they receive a percentage of the sales tax collections.

Summary

House Bill 5396 aims to amend the General Sales Tax Act of 1933 by eliminating the tax exemption for data centers established under section 4ee. The bill mandates that all revenue collected from sales taxes, notably a 4% tax, must be directed toward enhancing state funding for essential services, including the state school aid fund and local entities such as cities and townships. By repealing an existing exemption, the bill seeks to increase contributions to the state treasury and maintain support for various public sectors.

Contention

Notably, the bill presents areas of contention among stakeholders, particularly between lawmakers and the data center industry. Proponents argue that repealing the tax exemption is essential to ensure equitable tax contributions from all sectors, fostering a more robust funding base for critical public services. Conversely, opponents may express concern that such a repeal could hinder the growth of the data center industry in Michigan, which is often seen as a key player in economic development and technological advancement. This tension underscores a broader debate on balancing tax policy and economic incentives for businesses.