By Liz Nass
Gongwer News Service
The Michigan Strategic Fund guidelines for data centers to qualify for the state’s tax exemption incorrectly interpret the law, a coalition of environmental groups said in a letter this week.
In a letter sent to the Michigan Strategic Fund Board this week, the Michigan Environmental Council, the Natural Resources Defense Council and Citizens Utility Board of Michigan, said the MSF’s current guidelines for data center tax exemptions do not enforce the clean energy requirements in state law.
The sales and use tax exemption for data centers stipulates that applicants must prove their data center has received, or will receive within six years, 90% of their power from clean and renewable energy sources.
The letter said simply contracting with a utility provider subject to clean energy laws does not ensure the 90% clean energy requirement will be met.
The MSF guidelines say a data center operation is in compliance with the clean energy requirement “if it executes a long-term contract with a utility provider that is subject to and is operating under the regulatory framework set forth in section 5 of the Clean and Renewable Energy and Energy Waste Reduction Act.”
The environmental groups argue the guidelines aren’t following the law or the intention of the Legislature.
“Basic statutory interpretation confirms that the Tax Acts’ 90-percent clean energy requirement is in addition to requirements imposed on utility providers through the Clean and Renewable Energy Act,” the letter argues. “Statutes should generally be interpreted to give effect to every word and every provision, and yet, MSF’s Guidelines currently interpret the Tax Acts in a manner that renders the 90-percent clean energy standard meaningless.”
Charlotte Jameson, chief policy officer for the Michigan Environmental Council, in a statement said the Legislature recognized the threat of “energy invasive data centers,” when finalizing the sales and use tax exemptions.
“Being good corporate citizens in Michigan requires data centers to do their fair share to transition the state to clean, affordable energy,” she said. “We urge the Strategic Fund Board to correct their guidance, which currently renders the law’s 90% clean energy requirement meaningless and undermines Michigan’s clean energy future.”
Danielle Emerson, spokesperson for the Michigan Economic Development Corporation, said the MSF Board has received the letter and it will be included in the packet for their next public meeting in December.
Tim Minotas, legislative and political director for Sierra Club Michigan, said the loophole was “big enough for any data center to walk through.”
The groups also disagreed with the guidance from the MSF on how to deal with noncompliance, saying the MSF must revoke tax-exempt status for companies that don’t meet the clean energy requirement.
But the MSF guidelines say the companies who procured the contract in “good faith and certified its intent” would not be subject to revocation or repayment solely on the basis of procurement.
The environmental groups said the data centers cannot procure clean energy “merely by contracting with an electric utility” because utility providers are not required to achieve their lower 80-percent clean energy portfolios until 2035.
Contracting with a utility is allowed, the groups say, but data centers are still required to meet a higher clean energy standard.
The groups said in the letter that these provisions were added to the tax exemption because of the testimony in legislative sessions, saying “data centers consume about 3% of the world’s total electric supply and produce 2% of the world’s greenhouse gas emissions.” Lawmakers wanted to add more environmental protections to mitigate negative environmental impacts, the environmental groups said.
“Michigan lawmakers created a clear standard: If a data center wants a tax break, it must show it will run on 90% clean energy. But this interpretation creates a massive loophole,” said Derrell Slaughter, Michigan policy director for climate and energy at the Natural Resources Defense Council. “Without clear and firm language to enforce the clean energy provisions, the standard becomes something companies can evade, and the costs and consequences land on Michigan communities and ratepayers. The board should close this loophole and ensure these large new customers strengthen our clean energy goals rather than weaken Michigan’s ability to meet them.”
Attorney General Dana Nessel has been critical of the oversight ability of the MSF and the MEDC amid the Fay Beydoun investigation.
In questions from reporters on the MSF’s oversight of the environmental regulations with which data centers must comply, Nessel said she has so far been unimpressed with the agency, and would want to scrutinize their actions with the first data centers coming online.
Gongwer News Service
The Michigan Strategic Fund guidelines for data centers to qualify for the state’s tax exemption incorrectly interpret the law, a coalition of environmental groups said in a letter this week.
In a letter sent to the Michigan Strategic Fund Board this week, the Michigan Environmental Council, the Natural Resources Defense Council and Citizens Utility Board of Michigan, said the MSF’s current guidelines for data center tax exemptions do not enforce the clean energy requirements in state law.
The sales and use tax exemption for data centers stipulates that applicants must prove their data center has received, or will receive within six years, 90% of their power from clean and renewable energy sources.
The letter said simply contracting with a utility provider subject to clean energy laws does not ensure the 90% clean energy requirement will be met.
The MSF guidelines say a data center operation is in compliance with the clean energy requirement “if it executes a long-term contract with a utility provider that is subject to and is operating under the regulatory framework set forth in section 5 of the Clean and Renewable Energy and Energy Waste Reduction Act.”
The environmental groups argue the guidelines aren’t following the law or the intention of the Legislature.
“Basic statutory interpretation confirms that the Tax Acts’ 90-percent clean energy requirement is in addition to requirements imposed on utility providers through the Clean and Renewable Energy Act,” the letter argues. “Statutes should generally be interpreted to give effect to every word and every provision, and yet, MSF’s Guidelines currently interpret the Tax Acts in a manner that renders the 90-percent clean energy standard meaningless.”
Charlotte Jameson, chief policy officer for the Michigan Environmental Council, in a statement said the Legislature recognized the threat of “energy invasive data centers,” when finalizing the sales and use tax exemptions.
“Being good corporate citizens in Michigan requires data centers to do their fair share to transition the state to clean, affordable energy,” she said. “We urge the Strategic Fund Board to correct their guidance, which currently renders the law’s 90% clean energy requirement meaningless and undermines Michigan’s clean energy future.”
Danielle Emerson, spokesperson for the Michigan Economic Development Corporation, said the MSF Board has received the letter and it will be included in the packet for their next public meeting in December.
Tim Minotas, legislative and political director for Sierra Club Michigan, said the loophole was “big enough for any data center to walk through.”
The groups also disagreed with the guidance from the MSF on how to deal with noncompliance, saying the MSF must revoke tax-exempt status for companies that don’t meet the clean energy requirement.
But the MSF guidelines say the companies who procured the contract in “good faith and certified its intent” would not be subject to revocation or repayment solely on the basis of procurement.
The environmental groups said the data centers cannot procure clean energy “merely by contracting with an electric utility” because utility providers are not required to achieve their lower 80-percent clean energy portfolios until 2035.
Contracting with a utility is allowed, the groups say, but data centers are still required to meet a higher clean energy standard.
The groups said in the letter that these provisions were added to the tax exemption because of the testimony in legislative sessions, saying “data centers consume about 3% of the world’s total electric supply and produce 2% of the world’s greenhouse gas emissions.” Lawmakers wanted to add more environmental protections to mitigate negative environmental impacts, the environmental groups said.
“Michigan lawmakers created a clear standard: If a data center wants a tax break, it must show it will run on 90% clean energy. But this interpretation creates a massive loophole,” said Derrell Slaughter, Michigan policy director for climate and energy at the Natural Resources Defense Council. “Without clear and firm language to enforce the clean energy provisions, the standard becomes something companies can evade, and the costs and consequences land on Michigan communities and ratepayers. The board should close this loophole and ensure these large new customers strengthen our clean energy goals rather than weaken Michigan’s ability to meet them.”
Attorney General Dana Nessel has been critical of the oversight ability of the MSF and the MEDC amid the Fay Beydoun investigation.
In questions from reporters on the MSF’s oversight of the environmental regulations with which data centers must comply, Nessel said she has so far been unimpressed with the agency, and would want to scrutinize their actions with the first data centers coming online.
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