Sales and Use Tax and Property Tax - Exemptions for Data Centers - Repeal

EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
*hb0560*

HOUSE BILL 560
Q4, Q1 6lr1918

By: Delegates Palakovich Carr, Acevero, Bagnall, Boyce, Ebersole, Embry, Fair,
Feldmark, D. Jones, Kaufman, Lewis, Lopez, McCaskill, Moreno, Ruff, Ruth,
Stewart, Terrasa, White Holland, Wims, and Woorman
Introduced and read first time: January 28, 2026
Assigned to: Ways and Means

A BILL ENTITLED

AN ACT concerning 1

Sales and Use Tax and Property Tax – Exemptions for Data Centers – Repeal 2

FOR the purpose of repealing an exemption from the sales and use tax for certain sales of 3
certain personal property for use at certain qualified data centers under certain 4
circumstances; repealing the authorization for a governing body of a county or 5
municipal corporation to reduce or eliminate the assessment of certain personal 6
property used in certain qualified data centers; and generally relating to exemptions 7
from the sales and use tax and personal property tax for qualified dat a center 8
personal property. 9

BY repealing 10
Article – Tax – General 11
Section 11–239 12
Annotated Code of Maryland 13
(2022 Replacement Volume and 2025 Supplement) 14

BY repealing 15
Article – Tax – Property 16
Section 7–248 17
Annotated Code of Maryland 18
(2019 Replacement Volume and 2025 Supplement) 19

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 20
That the Laws of Maryland read as follows: 21

Article – Tax – General 22

[11–239. 23
2 HOUSE BILL 560

(a) (1) In this section the following words have the meanings indicated. 1

(2) “Data center” means a building or group of buildings used to house 2
computer systems, computer storage equipment, and associated infrastructure that 3
businesses or other organizations use to organize, process, store, and disseminate large 4
amounts of data. 5

(3) “Department” means the Department of Commerce. 6

(4) “Opportunity zone” means an area that has been designated as a 7
qualified opportunity zone in the State under § 1400Z–1 of the Internal Revenue Code. 8

(5) (i) “Qualified data center” means a data center located in the State 9
in which an individual or a corporation, within 3 years after submitting an application for 10
the sales and use tax exemption under this section, has: 11

1. for a data center located within a Tier I area, invested at 12
least $2,000,000 in qualified data center personal property and created at least five 13
qualified positions; or 14

2. for a data center located in any other area of the State, 15
invested at least $5,000,000 in qualified data center personal property and created at least 16
five qualified positions. 17

(ii) “Qualified data center” includes: 18

1. a data center that is a co –located or hosting data center 19
where equipment, space, and bandwidth are available to lease to multiple customers; and 20

2. an enterprise d ata center owned and operated by the 21
company it supports. 22

(6) (i) “Qualified data center personal property” means personal 23
property purchased or leased to establish or operate a data center. 24

(ii) “Qualified data center personal property” includes: 25

1. computer equipment or enabling software used for the 26
processing, storage, retrieval, or communication of data, including servers, routers, 27
connections, and other enabling hardware used in the operation of that equipment; 28

2. heating, ventilation, and air–conditioning and mechanical 29
systems, including chillers, cooling towers, air –handling units, pumps, energy storage or 30
energy efficiency technology, and other capital equipment used in the operation of that 31
equipment; and 32

HOUSE BILL 560 3

3. equipment necessary for the generation, transformation, 1
transmission, distribution, or management of electricity, including exterior substations, 2
generators, transformers, unit substations, uninterruptible power supply systems, 3
batteries, power distribution units, remote power panels, and any other capital equipment 4
necessary for these purposes. 5

(7) (i) “Qualified position” means a position that: 6

1. is a full–time position of indefinite duration; 7

2. pays at least 150% of the State minimum wage; 8

3. is newly created because a data center begins or expands 9
in a single location in the State; and 10

4. is filled. 11

(ii) “Qualified position” does not include a position: 12

1. created if an employment function is shifted from an 13
existing data center in the State to another data center of related ownership if the position 14
is not a net new job in the State; 15

2. created through a change in ownership of a trade or 16
business; 17

3. created through a consolidation, merger, or restructuring 18
of a business entity if the position is not a net new job in the State; 19

4. created if an employment function is contractually shifted 20
from an existing business entity in the State to another business entity if the position is 21
not a net new job in the State; or 22

5. filled for a period of less than 12 months. 23

(8) “Tier I area” means: 24

(i) a Tier I county as defined in § 1 –101 of the Economic 25
Development Article; or 26

(ii) an opportunity zone. 27

(b) The sales and use tax does not apply to the sale of qualified da ta center 28
personal property for use at a qualified data center if the buyer provides the vendor with 29
evidence of eligibility for the exemption issued by the Comptroller. 30

4 HOUSE BILL 560

(c) (1) To qualify for the sales and use tax exemption under subsection (b) of 1
this section, an individual or a corporation shall file an application for an exemption 2
certificate with the Department. 3

(2) The application must: 4

(i) demonstrate that the applicant intends to meet the requirements 5
of a qualified data center; and 6

(ii) include any information the Department requires to evidence the 7
capacity and intention of the applicant to fulfill the commitments set forth in the applicant’s 8
application. 9

(3) If, based on the information and supporting documentation provided in 10
the application, the Department determines the applicant is eligible for the sales and use 11
tax exemption under subsection (b) of this section, the Department shall certify the 12
eligibility of the applicant. 13

(d) (1) Each year, the Department shall provide the Comptroller with a list of 14
individuals and corporations that the Department determines are eligible for the sales and 15
use tax exemption under subsection (b) of this section. 16

(2) Within 30 days after receiving the list described in paragraph (1) of this 17
subsection, the Comptroller shall issue to each individual and corporation listed a 18
certificate of eligibility for the sales and use tax exemption under subsection (b) of this 19
section. 20

(3) (i) The certificate of eligibility issued under paragraph (2) of this 21
subsection: 22

1. must be renewed each year; and 23

2. except as provided in subparagraph (ii) of this paragraph, may 24
not be renewed for more than 10 consecutive years. 25

(ii) If the individual or corporation invests at least $250,000,000 in 26
qualified data center personal property, the certificate of eligibility may be renewed for up 27
to 20 consecutive years. 28

(e) For at least 3 years after the termination of a certificate issued under 29
subsection (d) of this section, each individual or corporat ion that receives the certificate 30
shall: 31

(1) maintain a record of: 32

(i) the amount of sales and use tax that was not paid as a result of 33
the certificate; 34
HOUSE BILL 560 5

(ii) the number of qualified positions created; and 1

(iii) the investment in qualified data center personal property; and 2

(2) allow the Department to inspect the records described in item (1) of this 3
subsection. 4

(f) (1) The Department may revoke a certificate of eligibility under subsection 5
(d) of this section if any representation made in connection with the application for the 6
certificate is determined by the Department to have been false when made or if the 7
applicant has failed to fulfill the applicant’s commitments under the application. 8

(2) The revocation may be in full or in par t as the Department may 9
determine. 10

(3) The individual or corporation shall have an opportunity to appeal any 11
revocation to the Department before notification of the Comptroller. 12

(4) The Comptroller may make an assessment against the individual or 13
corporation to recapture any amount of sales and use tax that the individual or corporation 14
has not paid as a result of an exemption under subsection (b) of this section.] 15

Article – Tax – Property 16

[7–248. 17

(a) In this section, “qualified data center” and “ qualified data center personal 18
property” have the meanings stated in § 11–238 of the Tax – General Article. 19

(b) The governing body of a county or municipal corporation may reduce or 20
eliminate, by law, the percentage of the assessment of any qualified dat a center personal 21
property used in a qualified data center that is subject to the county or municipal 22
corporation property tax under this title. 23

(c) (1) A county or municipal corporation that reduces or eliminates the 24
percentage of assessment of taxable qualified data center personal property under 25
subsection (b) of this section shall submit a copy of the law to the Department. 26

(2) If the Department receives a copy of the law on or before May 1, the 27
change will be effective for the taxable year following the date the law is enacted. 28

(d) If any qualified data center personal property is exempt under subsection (c) 29
of this section from county property tax but is subject to municipal corporation property 30
tax, the Department or the supervisor shall provid e the municipal corporation with the 31
assessment of the qualified data center personal property. 32

6 HOUSE BILL 560

(e) The Department may adopt regulations to implement this section.] 1

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect July 2
1, 2026. 3