During the 2025 legislative session, the Kentucky General Assembly passed House Bill 775 ("HB 775") expanding the sales and use tax exemptions for qualified data center projects in Kentucky. Eligible entities engaged in "qualified data center projects" are exempt from sales and use taxes on data center equipment, so long as the owner, operator, or colocation tenant makes the required minimum capital investments.
The Kentucky General Assembly's new definition of "qualified data center project," expands the sales and use tax exemption for data center projects based on the population of the Kentucky county where the project is located. This is a vast expansion from the statutes' prior limited application to consolidated local governments with a population of at least 500,000, which only applied to Louisville, Jefferson County, Kentucky.
To receive the sales and use tax exemption, the data center project must make a minimum capital investment within five (5) years of the project's preliminary approval, as follows:
- If located in a Kentucky county with a population equal or greater than 100,000, the owner, operator, or colocation tenant of a data center project must make a capital investment of at least $450 million. Kentucky counties with populations greater than 100,000 include, at least, Boone, Daviess, Fayette, Hardin, Jefferson, Kenton, and Warren counties.
- If located in a Kentucky county with a population greater than 50,000, but less than 100,000 the owner, operator, or colocation tenant of a data center project must make a capital investment of at least $100 million. This includes Bullitt, Campbell, Christian, Jessamine, Laurel, McCracken, Oldham, Pike, Pulaski, and Scott Counties.
- If located in a Kentucky county with a population less than 50,000, the owner, operator, or colocation tenant of a data center project must make a capital investment of a least $25 million.
The sales and use tax exemption may extend for up to 50 years if the qualified data center project makes a capital investment of at least $450 million.
Through this expansion, the Kentucky General Assembly seeks to draw large data center developers to Kentucky and provide the economic stimulus to the Commonwealth that often follows with large data center projects.
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