SB98 Deep Dive
What is it?

Kansas SB98...

Is it a corporate giveaway to the rich, or a set of guidelines legislators put in place to protect Kansans?

SB98 was put in place in 2025, and you're going to be hearing a lot more about it in the upcoming months. Data center development and potential local bans are a now a very divisive topic.

AND, SB98 is both a giveaway AND a set of protections, all in one.

Anti-data center groups are now beginning to rally around a repeal of SB98. Political campaigns are likely to use the bill as a cudgel to wield against opponents who voted for it. So, what's in the bill and how does it affect data centers?

Why this bill was passed:

Basically, surrounding states had sales tax exemptions for data centers, but Kansas didn't, which made us uncompetitive in attracting these investment dollars. At the same time, Kansas had no protections in place for limits on key areas of data centers. So, legislators put it all together in one package and passed SB98. All the legislators in our area voted for this bill. At the time it was passed, it wasn't considered to be all that controversial.

What incentive does a data center get with SB98?

20-Year Sales Tax Exemption on:

• All building materials and fixtures used in the construction or remodeling of the data center.

• The purchase or lease of servers, cooling systems, power infrastructure, networking gear, and associated software.

• Costs tied to installing, repairing, servicing, or maintaining qualified data center equipment.

• Direct expenditures tied to site preparation and infrastructure development.

Is providing an incentive the same as losing money?

No. 100% of NOTHING is still NOTHING. Incentives don't lose money if the business wouldn't have come to your area without them. AND, there are a huge number of tax exemptions for all kinds of businesses in Kansas. Basic agriculture incentives are even baked into the Kansas Constitution. Incentives are part of the fabric of America, and almost everyone, and every business, receives incentives from the government in one form or another. Economic development almost always involves incentives. 

What about local control?

While SB98 dictates whether a data center developer gets a sales tax break, it leaves local control intact. SB98 does not bypass local zoning boards or protect developers from local pushback. Municipalities retain the complete authority to negotiate property tax abatements, add local hiring requirements and community benefit agreements in addition to putting in place more stringent regulations.

SB98 -Requirements of data centers to receive SB98 sales tax exemption:

• 10-year public utility electricity purchase commitment.

• Invest 250 million dollars or more.

• Create twenty (20) new full-time jobs.

• Water conservation measures.

• National security vetting.

• Five-year recertification to ensure ongoing compliance. 

SB98 -Requirements, in detail:

10-year public utility electricity purchase commitment.

• No discounted power rates. SB98 prohibits data centers from receiving discounted economic development power rates. Data centers will NOT be allowed to take advantage of the state law that allows large economic development projects to discount electricity rates by 40% for the first five years and a 20% reduction in the following five years.

• No out of state electricity providers.

• No onsite power generation. This is important as it maintains air quality, reduces noise levels, and limits water usage in the local area. No gas turbines or diesel generators operating continuously onsite to provide power! Only grid power allowed.

• Cities retain their franchise tax on power (5%).

Invest 250 million dollars or more.

• Investment to be completed by the 5th year of operations.

• Ensure that all expenditures align with the statutory definition of “eligible costs,” which focuses on physical development, equipment, and site-specific operational needs.

• Note: smaller data centers (under 250 million) who don't qualify for SB98 have the potential for local tax breaks through individual agreements with local governmental bodies, which could include tax abatements and/or Industrial Revenue Bonds (IRB). AND smaller data centers are not bound by the requirements of SB98, so local planners should be aware of this in their data center regulation process.

Create twenty (20) new full-time jobs.

• Kansas residents required.

• Complete hiring within two (2) years of commencing operations.

• Jobs to be located at the project site.

Water conservation measures.

• Applicants must adopt a comprehensive water plan that reflects responsible stewardship and long-term operational sustainability. This plan must outline measures such as efficient fixtures, rainwater infiltration or harvesting, water recirculation systems, discharge reuse partnerships, and efforts to support watershed restoration. These requirements ensure that projects reflect the resource-intensive nature of data center operations while balancing local environmental considerations.

• Note: While this requirement is a good first step, in water constrained Kansas, local regulators should consider adding additional gallon/day water limits to force data centers to utilize closed loop cooling and reduce usage.

National security vetting.

• Applicants must undergo a comprehensive review by the Kansas Intelligence Fusion Center (KIFC), with final approval from the Fusion Center Oversight Board. This review evaluates the project’s equipment, software, ownership structure, and operational purpose to ensure that it poses no undue risk to Kansas’ critical infrastructure.

Five-year recertification to ensure ongoing compliance. 

• Kansas Department of Commerce evaluates compliance on an ongoing basis and formally reassesses the project every five (5) years, as required by SB98.

• Firms are expected to:

  • Maintain the required level of capital investment.

  • Create and retain the minimum number of new full-time jobs.

  • Continue purchasing electricity consistent with the 10-year agreement.

  • Implement and maintain approved water conservation and reuse practices.

  • Allow reasonable access to Commerce and KDOR for audits or site visits.

  • Provide timely and accurate documentation as requested by Commerce.

  • Remain in good standing with the State of Kansas.