Michigan State Rep Proposes Bills to Close Data Center Tax Loopholes, Require Environmental Disclosure

State Rep. Reggie Miller (D-Van Buren Township) has introduced two bills that would close loopholes allowing colleges and universities to access local property tax abatements meant for education facilities or economic development when building data centers.

The legislation comes as Michigan hosts 70 data centers and continues to attract major tech companies, including Google, Oracle, and OpenAI, whose facilities are drawing significant public attention for their environmental and financial impacts.

Two Bills Target Different Issues

Miller's first bill would prevent colleges and universities from using tax incentives designated for educational purposes or economic development when developing or partnering on data center projects. According to Miller's Chief of Staff Jackson Pahle, the measure would help ensure data centers remain on the tax rolls if that is their primary function.

"Colleges are still able to build them. This is not a moratorium or a ban or anything, but its just so that colleges and these data centers are not double dipping on tax incentives," Pahle said.

The second bill would require data centers to register with the state and disclose operational impacts, including energy and water use. It would also mandate financial safeguards for potential environmental risks or decommissioning costs.

Growing Concerns Across Michigan

Michigan Attorney General Dana Nessel has been vocal about data center transparency concerns, hosting town halls in Howell and other communities where residents raised questions about costs, accountability, and environmental impacts.

"It's really not well monitored at all. These companies are on the honor system," Nessel said during a town hall in Howell on March 31. She noted that some data center agreements are heavily redacted and not all companies are transparent with their contracts.

"With 70 data centers already in Michigan, the AG agrees with the principle behind data centers, but said the process of building them is flawed," Nessel stated.

Environmental and Utility Concerns

Experts who spoke at the Howell town hall and across the state expressed concern about impacts that cannot be avoided, including energy and water consumption. The Environmental and Energy Study Institute noted that large data centers can consume up to 5 million gallons of water per day, enough to supply a town of up to 50,000 residents.

Panelist Charlotte Jameson, chief policy officer of the Michigan Environmental Council, said hyperscale data centers impact the environment in three ways: energy use and climate, water use, and land use and community impacts. She pointed out there is little information on potential water contaminants from cooling usage, nor are there requirements for conservation efforts.

Local Impact and Rate Concerns

Residents in communities where data centers are being built have expressed concern about utility rate increases. In Dowagiac, a small town in Cass County, Hyperscale Data operates a data center and is expanding its footprint. The company announced plans to purchase approximately 48.5 acres to expand its Michigan campus, though local officials said they were unaware of the transaction until it appeared in press releases.

"It would be unusual for a business to consult the city when buying or selling property," Dowagiac City Manager Kevin Anderson said. "We have the same questions you do. The City did not know about this transaction."

The company previously announced plans to scale up its Michigan campus from 30 to 340 megawatts, enough to power approximately 200,000 to 300,000 homes. The expansion would be complete by 2029, with an initial milestone in 2027.

Utilities Seeking Rate Protections

Indiana Michigan Power, which serves Hyperscale Data in Dowagiac, is seeking approval from Michigan regulators for a power rate structure to serve megaprojects like data centers. The utility stated it does not have any agreements or commitments in place to provide the amount of power in question, but confirmed it serves the company.

"We have a very robust process for analyzing large expansions to ensure we can reliably serve all customers," an I&M spokesperson said.

Broader State Debate

The legislation comes amid a broader debate about how Michigan should regulate the rapidly growing data center industry. Some community leaders and residents have pushed for what they call "done right" data center policies that protect neighborhoods from rate spikes and ensure proper oversight.

In Van Buren Township, where Google has announced plans for a 1,000 megawatt data center, local officials and residents have been calling for transparency and accountability. The township is one of several communities grappling with the question of how to balance economic development with environmental and community protection.

Legislative Process

The bills would be considered when the Michigan State House returns next week. Miller, representing Van Buren Township in Wayne County, has been among the lawmakers most vocal about data center regulation.

The measures join other efforts to bring guardrails to the industry. Some legislators have proposed requiring three-year rate plans for utilities serving data centers, while others have called for stricter environmental reviews and community notification requirements.

As the debate continues, Michigan communities remain divided on how to approach the data center boom. Some see economic opportunity and job growth, while others worry about environmental impacts, utility rate increases, and lack of transparency in the development process.