To qualify for one of Iowa’s Sales and Use tax incentives for data centers, an eligible data center must make a minimum investment in Iowa and satisfy other requirements as described below. Once eligible, a data center may make qualifying purchases exempt from Sales and Use tax or claim a partial refund of Sales and Use tax paid on qualifying purchases.
List items for Data Center Sales and Use Tax Incentives
Relevant Statute and Rules
Iowa Code section 423.3(95); Iowa Administrative Code 701—215.12, 215.13
“Data center” means a building rehabilitated or constructed to house a group of networked server computers in one physical location in order to centralize the storage, management, and dissemination of data and information pertaining to a particular business, taxonomy, or body of knowledge. A data center business’s facility typically includes the mechanical and electrical systems, redundant or backup power supplies, redundant data communications connections, environmental controls, and fire suppression systems. A data center business’s facility also includes a restricted access area employing advanced physical security measures such as video surveillance systems and card-based security or biometric security access systems. “Data center” includes the lease of a business facility leased by an entity operating a data center business at that location.
“Data center business” means an entity whose business among other businesses, is to
operate or lease a data center.
“Site preparation activities” means actions that are taken prior to beginning construction or rehabilitation of the building that will house the data center and in preparation for the construction or rehabilitation. “Site preparation activities” include but are hot limited to grading and clearing of land, storing of construction equipment including temporary buildings and trailers for equipment storage and for construction offices, exploratory excavating and borings to assess the sustainability of a site, and clearing the site of existing vegetation, old buildings, or old equipment. “Site preparation activities” does not include the purchase or installation of the tangible personal property described in Iowa Code section 423.3(95)(a)(1).
Relevant Statute and Rules
Iowa Code section 423.3(95); Iowa Administrative Code 701—215.12, 215.13.
Summary
An eligible data center business may purchase and use qualifying items exempt from Iowa Sales and Use tax. An eligible data center business may instead claim a refund of all Iowa Sales and Use tax paid on qualifying items. An eligible data center business must make a minimum investment in an Iowa physical location of $200 million within the first six years of operation in Iowa and meet other requirements described below.
Qualifying Items
The exemption applies to the sales price of the following items when purchased or used by a data center business:
- Computers and equipment that are necessary for the maintenance and operation of a data center business
- Other property, whether directly or indirectly connected to the computers, including the following (list is nonexclusive):
- cooling systems, cooling towers, and other temperature control infrastructure
- power infrastructure for transformation, distribution, or management of electricity used for the maintenance and operation of the data center business, including but not limited to
- exterior dedicated business-owned substations
- backup power generation systems
- battery systems
- related infrastructure
- racking systems, cabling, and trays, which are necessary for the maintenance and operation of the data center business
- Backup power generation fuel that is purchased by a data center business for use in the items listed above
- Electricity purchased for use by a data center business
Duration of Exemption
- For computers and other property listed above, excluding backup power generation fuel and electricity, the exemption is permanent.
- For backup power generation fuel and electricity listed above, the duration of the exemption varies as follows:
- For items purchased in connection with real property the data center business began operating prior to June 6, 2025, the exemption is permanent.
- For items purchased in connection with real property the data center business began operating on or after June 6, 2025:
- If such property is located entirely or in part within a city having a population of more than 30,000, the exemption is available for the first ten years of operation in connection with the new construction or addition to the existing property.
- If such property is not located in part within a city having a population of more than 30,000, the exemption is available for the first 15 years of operation in connection with the new construction or addition to the existing property.
The same limitation applies to the exemption for purchases by a web search portal business under Iowa Code 423.3(92) or (93).
Required Minimum Investment
The data center business must make a minimum investment in an Iowa physical location of $200 million within the first six years of operation in Iowa beginning with the date the data center business initiates site preparation activities, or the beginning date of the initial lease term of a data center, as applicable. The minimum investment includes the initial investment, including land and subsequent acquisition of additional adjacent land and subsequent investment at the Iowa location.
Required Minimum Physical Size
The data center business must have a physical location in the state that is, in the aggregate, at least 5,000 square feet in size that is used for the operations and maintenance of the data center business.
Required Design and Construction Standards
The data center business must comply with the sustainable design and construction standards established by the state building code commissioner pursuant to Iowa Code section 103A.8B.
Registration
To claim this exemption, the data center business must register with the Department. Registration forms will be available on the Department’s website later this year. Once registered, the data center business will receive special exemption certificates, which are used to make exempt purchases under Iowa Code section 423.3(95). This same registration requirement applies to a web search portal business seeking an exemption under Iowa Code section 423.3(92) or (93).
Reporting
To maintain its registration and eligibility for exemption, the data center business must file an annual report with the Department by January 31 each year. The first report is due by January 31, 2026. The report must describe the backup power generation fuel and electricity purchased by the data center business in the previous calendar year. Reporting forms will be available on the Department’s website later this year. The Department will treat these reports as confidential to the same extent as other return information; anonymized aggregate information from the reports may be subject to disclosure, but the Department will not disclose individual report information to the public. This same reporting requirement applies to a web search portal business seeking an exemption under Iowa Code section 423.3(92) or (93).
Relevant Statute and Rule
Iowa Code section 423.4(7); Iowa Administrative Code 701—215.13.
Summary
An eligible data center business may claim a partial refund of 50% of the Iowa Sales and Use tax paid on qualifying items, up to 5% of the sales price, for the first five years of operation. This refund does not apply to any local option sales tax paid. An eligible data center business must make a minimum investment in an Iowa physical location of $1 million—but less than $10 million for a newly constructed building or $5 million for a rehabilitated building—within the first three years of operation in Iowa and meet other requirements described below.
Qualifying Items
The partial refund applies to the sales price of fuel used in creating heat, power, and steam for processing or generating electrical current, or from the sale of electricity consumed by computers, machinery, or other equipment for operation of the data center business facility.
Duration of Refund
The partial refund is available for the first five years of the data center’s operation.
Required Minimum Investment
The data center business must make an investment in an Iowa physical location within the first three years of operation in Iowa beginning with the date on which the data center business initiates site preparation activities, or within three years of the beginning date of the initial lease term of the data center, as applicable. The amount of the investment in an Iowa physical location, including the value of a lease agreement, or an investment in land or buildings, and the capital expenditures for computers, machinery, and other equipment used in the operation of the data center business must equal at least $1million, but cannot exceed $10 million for a newly constructed building or $5 million for a rehabilitated building.
Required Minimum Duration for Leasing Arrangements
If the data center business is leasing a building to house operations, the data center business must enter into a lease that is at least five years in duration.
Required Design & Construction Standards
The data center business must comply with the sustainable design and construction standards established by the state building code commissioner pursuant to Iowa Code section 103A.8B.
Claiming the Refund
The owner of a data center business seeking a refund under Iowa Code section 423.4(7) must submit an IA 843 Refund Claim through GovConnectIowa or file an IA 843 Refund Return (22-009). The refund request must be completed in its entirety.
The refund request must be filed with the Department no later than one year after the purchase of qualifying items and within three months after the end of the refund year. The refund request must include detailed schedules of the items being claimed including dates of purchase amount of purchase, and tax paid.
In addition to completing and filing a refund request, the owner of a data center business seeking a refund must complete and file with the Department an affidavit certifying that qualifications for the refund have been met. An affidavit template is available in administrative rule 701-215.13(7)”d”.
Relevant Statute and Rule
Iowa Code section 423.4(8); Iowa Administrative Code 701—215.13.
Summary
An eligible data center business may claim a partial refund of 50% of the Iowa Sales and Use tax paid on qualifying items, up to 5% of the sales price. This refund does not apply to any local option sales tax paid. This refund is available for the first seven or ten years of operation, depending on the size of the investment. An eligible data center business must make a minimum investment in an Iowa physical location of $10 million for a newly constructed building or $5 million for a rehabilitated building—but less than $200 million—within the first six years of operation in Iowa and meet other requirements described below.
Qualifying Items
The partial refund applies to the sales price of the following items when purchased or used by a data center business:
- Computers and equipment that are necessary for the maintenance and operation of a data center business
- Other property, whether directly or indirectly connected to the computers, including the following (list is nonexclusive):
- cooling systems
- cooling towers, and other temperature control infrastructure;
- power infrastructure for transformation, distribution, or management of electricity used for the maintenance and operation of the data center business, including but not limited to exterior dedicated business-owned substations,
- backup power generation systems,
- battery systems and related infrastructure; and
- racking systems, cabling, and trays, which are necessary for the maintenance and operation of the data center business.
- Backup power generation fuel that is purchased by a data center business for use in the items listed above
- Electricity purchased for use by a data center business
Duration of Refund
The duration of the partial refund varies based on the size of the investment:
- For an investment of at least $10 million, in the case of new construction, or at least $5 million, in the case of a rehabilitated building, but less than $136 million, ten years.
- For an investment of at least $136 million, but less than $200 million dollars, seven years.
Required Minimum Investment
The data center business must make a minimum investment of at least $10 million, in the case of new construction, or at least five million dollars in the case of a rehabilitated building, in an Iowa physical location within the first six years of operation in Iowa, beginning with the date on which the data center business initiates site preparation activities or the beginning date of the initial lease term, as applicable. The minimum investment includes the initial investment, including the value of a lease agreement or the amount invested in land and subsequent acquisition of additional adjacent land and subsequent investment at the Iowa location.
Required Minimum Duration for Leasing Arrangements
If the data center business is leasing a building to house operations, the data center business must enter into a lease that is at least five years in duration.
Required Minimum Physical Size
The data center business must have a physical location in the state that is at least 5,000 square feet in size.
Required Design & Construction Standards
The data center business must comply with the sustainable design and construction standards established by the state building code commissioner pursuant to Iowa Code section 103A.8B.
Claiming the Refund
The owner of a data center business seeking a refund under Iowa Code section 423.4(8) must submit an IA 843 Refund Claim through GovConnectIowa or file an IA 843 Refund Return (22-009). The refund request must be completed in its entirety.
The refund request must be filed with the Department no later than one year after the purchase of qualifying items and within three months after the end of the refund year. The refund request must include detailed schedules of the items being claimed including dates of purchase amount of purchase, and tax paid.
In addition to completing and filing a refund request, the owner of a data center business seeking a refund as specified in this rule must also complete and file with the Department an affidavit certifying that qualifications for the refund have been met. An affidavit template is available in administrative rule 701—215.13(7)”d”.