Taxes

Last updated 11/14/25

Minnesota has a higher tax rate for commercial development than for residential. Although the equation can be complex, commercial rates are usually twice as high (or more) than residential rates.

New types of commercial development help diversify our local and regional tax base beyond the current mix of businesses and residents. This makes our financial situation more resilient to economic changes.

 

What, if any, local tax incentives would the data center receive?

Currently, the City has not received an application for business subsidies, or tax incentives for Project Skyway.

It has been determined that data centers do not qualify for a Tax Increment Financing (TIF) district. However, a data center could qualify for a business subsidy in the form of tax abatement. Tax abatement is a tax incentive where a portion of that parcel’s property taxes could be reduced or refunded, subject to state law. Non data center light industrial projects could qualify for Tax Increment Financing and tax abatement.

If the City were to enter into a tax abatement agreement, the City’s policy will only entertain a “Pay as You Go” model. This means the end user would first have to pay their portion of property taxes, and a portion of those taxes could be abated, or paid back to the end user.

However, tax abatement agreements are 100% negotiable and are typically tied to City goals such as job creation and economic growth. Some cities use business subsidies as a tool to ensure new businesses are meeting their job creation goals and to help establish what those positions are paid. If any requirement outlined in an abatement agreement is not met, the business would lose all or a portion of their incentives.

 

What, if any, sales tax exemptions would the data center receive?

While the State of Minnesota offers a sales tax exemption for qualified data centers, the City of Pine Island does not have input or control over whether or not a qualified data center receives the exemption.