Sioux Falls Excludes Data Centers From Tax Break

The City Council voted 7-0 to remove data processing and storage operations from its industrial property tax reduction program.

Updated on Nov. 11, 2026 in Data Centers

Isometric editorial illustration of plain steel data center enclosures with cooling vents on a flat prairie lot beneath open sky. — Sioux Falls voted 7-0 to bar data processing and storage operations from its industrial property tax reduction program, aligning city rules with new state reforms. AI Illustration. Upload story photo >

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The Sioux Falls City Council voted 7-0 on Tuesday to revise its industrial property tax reduction program, removing data processing and storage operations from eligibility. The change is part of a broader overhaul of four property tax reduction programs that began in the late 1980s.

Why it matters

Mayor Christine Erickson said data centers must pay their own way, and the revisions seek to align city programs with state property tax reforms adopted by Gov. Larry Rhoden and the South Dakota Legislature. An ad hoc council committee is also weighing potential regulations for data centers.

The council set a minimum of 75 percent of facility square footage devoted to a qualifying use and raised the minimum property value increase for industrial projects to $500,000. Data centers had already been excluded from a separate sales tax rebate, and the number of facilities affected by the new property tax changes has not been reported.

The players

Sioux Falls City Council

The governing body of South Dakota's largest city, which oversees municipal programs including its property tax incentives.

Christine Erickson

The mayor of Sioux Falls, who publicly stated that data centers must pay their own way.

The details

The revised industrial program now offers reduced property tax assessments for five to seven years, depending on development type, and adds cybersecurity as an eligible use. The revisions also standardize application procedures and deadlines across all four programs.

Tuesday, November 10, 2026: City Council votes 7-0 to revise the property tax reduction program.
Late 1980s: Sioux Falls property tax reduction programs begin.
Recent years: South Dakota adopts property tax reforms under Gov. Larry Rhoden.

Market Dynamics

The city's revisions bring its incentive programs into line with the state property tax reforms adopted under Gov. Larry Rhoden and the Legislature. The move signals that local officials are reassessing whether data centers should receive the same tax treatment as traditional industrial users.

Residents and businesses in Sioux Falls will see that data centers no longer qualify for the city's industrial property tax reduction, so those facilities will be assessed at full value. Future data center projects will also face the committee's pending regulatory review.

The takeaway

Local property tax incentives are being reexamined as cities decide whether large data facilities should receive the same breaks as traditional industry. Watch for the ad hoc committee's recommendations on regulating data centers.