Does a data center count as an 'industrial building' under Kentucky law so it can be financed with industrial revenue bonds?
Plain-English summary
An attorney representing a company that wants to build a nearly billion-dollar data center on over a thousand acres asked the Attorney General whether a data center fits the definition of a "building" or "industrial building" under KRS 103.200. The answer matters because only facilities that fit that definition can be financed with industrial revenue bonds (IRBs) under KRS 103.210, a common economic-development tool.
The Attorney General concluded that a data center qualifies. The opinion takes two routes. Under KRS 103.200(1)(a), an industrial building includes a facility for "manufacturing, processing or assembling" a "commercial product." Data centers are understood to process data (the opinion points to the federal definition of "data center" in 42 U.S.C. § 17112 and to Kentucky's own data-center incentive statutes), and data is a commercial product because it is produced and can be sold for profit. The opinion also rejects the idea that the four example products listed in the statute (agricultural, mining, manufactured, solar) limit the definition, because "including" signals an illustrative list, not an exhaustive one. Under KRS 103.200(1)(b), which covers "mass communication facilities," a data center that transmits digital information for public use can also qualify. Reading the statute liberally to promote its economic-development purpose (as KRS 446.080(1) directs), the opinion concludes a data center is an industrial building eligible for an IRB.
What this means for you
City and county officials and economic-development agencies
Under the opinion, a city or county (or the Kentucky Economic Development Finance Authority) may treat a qualifying data center as an "industrial building" for purposes of issuing industrial revenue bonds under KRS 103.210, after adopting the required ordinance or resolution. This is the Attorney General's legal interpretation; it does not itself approve any particular project or bond.
Data center developers
The opinion analyzes eligibility based on the "common understanding" of what a data center does (processing, storing, and transmitting digital information), because the requester did not specify the exact activities of the proposed facility. A specific project's eligibility would still depend on its actual characteristics and on the local legislative body's action.
Bond counsel and tax-and-finance attorneys
The opinion sets out the interpretive moves it relies on: the disjunctive "or" in KRS 103.200(1)(a) (processing alone suffices), the non-exhaustive meaning of "including" (citing Federal Land Bank of St. Paul v. Bismarck Lumber Co.), and the liberal-construction command of KRS 446.080(1). It also reads KRS 103.200(1)(b)'s "mass communication facilities" as an independent basis for eligibility.
Common questions
Q: What is an industrial revenue bond, and why does this definition matter?
A: An IRB is a financing tool that lets a city or county issue bonds to help fund certain facilities. Under KRS 103.210, only projects that fit the "building" or "industrial building" definition in KRS 103.200 are eligible, so whether a data center fits that definition determines whether it can be financed this way.
Q: How can a data center be "manufacturing, processing, or assembling" a product?
A: The opinion focuses on "processing." It cites the federal definition of a data center as a facility that processes, stores, and transmits digital information, and Kentucky's own statutes describing data-center equipment as used for processing and communicating data, to conclude that a data center processes data.
Q: Is "data" really a commercial product?
A: The opinion says yes, because a product is "something produced" and "commercial" means relating to selling goods or services for profit, and data is produced and can be sold for profit. It adds that the data does not have to be produced by the facility; processing it is enough.
Q: Don't the listed products (agricultural, mining, manufactured, solar) limit what counts?
A: No. The opinion explains that "including" introduces illustrative examples, not an exhaustive list, citing Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95 (1941).
Background and statutory framework
Kentucky's industrial revenue bond statutes (KRS 103.200 to 103.285) let local governments issue bonds to finance an "industrial building," a term KRS 103.200(1) defines broadly to reach well beyond traditional factories (it includes, for example, hotels, recreation parks, and certain housing). KRS 103.210 states the IRB program exists to "promote the economic development of the Commonwealth" and "encourage the increase of industry." The opinion leans on KRS 446.080(1), which directs that statutes "shall be liberally construed" to carry out legislative intent, and on the General Assembly's separate statement (KRS 154.20-222(3)) that attracting data-center projects is "of paramount importance to the economic well-being of the Commonwealth," to read the IRB definition as covering data centers under both KRS 103.200(1)(a) and (b).
Citations and references
Statutes:
- KRS 103.200 (definition of building / industrial building) and KRS 103.210 (IRB authority)
- KRS 446.080(1) (liberal construction)
- KRS 154.20-222(3) (importance of data center projects)
- 42 U.S.C. § 17112(a)(1) (federal data-center definition)
Cases:
- Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95 (1941), "including" is illustrative
- Reed v. Greene, 243 S.W.2d 892 (Ky. 1951) and Commonwealth v. Plowman, 86 S.W.3d 47 (Ky. 2001), courts construe statutes to effectuate legislative intent
Source
- Landing page: https://www.ag.ky.gov/Opinions/Pages/default.aspx
- Original PDF: https://www.ag.ky.gov/Resources/Opinions/Opinions/OAG%2025-10.pdf
Original opinion text
The full opinion as issued by the Office of the Kentucky Attorney General:
August 20, 2025
OAG 25-10
Subject: Whether the definition of a “building” or “industrial building” as
defined by KRS 103.200 includes a data center.
Requested by: Mark F. Sommer
Attorney
Written by: Jason Woodall
Assistant Attorney General
Syllabus: A data processing center qualifies as an industrial building under
KRS 103.200(1)(a) and (b).
Opinion of the Attorney General
Attorney Mark Sommer has asked the Office of the Attorney General to provide
an opinion on whether a data center proposed to be built by his client (the
“Company”), is among the types of facilities that are considered “buildings” or
“industrial buildings” under KRS 103.200, and, therefore, may be eligible for an
industrial revenue bond (“IRB”) under KRS 103.210.1
Mr. Sommer states the Company proposes to build a large technology and data
center, which he describes as an economic investment of nearly one-billion dollars on
over one-thousand acres. Although he lists several activities that the proposed facility
may include, such as supporting and generating artificial intelligence, providing IT
infrastructure, data storage, and platforms for applications, and facilitating
networking and other communications, he states no definite activity to be performed
by the data center. Therefore, this opinion answers his question based on the common
1 For a primer on industrial revenue bonds, see Just the Facts: Industrial Revenue Bonds (IRB)
Operating Procedures, KENTUCKY ECONOMIC DEVELOPMENT FINANCE AUTHORITY
https://cedky.com/cdn/1740_irbprocedures.pdf (last visited August 20, 2025).
understanding of what a data center is compared to the understanding of the types
of facilities authorized for IRBs.
Whether a development project is eligible for an industrial revenue bond
largely depends on whether the proposed facility falls within the definition of a
“building” or “industrial building” under the IRB statutes, KRS 103.200 to 103.285.
KRS 103.210(1) allows any city or county to “borrow money and issue negotiable
bonds for the purpose of defraying the cost of acquiring any industrial building
. . . after an ordinance or resolution has been adopted” by the local legislative body or
by the Kentucky Economic Development Finance authority. “Industrial building” is
defined by KRS 103.200(1) and includes a variety of real estate types beyond what is
normally considered an industrial building (e.g. nonprofit educational institutions,
recreation or amusement parks, hotels or motels, new construction designed for the
revitalization of downtown business districts, and new construction of certain
residential multifamily housing units).
Mr. Sommer’s question focuses on whether a data center is eligible for an IRB
under subsection (a) of KRS 103.200(1), which is any facility suitable for:
(a) Any activity, business, or industry for the manufacturing,
processing or assembling of any commercial product, including
agricultural, mining, or manufactured products, and solar-
generated electricity, together with storage, warehousing, and
distribution facilities in respect thereof.
The first question to consider is whether a data center is a facility suitable for
“any activity, business, or industry for the manufacturing, processing, or assembling
of any commercial product.” Data centers are commonly known and understood to
process data. For example, the federal government, in a subchapter on energy savings
in buildings and industry, defines “data center” to mean “any facility that primarily
contains electronic equipment used to process, store, and transmit digital information
. . . .” 42 U.S.C. § 17112(a)(1) (emphasis added). And Kentucky law defines data center
equipment, in a section for qualified data center project incentives, KRS 154.20-220
through 154.20-229, as “computer equipment and software for the processing,
storage, retrieval, or communication of data, used directly and exclusively in a
qualified data center project . . . .” KRS 154.20-220(6)(a) (emphasis added). Clearly,
it is well understood that a data center is a facility suitable for the activity of
processing data.2
2 Because it is clear that data centers process data, determining whether data centers manufacture
data is unnecessary. The statute requires an eligible industrial building to be a facility for the
“manufacturing, processing, or assembling of any commercial product.” KRS 103.200(1)(a) (emphasis
The second question to consider is whether data may be considered a
“commercial product.” A “product” is most simply defined as “something produced.”3
Black’s Law Dictionary defines “commercial” as “[o]f, relating to, or involving the
selling of goods or services for profit.”4 Therefore, data is a commercial product
because it is produced and can be sold for a profit.5 To be clear, the data processed
by the facility need not be produced by the facility to be considered a commercial
product; mere processing suffices to meet the definition of KRS 103.200(1)(a).
A third question to consider is whether the word “including” in KRS
103.200(1)(a) limits the scope of what is considered a “commercial product” such that
commercial products are only those that are or are akin to the four types of products
listed. The Supreme Court has held that the word “including” does not create an “all-
embracing definition, but connotes simply an illustrative application of the general
principle.” Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 100
(1941) (citations omitted). Moreover, Black’s Law Dictionary explains “[t]he participle
including typically indicates a partial list. . . . But some drafters use phrases such as
including without limitation and including but not limited to—which mean the same
thing.”6 Accordingly, the use of “including without limitation,” KRS 103.200(1)(c), and
“including but not limited,” KRS 103.200(1)(d), should not cause one to assume the
General Assembly intended to limit the scope of “commercial product” in KRS
103.200(1)(a) to agricultural, mining, or manufactured products and solar-generated
electricity. Rather these four products should be seen as illustrative examples.
Carrying out the legislative intent is the primary purpose of judicial
construction. Reed v. Greene, 243 S.W.2d 892, 893 (Ky. 1951); see also Commonwealth
v. Plowman, 86 S.W.3d 47, 49 (Ky. 2001) (“The seminal duty of a court in construing
a statute is to effectuate the intent of the legislature.”) (citations omitted). KRS
446.080(1) plainly states, “[a]ll statutes of this state shall be liberally construed with
a view to promote their objects and carry out the intent of the legislature. . . .”
Therefore, an examination of the legislative intent behind the statute aids in
determining whether IRBs may be used for data centers.
KRS 103.210 states that the industrial bond incentive was created “[i]n order
to promote the economic development of the Commonwealth, to relieve conditions of
added). The disjunctive “or” requires only one of the three elements. Because the processing element
has been satisfied, the manufacturing or assembling elements need not be shown.
3 Product, MERRIAM-WEBSTER, https://www.merriam-webster.com/dictionary/product (last visited
Aug. 20, 2025).
4 Commercial, BLACK’S LAW DICTIONARY (12th ed. 2024).
5 See, e.g., Kentucky Consumer Data Protection Act, KRS 367.3611 to 367.3629; KRS 365.880(4)
(defining “trade secret” to include “data”).
6 Include, BLACK’S LAW DICTIONARY (12th ed. 2024).
unemployment, [and] to encourage the increase of industry in this state . . . .” The
General Assembly has also emphasized the importance of data center projects to the
economic development of the Commonwealth. In a separate incentive for data center
projects, the General Assembly states, “the inducement of the location of data center
projects within the Commonwealth is of paramount importance to the economic well-
being of the Commonwealth.” KRS 154.20-222(3). Given that the General Assembly
has emphasized the importance of data centers for the Commonwealth’s economy, it
seems incentivizing data center projects through IRBs aligns with the purpose of the
industrial revenue bond statutes.
KRS 103.200(1)(b) provides another avenue for data centers to become eligible
for industrial revenue bonds. Subsection (1)(b) states that industrial buildings also
include facilities suitable for “[a]ny undertaking involving the construction,
reconstruction, and use of airports, mass commuting facilities, ship canals, ports or
port facilities, docks or wharf facilities or harbor facilities, off-street parking facilities
or of railroads, monorails, or tramways, railway or airline terminals, cable television,
mass communication facilities, and related facilities.” KRS 103.200(1)(b). This list of
facilities relates to those involved in the transport of people and information.
Consider again the federal definition of “data center,” which says it is “any facility
that primarily contains electronic equipment used to process, store, and transmit
digital information . . . .” 42 U.S.C. § 17112(a)(1) (emphasis added). Data centers, by
this definition, are involved in the transmission of digital information which may be
used by the public. They could be considered mass communication facilities. The
command of KRS 446.080(1) to “liberally construe[]” this statute in order to “promote”
its objects leads to the conclusion that data centers should be considered industrial
buildings for the purpose of eligibility to receive IRBs.
For the foregoing reasons, a data center fits within the definition of “building”
or “industrial building” under KRS 103.200(1) and may be eligible for an industrial
revenue bond.
Russell Coleman
ATTORNEY GENERAL
Jason P. Woodall
Assistant Attorney General