RICHMOND, Va.—Virginia’s Democratic-controlled legislature failed to finalize a budget on Thursday due to disputes over tax exemptions for data centers.
Both chambers adjourned without a budget draft, preventing the required 48-hour public review before a final vote slated for Saturday, the session’s last day. Democrats hold a 64-36 majority in the House and a 21-19 edge in the Senate. Gov. Abigail Spanberger, a Democrat, leads the state government.
Senate Democrats propose ending data center tax exemptions on Jan. 1, while House Democrats support continuing them if data centers switch to renewable energy.
Virginia, home to 575 data centers, is a global leader in the sector. The state, essential to national security and the internet’s origin, is watched closely by rivals regarding its tax and regulatory strategies. Per Data Center Map, Virginia hosts more data centers than any U.S. state or nation.
Existing law exempts data centers investing $150 million and creating 50 jobs from retail sales and use tax, ranging from 5.3% to 7%, depending on the locality. This exemption lasts until 2035 but can extend to 2050 with more investments. In 2025, exemptions provided $1.9 billion to data centers, 2% of the state’s $74 billion budget.
Del. Luke Torian, D-Prince William, chairman of the House Appropriations Committee, highlighted the economic benefits of data centers and attributed the budget delay to the Senate’s aim to end exemptions, risking Virginia’s business appeal.
“Ending the tax exemption could harm Virginia more than lost revenue,” Torian said before adjournment. “Our business-friendly reputation would be jeopardized.”
Senate President Pro Tempore Louise Lucas, D-Portsmouth, a key supporter of ending the exemptions, refrained from commenting after the adjournment but posted on X: “We won’t prioritize data center tax breaks over Virginia families.”
The Different Tracks
Lucas’ proposal could generate $1 billion over two years for transportation and other needs, potentially benefiting localities by $93.8 million.
The House plan requires data centers to cease using polluting fossil fuels. Dedicated natural gas power plants for data centers are a growing trend nationwide.
House Speaker Don Scott, D-Portsmouth, emphasized careful progress to maintain Virginia’s competitive edge, urging data centers to self-sustain their power and minimize community noise.
Governor Spanberger suggested an energy consumption tax, affecting all customers based on usage, to ensure data centers pay their fair share.
“Virginians struggle with rising energy costs,” Spanberger said. “Data centers should bear their fair share of energy expenses.”
What’s Next
Lawmakers have until April 22 to address Gov. Spanberger’s recommendations. A special session may be called for further budget discussions before the fiscal year starts on July 1, risking funding issues for localities and services.
Negotiations continue, with experts uncertain about outcomes. On Wednesday, Attorney General Jay Jones, Lucas, and data center representatives from Amazon, Microsoft, Meta, and the Data Center Coalition met privately but declined to comment afterward. Further secret meetings occurred Thursday.
Sen. Glen Sturtevant, a Republican from south Richmond, expressed concern over the House’s reluctance to end exemptions, highlighting potential benefits for middle-class tax relief instead of favoring large corporations.
Original Story at insideclimatenews.org