With June 30 deadline looming, Virginia House conferees unveil new budget proposal as data center dispute continues to stall final agreement
Virginia's House of Delegates unveiled a revised state budget proposal to break a stalemate with the Senate, largely centered on data center tax policy. The new plan removes prior environmental requirements for data centers and instead proposes a commission to study the industry's impacts, including on the energy grid, environment, and water resources. Lawmakers face a June 30 deadline to approve the budget.
Virginia's House of Delegates has unveiled a revised state budget proposal in an effort to end a months-long stalemate with the Senate, with the dispute largely revolving around data center tax policy. House Speaker Don Scott and House Appropriations Chairman Luke Torian presented the plan as a compromise, urging the Senate to accept it before the June 30 deadline for approving a new fiscal year budget.
The core of the disagreement centers on Virginia's 5.3% sales and use tax exemption for qualifying data centers, which currently saves the industry approximately $1.6 billion annually. While the Senate, led by Finance Chair Louise Lucas, has advocated for ending the exemption to redirect funds towards state priorities like housing and healthcare, the House has supported its continuation, citing the industry's economic impact and local tax revenue.
To bridge this divide, the revised House proposal removes earlier provisions that would have imposed environmental requirements and restrictions on carbon-emitting power generation for data centers seeking the tax exemption. Instead, it proposes creating a commission tasked with studying the comprehensive impacts of the data center industry on Virginia's economy, energy grid, environment, water resources, air quality, local communities, and utility customers. This commission would be required to submit recommendations to the General Assembly by November 1, 2026, specifically examining how to prevent increased costs for residential electric customers due to data center energy demands and exploring future revenue mechanisms.
Governor Abigail Spanberger has expressed support for the House proposal, noting it establishes a process for evaluating data center incentives while protecting ratepayers. The Senate has not yet publicly responded to the House's revised plan, with both chambers scheduled to reconvene in late June to consider the budget.