Virginia lawmakers begin data center tax exemption review
Virginia lawmakers have initiated a review of the state's sales and use tax exemption for data centers, which saved the industry $1.9 billion in the last fiscal year. The Joint Subcommittee on Tax Policy is tasked with recommending mechanisms for the state to receive direct revenue from the industry by December 2026, amid debates over the exemption's economic impact and its scheduled expiration in 2035.
Virginia lawmakers convened the first meeting of the Joint Subcommittee on Tax Policy since 2024 to review the state's sales and use tax exemption for data centers. This review was part of a compromise that resolved a prolonged budget dispute regarding the exemption, which has saved the data center industry $1.9 billion in the last fiscal year.
Del. Luke Torian (D-Prince William) was elected chair and Sen. Louise Lucas (D-Portsmouth) vice-chair. Senator Lucas is a vocal critic of the exemption, arguing that it has cost the state more in lost revenue than originally anticipated and that localities are being exploited. She expressed strong resolve, stating, "I don't intend to back down on this issue."
Conversely, Jason El-Koubi, CEO and President of the Virginia Economic Development Partnership, presented data suggesting that the industry contributes approximately $1.7 billion in state tax revenue and $3.6 billion in local tax revenues over five years, based on conservative estimates. He noted that Virginia is one of 36 states offering a sales and use tax exemption for data centers, with 23 requiring job creation in exchange, typically involving a $150 million capital investment and 50 new full-time jobs.
Nicole Riley, Director of Virginia Government Affairs for the Data Center Coalition, defended the exemption, highlighting its role in creating jobs, generating tax revenue, and fostering responsible operations, asserting its similarity to programs in other states and within Virginia. The subcommittee is required to meet at least one more time and is tasked with recommending ways to provide direct revenue to the state from the data center industry by December 15, 2026.