Virginia House and Senate Budget Proposals Diverge on Data Center Tax Exemptions
Virginia lawmakers are in a deadlock over the state's budget due to differing views on whether to continue the state's sales and use tax exemption for data centers. The House proposes extending the exemption and creating a commission to study the industry's impact, while the Senate suggests a tiered state impact fee. A June 30 deadline looms to avoid a government shutdown.
Virginia legislators are facing a June 30 deadline to reconcile their budget proposals and avoid a state government shutdown, with a key sticking point being the sales and use tax exemption for data centers. The House of Delegates, led by Speaker Don Scott, unveiled an updated $74 billion budget that preserves the data center tax exemption through 2035 and eliminates previous environmental standards for the industry. Instead, the House proposes a commission of legislators and stakeholders to study data centers' energy use and their impact on state and local tax revenues, a plan supported by Gov. Abigail Spanberger.
Conversely, Sen. Louise Lucas (D-Portsmouth) announced an updated Senate budget proposal that includes a "tiered state impact fee" on data centers based on generator type and energy capacity, estimated to generate $1.7 billion in tax revenue. The Senate's plan also includes funding for a work group to study the tax exemption and protections for ratepayers and local communities. The sales and use tax exemption, which began in 2008, costs the state an average of $1.6 billion annually and remains the largest bottleneck in budget negotiations, with some lawmakers pushing for its termination. Both chambers also have differing proposals on teacher pay raises, healthcare funding, and housing initiatives.