Virginia legislators propose new tax on data centers’ power usage to break budget deadlock
Virginia legislators have reached a budget agreement that includes a new electricity consumption tax for data centers. This tax, set at $0.011 per kilowatt-hour, aims to generate $1.2 billion over a two-year budget cycle. The agreement, which awaits the governor's signature, maintains the sales and use tax exemption for data centers.
Democratic leaders in the Virginia General Assembly have reached a budget agreement that introduces a new electricity consumption tax on data centers. The proposed budget, which passed both the Virginia Senate and House on Monday, maintains the existing sales and use tax exemption for data centers while adding a charge of $0.011 per kilowatt-hour based on monthly electricity usage.
Governor Abigail Spanberger lauded the budget, stating it positions Virginia as a national leader by instituting the first statewide energy consumption tax on data centers to ensure the industry "pays its fair share." However, Josh Levi, president and CEO of the Data Center Coalition, warned that the new taxes and regulations could harm Virginia's business reputation and deter future investments. Environmental advocates, represented by Brennan Gilmore of Clean Virginia, also expressed dissatisfaction, arguing the budget did not go far enough and that the industry still received too many benefits.
Lawmakers estimate the new tax could generate $1.2 billion over the two-year budget cycle, with large-scale energy users, including data centers, also facing a new rate class on Dominion Energy bills starting January 1, 2027. The budget agreement also includes raises for teachers and state employees, establishes a marijuana retail market, and increases the state's standard deduction.
Despite the compromise, Senate Finance Appropriations Chair L. Louise Lucas indicated that a work group would continue examining data center revenue issues and the sales and use tax exemption, with recommendations due by mid-December.