Virginia lawmakers debate ending data-center tax break amid power and water concerns

Virginia, home to hundreds of data facilities, has offered a retail sales and use tax exemption to qualifying centers since 2010, a policy slated to expire in 2035. A coalition headed by Senate president pro tempore Louise Lucas halted the state budget to force a review, prompting a compromise that adds a $0.011 per kilowatt-hour electricity tax this summer. A bipartisan subcommittee is tasked with recommending ways to capture direct state revenue from the industry by mid-December.

Governor Abigail Spanberger left decisions on new projects to local jurisdictions, noting some counties have already imposed moratoria. Google’s Ben Townsend announced a $10 million investment in water infrastructure for a Botetourt County site, highlighting the sector’s strain on power grids and water supplies. Critics estimate the exemption cost the state $1.9 billion in lost revenue last year, while supporters point to $1.7 billion in state and $3.6 billion in local taxes generated over five years.