Virginia lawmakers begin data center tax exemption review: 'I don't intend to back down'

RICHMOND, Va. -- Virginia lawmakers held a meeting Wednesday to discuss the sales and use tax exemption for data centers. The meeting was part of the compromise that ended a months-long budget stand-off over the same exemption.

As mentioned at the start of the meeting when they elected the chair, Del. Luke Torian (D-Prince William), and vice-chair, Sen. Louise Lucas (D-Portsmouth), this was the first meeting of the Joint Subcommittee on Tax Policy since 2024.

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The language in the budget called for the subcommittee to meet at least twice and direct it to review the exemption, the direct and indirect economic benefit the industry brings to Virginia, and how other states approach the same topic.

Some lawmakers, including Lucas, have said the exemption, which applies to computer equipment, has cost the state much more than expected in lost revenue when it was first approved. The exemption totaled over $1.9 billion in FY25 according to staff report presented during the meeting, and what to end it before its current scheduled expiration in 2035.

Subcommittee staff did add that based on conservative estimates, the industry produces about $ 1.7 billion in state tax revenue and $ 3.6 billion in local tax revenues over five years.

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Other lawmakers, including Torian, have been opposed to ending the exemption early and said doing so would harm Virginia's business reputation.

In a presentation from the Virginia Economic Development Partnership, CEO and President Jason El-Koubi said Virginia is among 36 states that provide a sales and use tax exemption for data centers and among 23 that require the creation of new jobs in exchange. El-Koubi said the standard agreement calls for "$150-million in capital investment and the creation of 50 new full-time jobs paying at least 150% of the prevailing average wage of the locality in order to receive the tax benefit."

But he added that operators only need one agreement per locality, even if they operate more than one complex in the same jurisdiction.

"I don't care how many of these meetings we have here in Richmond, you're not going to be able to convince people out in all these localities that we aren't taking advantage of them, and for that reason, I don't intend to back down on this issue, Mr. Chairman," said Lucas.

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The head of Virginia's data center coalition said the first meeting was a "valuable and important reminder of the thousands of good-paying jobs, billions in tax revenue, and responsible operations" associated with the industry.

“As legislators heard, the state’s data center sales tax exemption program is similar to programs in a majority of other states and also other programs within Virginia, including the manufacturing sales tax exemption," said Nicole Riley, Director of Virginia Government Affairs for Data Center Coalition in a statement. "We share Gov. Spanberger’s and legislative leaders’ goals of ensuring that Virginia can capture the significant economic opportunities presented by data center development while protecting the interests of residents and communities across the Commonwealth."

The subcommittee is only required to meet one more time, but Lucas pushed for at least three more meetings. It is tasked with recommending "mechanisms to provide direct revenue to the state from the data center industry" by Dec. 15, 2026.