RICHMOND, Va. — Virginia lawmakers convened in Richmond for a brief special session Thursday as they have failed to reach an agreement on the state's two-year budget, which is due by June 30.
The primary sticking point between the House and Senate is a sales and use tax exemption for data centers. The two chambers passed separate budgets that are more than $1 billion apart.
Watch: Virginia lamwakers near budget deal as data center tax fight continues
Lead Senate budget negotiator Sen. Louise Lucas (D-Chesapeake) wants to end the tax exemption, which lawmakers say cost the state nearly $2 billion in tax revenue last year.
Lucas was not available to speak with the media Thursday, but she and others have recently stated they want to ensure data centers pay their fair share of taxes. The exact mechanism for how that would happen has not been made public.
Lead House budget negotiator Del. Luke Torian (D-Prince William) opposes eliminating the exemption for companies already operating in Virginia.
"We have MOUs that we have signed with folks in that industry that I believe the Commonwealth should honor, and that's what we plan to do," Torian said.
Torian said while the two sides have been talking, an official meeting between them has not happened for a little while now.
"We're not in a position to present anything to the General Assembly relative to a budget, because we are waiting those conversations," Torian said.
Despite the delay, Torian remains optimistic about reaching an agreement.
"I feel very confident that we will have a budget prior to that deadline," Torian said.
Torian added that data center companies will need to engage directly with the Senate regarding the proposed changes.
"I think that the data center industry will have to have that conversation with the Senate, Senate leadership relative to how they work out that mechanism on how they provide the resources that have been requested by the Senate," Torian said.
Sen. Scott Surovell believes the state's decision will have broader implications.
"I think Virginia has a chance here to sort of start the national and set the national discussion about what the proper policy is for data center sales tax exemptions, because it's going to be having a big impact across the entire country," Surovell said.
The Data Center Coalition released the following statement after Thursday's special session ended:
“The data center industry remains open to working with Governor Spanberger and members of the House and Senate on an approach that advances their respective goals, keeps Virginia competitive for investment, and allows the Commonwealth to honor the commitments that produced $80 billion of investment and $5 billion in tax revenue in just the last two years. The industry offered legislative leaders two proposals that would help achieve this, the most recent of which would provide $1.1 billion of new state revenue over the biennium and hundreds of millions in recurring revenue in the out years. These proposals were rejected. The industry has yet to receive any substantive feedback or details about what a resolution might include," said DCC President Josh Levi.
House Republicans, who are in the minority, also oppose getting rid of the exemption. They emphasize that a deal is needed soon so localities know what to expect from the state.
"School boards, counties, hey, when can we start doing our budget? Because they've got budgetary constraints of June the 30th," Del. Terry Kilgore (R-Scott) said.
Another wrinkle in the negotiations is that lawmakers need to see what Gov. Spanberger does with legislation sent to her on Wednesday, including the creation of a retail marijuana market.
If she vetoes the legislation, lawmakers can no longer plan on having that revenue for the budget.
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