With less than a day before the state budget deadline, conferees appear no closer to an agreement regarding data center tax exemptions in the spending bill.
Senate President Pro Tempore Louise Lucas, chair of the Senate Appropriations Committee and a budget conferee, has said that she will not send a bill to the governor’s desk without language that would end the data center tax exemption in 2027.
In Virginia, data centers that meet certain requirements, including investing at least $150 million and creating at least 50 jobs — or, in economically distressed localities, $70 million and 10 jobs — are exempt from paying state retail sales and use tax on computers and other equipment. The tax exemption is set to end in 2035.
That proposal was included in the state Senate spending bill but was absent from the House of Delegates spending bill. The Senate proposal could generate nearly $1 billion in revenue over the biennium.
Del. Luke Torian, chair of the House of Delegates Appropriations Committee and a budget conferee, told reporters on Tuesday that the group of 11 budget conferees had not yet met to smooth over budget differences. The conferees were appointed on March 4.
Torian, a Democrat from Prince William County, told reporters on Tuesday that the data center tax exemption was the biggest difference between the two chambers’ proposals, according to 8News.
Democratic Gov. Abigail Spanberger said, during an impromptu press conference on Wednesday, she had productive meetings with the budget conferees Wednesday morning and that conversations regarding the budget are ongoing.
Outside of the data center tax exemptions, Spanberger said, the two chambers agree on “so much,” including funding for communities, gun violence prevention programs and effects of federal budget cuts on states, including funding for the Supplemental Nutrition Assistance Program, or SNAP.
“We as a commonwealth are moving in the right direction. Certainly as a former legislator, I know that the budgeting and appropriating process is never easy, but they’re working and we’re on our way,” she said.
Conferees will need to come to an agreement by 5 p.m. Thursday in order to meet a requirement to give lawmakers 48 hours to read the legislation before they are expected to vote on it. The 2026 General Assembly session is slated to gavel out of the 2026 legislative session at 5 p.m. on Saturday.
Lawmakers may be called into a special session to vote on the budget bill if they are unable to meet that deadline.
No movement on data center tax exemptions
Sen. Creigh Deeds, a budget conferee and Democrat from Charlottesville, said that there has been no movement within the group regarding data center tax exemptions.
Spanberger painted a more positive picture, saying that everyone “broadly agrees that data centers should be paying their fair share.” What that looks like may differ among the group of lawmakers, however, and there have been discussions of implementing a data center energy consumption tax.
At least two states, New York and Montana, have introduced similar measures. Minnesota amended its data center tax incentive in June to remove the sales tax exemption and created a new fee for large-scale data centers to be levied annually based on energy use, according to the National Conference of State Legislatures. A New York measure would levy a grid modernization surcharge on large data centers based on energy usage.
“If the issue is how much energy are data centers using, well should there be a consumption tax to make sure they are quite literally paying their fair share when it comes to the energy consumption,” Spanberger said Wednesday afternoon.
Deeds said that the consumption tax was a proposal brought by the industry.
“Nothing has been proposed that could approximate the revenue given up through the sales tax exemption,” he said in a text message.
Spanberger said that Virginia should honor the contracts and commitments it made to businesses and that she will not support pulling back on contracts. She did not directly answer when asked if she planned to sign, line-item veto or provide amendment language to end the data center tax exemption in 2026, should it be included in the budget bill.
“I won’t be negotiating with her in the press, but she knows where I stand on this issue, I know where she stands, but ultimately we have the same shared goal” of fairness, Spanberger said of Lucas, a Democrat from Portsmouth. “I think there are a variety of ways to get to that point of fairness and ensure that they are indeed paying their fair share.”
“The most important thing is that we move as quickly as possible,” Spanberger said. “It is a priority to get this budget done.”
She added that localities across the commonwealth are also working on their local budgets and that they “need to know what they’re working with” from the state government to pass their own spending bills.
Matt Busse contributed to this report.