The legislators negotiating the state budget are at loggerheads over whether to keep, modify or abolish Virginia’s tax incentives for data centers.
Senate Finance Chair Louise Lucas, D-Portsmouth, is firmly in the abolish camp; she sees these tax abatements — now running upwards of $1.9 billion a year — as nothing more than a giveaway.
On the other side, multiple business groups are weighing in to make the case that these tax breaks are actually a bargain because the heavy investment in data centers in Virginia (a state report puts the gross domestic product of data centers in the commonwealth at $9.1 billion) wouldn’t happen without them.
Until now, those business groups have tended to come from the technology sector in Northern Virginia. Earlier this week, the Northern Virginia Technology Council, which represents more than 500 companies, “expressed strong concern” about the proposal to eliminate the tax break eight years ahead of its scheduled expiration in 2035.
“NVTC warned that accelerating the expiration of the exemption would introduce uncertainty for an industry that plans capital investments years in advance and undermine Virginia’s long-standing reputation as the global leader in digital infrastructure,” the group said in a statement.
Now, a business group on the other end of the state has joined that chorus. On Thursday, a Danville-based economic development group issued a statement calling on the state to keep the tax exemption, saying it’s critical to growing a technology sector in the mostly rural southern part of the state.
The Future of the Piedmont Foundation, formed in 2000 after the collapse of the textile industry and the slow decline of tobacco across the southern part of Virginia, cited the recent news that a Colorado-based company with ties to the data center industry had agreed to buy 2,900 acres at the Southern Virginia Megasite in Pittsylvania, almost all of the remaining acreage. A draft performance agreement calls for the company to create 2,050 jobs at an average salary of $80,500 — well above the county’s current average of $49,182.
This would be the largest economic development announcement in the region’s history. The Future of the Piedmont noted, in bold, “That agreement was signed the same week legislators are debating whether to break the very state commitment that made it possible.”
The group, in a message directed to “state and federal leaders,” said: “The data center investment now taking shape at Berry Hill is proof that bipartisan commitment works. Don’t walk it back.”
The Future of the Piedmont acknowledged concerns that some have about data centers: “Lawmakers raising concerns about tax equity, grid capacity, and workforce development are asking real questions that deserve real answers — not a retroactive reversal of commitments already made.”
The Future of the Piedmont statement warned that ending the tax incentives early would hurt Virginia’s reputation with other business sectors. “Site selectors talk to each other. Leaders in our top competitor states — North Carolina, Georgia, and South Carolina — are already sharing with potential investors what Virginia is considering. When Virginia breaks a commitment to one industry, that information travels. It becomes a Virginia story, not a data center story. We know this from twenty-five years of recruiting investment to Southern Virginia. We know the difference a state’s credibility makes — and how hard it is to rebuild that credibility once it is lost.”
The group called on Gov. Abigail Spanberger and state legislators to honor the tax exemptions “at least through 2035 make that commitment clear — publicly and to key legislators — as a signal that Virginia’s promises hold across administrations and party lines.”
Spanberger has been widely reported as being skeptical of doing away with the exemptions entirely and has floated other options. In a statement to Cardinal News, a spokesperson for the governor said: “As energy costs rise, Governor Spanberger strongly believes that data centers should be paying their fair share for the energy they use. The Governor has also made clear that Virginia should not be going back on agreements it has signed with companies that have brought business investment and substantial economic development to the Commonwealth. Governor Spanberger believes there is a path forward in budget negotiations that keeps Virginia’s commitments while also making sure data centers pay their fair share of taxes and energy costs. As discussions move forward, the Governor will remain in close contact with leaders in the House and Senate.”
Lucas, who has been posting almost daily on X (formerly Twitter) about how she’s determined to get rid of the data center tax breaks, did not respond to a request for comment. However, after House Appropriations Chair Luke Torian, D-Prince William County, took to the House floor to blame the Senate for the budget impasse, Lucas posted on X Thursday night: “As you know I’ve been saying for weeks now that we will not pass a budget that puts data centers tax breaks ahead of hard working Virginia families and I am not backing down now.”
Environmental groups and progressive groups have also been vocal in their desire to eliminate or at least restrict the tax breaks. The Warrenton-based Piedmont Environmental Council this week called for “eliminating or substantially limiting” the tax incentives for data centers.
“As we’ve said all along, Virginia’s families should not be subsidizing the richest companies in the world. This tax exemption should be eliminated or phased out to support programs for people, not the profits of Amazon, Google, Meta and others,” said Chris Miller, president of The Piedmont Environmental Council, in that statement released Tuesday.
The Piedmont Environmental Council went on to say: “The tax exemption began in 2008 to attract economic development to the state. Given that Virginia is the data center capital of the world, the incentive worked. The problem Virginia faces now is that we don’t have the infrastructure to support what’s already here and what’s in the development process.”
What has been a fairly conventional argument between technology-oriented groups in Northern Virginia and environmental groups over tax policy has become more complicated with the entry of downstate voices into the debate — who make the case that while data centers may be a mature industry in Northern Virginia, the rural part of the state is only now getting a chance to cash in on the jobs and tax revenue they produce.
Earlier this week, Danville city council member Lee Vogler posted a message to Lucas on X: “Ending these tax incentives early would be a massive mistake. This incentive was available for years while data centers were being built left and right in northern VA. Now as soon as rural localities in Virginia have a chance to get in the game, @SenLouiseLucas wants to pull the plug. Big mistake!”
Thursday’s statement from the Future of the Piedmont Foundation makes a similar point: “The Future of the Piedmont Foundation has spent twenty-five years making the case that Southern Virginia — a region the broader market largely wrote off — is a reliable, stable place to invest. The Commonwealth’s willingness to honor its commitments was foundational to every win we achieved.”
It urged policymakers in Richmond to consider the news that a data center company could bring a transformative number of jobs to a region that’s been losing jobs for decades: “Use Berry Hill as the proof point: this is what bipartisan, multi-decade commitment to Southern Virginia produces. Protect the model that made it possible.”
The debate over a data center tax policy is key to whether House and Senate budget negotiators can come to terms on a budget. As one of those negotiators, state Sen. Creigh Deeds, D-Charlottesville, has pointed out several times, legislators can’t make a budget until they know how much money is available.
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