House of Delegates Speaker Don Scott, D-Portsmouth, said on Wednesday that a biennial budget will be ready by June, signaling that it could be months before a compromise on data center tax exemptions is reached.
Funding for the current 2024-2026 biennium will run out on June 30.
The General Assembly is expected to gavel in and immediately gavel out on Thursday at the start of the special session called to tackle the biennial budget, according to reporting by the Richmond Times-Dispatch.
The 2026 legislative session ended in March with a more than $1 billion-sized gulf between the biennial budgets proposed by the House and state Senate.
A budget agreement “remains to be seen,” Sen. Louise Lucas, D-Portsmouth, said Wednesday. Lucas is chair of the Senate Finance Committee.
Lucas has been a strong proponent of an effort to end tax exemptions early for data centers – the main catching point in budget negotiations. The tax exemptions are currently slated to expire in 2035 and the Senate budget proposal would end them in 2027. That clause is absent from the House budget proposal.
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.
Supporters of the effort to end the tax exemptions early have said the tax revenue generated could pay for child care programs, school construction and cover funding cuts to federal programs.
Opponents of the effort to end the tax exemption program in 2027 have said that Virginia would no longer be a competitive state to attract more developers in the billion-dollar industry. Lucas dismissed that argument Wednesday.
“We’ve got the infrastructure, we’ve got the water, we’ve got the land, where are they going? They’re not going to go anywhere,” she said. “They’re going to deal with us because other states are going to feel the same way that we do about them taking money from the voters and giving it to these large corporations.”
She added that 35% of all data centers are in Virginia.
“We don’t care if they grow here, as long as they pay their fair share of taxes,” she said.
All parties agreed that data centers must pay their “fair share,” but Lucas and Del. Luke Torian, D-Prince William County, appear split on what that could look like. Torian chairs the House Finance Committee.
The data center tax exemption was implemented in 2008 and saved the industry nearly $2 billion in fiscal year 2025. That amount is significantly greater than projections in fiscal year 2009, when the state Department of Taxation said it would cost $1.54 million, or about $2.37 million accounting for inflation, according to a report by Virginia Public Media.
Lucas initially supported the tax exemptions when they were passed in 2008. She addressed her 2008 vote on the Senate floor in March, and said that the goal was to incentivize the industry to create jobs in Virginia. Since then, Virginia has become known colloquially as the data center capital of the world. Virginia’s data center boom is attributed not only to the tax incentives, but the proximity to a strong fiber network, access to land and other resources. That industry growth has added to higher energy prices and strain on the grid, Lucas said in March.
