The governor of West Virginia has a message for the tech industry, as the budget battle over data center tax exemptions continues in the Virginia General Assembly: You’re welcome here.
“If Virginia no longer wants to grow economically, West Virginia will be happy to step up and power our nation’s data technology future,” Gov. Patrick Morrisey said in a statement Thursday.
His comment comes as the Virginia General Assembly has reached an impasse in its biennial budget negotiations over whether or not to end tax exemptions for data centers in 2027 — eight years ahead of their slated expiration.
“We have streamlined our regulatory process, reduced time to build, and have passed the most innovative data and energy legislation in the country. Most importantly, we have the energy to power clients’ needs while most other states do not. We look forward to working as true partners with companies that want to relocate here and invest in our communities,” Morrisey said.
What is at stake
The West Virginia legislature passed a comprehensive data center bill during its 2025 session to create energy microgrids for data centers and exempt them from local zoning ordinances in an effort to bring the industry to the state.
In the last two months, West Virginia received its first two announcements from tech companies that plan to build data centers in the state, including one from Google, said Nick Preservati, the state’s deputy secretary of commerce and director of the Office of Energy.
[Disclosure: Google is one of our donors, but donors have no say in news decisions; see our policy.]
“It’s a priority in West Virginia, we feel like it’s one of the quickest ways to get investment in our communities,” Preservati said in an interview on Friday. “We need that economic development.”
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.
Virginia has become known colloquially as the data center capital of the world since 2010, when the tax exemptions were enacted. The commonwealth’s data center boom has been attributed not only to the tax incentives, but also to the proximity to a strong fiber network, access to land and other resources. Most of Virginia’s data centers are located in “data center alley,” a part of Northern Virginia where a high concentration of the development first took place. Tech companies have begun looking at other, more rural areas of the commonwealth for infrastructure development, setting up a battle between residents who want to maintain the bucolic landscape and local governments that are in need of tax revenue.
That tax exemption is currently slated to expire in 2035, but the state Senate’s biennial budget proposal would end that exemption in 2027. The House of Delegates’ budget proposal does not end the exemption early, creating a more than $1 billion difference in tax revenue between the two spending plans. That difference must be rectified by 11:59 p.m. June 30, when funding through the current biennium is slated to run out.
State Sen. Tammy Mulchi, R-Mecklenburg County, and Del. Eric Phillips, R-Henry County, warned that if an agreement isn’t reached soon, Pittsylvania County could lose the largest economic development deal in Southside Virginia’s history.
The Stack Infrastructure project at the Berry Hill megasite, which is expected to bring thousands of jobs to Southside, may not happen if Virginia does away with data center tax exemptions, Secretary of Finance Mark Sickles told the Senate Finance Committee in April.
“Our region is in line for a potential $73 billion private investment and more than 2,000 jobs tied to a data center project. That opportunity depends on the decisions being made right now. We have to get this right and ensure Virginia remains competitive,” Mulchi and Phillips said in a joint statement.
Virginia’s Senate majority leader, Scott Surovell, said that he is confident that the General Assembly will be able to work out a compromise that maintains Virginia’s “nation leading business environment while balancing the industry’s economic contributions to our state with the AI-related job displacement, environmental and community impacts that come with data center development.”
“If the Governor of West Virginia wants more data centers then his state should consider rejoining the Commonwealth after their 166-year vacation,” Surovell said by email.
The General Assembly’s fight over a ‘highly mobile’ industry
Josh Levi, president of the Data Center Coalition, said that industry investment is “highly competitive” and “highly mobile” when asked if shifting data center development from Virginia to West Virginia is a viable option.
“If Virginia’s tax, regulatory, and business environment reduces Virginia’s competitiveness we will likely see investment and jobs flow to states who stand by their commitments and offer more certainty and stability,” Levi added.
House Minority Leader Terry Kilgore said that state Senate Democrats’ “overt hostility” to data centers has the industry looking elsewhere.
“Virginia is not an island,” he said. “We can’t set the terms for all data centers. If Senate Democrats decide they don’t want these things in Virginia, they’ll happily go somewhere else.”
The offices of Sen. Louise Lucas, D-Portsmouth, and Del. Luke Torian, D-Prince William County, did not respond to a request for comment regarding the West Virginia governor’s statement. Lucas and Torian chair the finance committees in their respective chambers.
Lawmakers left Richmond on Thursday, the first day of a special session called to address the budget impasse, without striking a deal regarding the tax exemptions.
Lucas has been a strong proponent of ending the exemptions early, while Torian has said that he believes Virginia must honor memorandums of understanding that it signed with the tech companies — a position shared by Democratic Gov. Abigail Spanberger. Torian also said Thursday that it is ultimately up to the state Senate and the Data Center Coalition to come to an agreement.
Levi said Thursday that the industry offered legislative leaders two proposals, the latest 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,” Levi said.
Lucas said Thursday that the House and Senate are getting closer to an agreement, however.
Supporters of the effort to end the tax exemptions early have said the tax revenue generated could pay for childcare 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.
