Tax incentives for data centers have become a main sticking point in biennial budget negotiations.
The state Senate introduced an effort to remove data center tax incentives in 2027 in its biennial budget proposal, eight years earlier than those incentives’ initial 2035 expiration date. That effort was absent from the House of Delegates’ budget proposal and that difference in the two spending bills has created a roughly $1 billion revenue gulf.
“You have to know how much to spend before you can make a budget so it’s fair to say that the data center sales tax exemption is a major sticking point,” said Sen. Creigh Deeds, D-Charlottesville, who is serving as a budget conferee. “We have to know about the resources before we can even begin discussions about other matters.”
Proponents of the effort to end the data center sales and use tax exemption in 2027 have said the $1 billion generated in tax revenue over the biennium could be used to pay for child care programs and school construction, and to cover funding cuts to federal programs.
Opponents of the effort to end the program eight years early have said that Virginia would no longer be a competitive state to attract more developers in the billion-dollar industry, without the tax incentives.
Democratic Gov. Abigail Spanberger will have the final say through signing or line-item vetoing the spending bill once it passes the General Assembly. She can also opt to do nothing with the legislation and it will automatically become law 30 days after it passes the General Assembly.
“As budget negotiations advance, the governor has expressed to House and Senate leaders her serious concerns about going back on commitments Virginia has made to businesses that it recruited to invest in the commonwealth,” said Libby Wiet, spokesperson for Spanberger, when asked on Friday about the governor’s stance regarding the Senate proposal to end the tax exemptions in 2027.
“The Governor is committed to being a partner to facilitate conversations between House and Senate budget negotiators,” Wiet added.
The state Senate offered amendments to the opposite chamber’s budget proposal on Wednesday. Those amendments were rejected by the House of Delegates, but insisted on by the Senate prompting the spending bill to go into a conference committee to smooth out the differences.
The two budget proposals will need to be reconciled into one and presented to the General Assembly by Thursday to avoid a special session. Those proposals differed widely when they were introduced in February — the House proposed $71.5 billion in appropriations over the biennium while the Senate proposed spending roughly $74 billion.
Other differences between the two money committee proposals
Notable differences between the two chamber spending proposals include disparities in appropriations for a second inland port to be built in Washington County. The House proposed $2 million for a study regarding the port while the Senate earmarked $35 million for the port’s construction.
The Senate also forecast over the biennium about $71 million in revenue through excise tax for the sale of recreational cannabis, should efforts to legalize retail marijuana be successful. The bill to establish a retail framework for cannabis was also sent to a conference committee to determine the tax rate for sales and the date recreational sales can begin. Conferees for that bill include Del. Paul Krizek, D-Fairfax County; Del. Charniele Herring, D-Alexandria; Del. Will Morefield, R-Tazewell County; Sen. Lashrecse Aird, D-Petersburg; Sen. Schuyler VanValkenburg, D-Henrico County; Sen. Aaron Rouse, D-Virginia Beach; and Sen. Chris Head, R-Botetourt County. Head had initially voted on party lines against the bill.
Some other differences in budget proposals include:
- Virginia Tech Carilion School of Medicine
- House: $13 million for increased enrollment at the Roanoke school
- Senate: $0
- Patient Research Center
- The new research center at the Fralin Biomedical Research Institute at VTC in Roanoke is intended to move some of the institute’s research from the laboratory to real-world patients
- House: $6 million
- Senate: $0
- George Mason University-Averett University partnership
- The proposal is for George Mason to work with Averett, a private college in Danville, on “enhancing workforce training and career pathways, and supporting economic development in Southern Virginia,” contingent on funding from various sources other than the state budget.
- House: Includes language to authorize such a partnership, which would extend George Mason’s reach into Southside.
- Senate: No mention
- Fincastle Museum
- This museum to house Botetourt County history would be located at the Greenfield business park. In previous years, the legislature appropriated $6 million for construction.
- House: $2.5 million
- Senate: $0
This list has been updated to remove the New College Institute.