Virginia Democrats Propose Ending Data Center Tax Exemption

Senate budget would end $1.6 billion tax break, while House version keeps it

Published on Feb. 23, 2026

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The Virginia General Assembly's money committees have presented their respective budget amendments, with the Senate proposing to end the state's data center sales and use tax exemption, a measure absent from the House version. The Senate's approach aims to generate over $1 billion in new revenue, which it plans to invest in education, healthcare, and other areas. However, the data center industry warns that this move could 'effectively halt investment' and lead to job losses and revenue declines for the state.

Why it matters

The data center tax exemption, in place since 2010, has been credited with fueling Virginia's data center boom, but it has also cost the state an estimated $2.7 billion in lost revenue over the past decade. The Senate's proposal to end the exemption reflects a shift in priorities, with Democrats seeking to redirect funds towards social programs and services rather than continuing the tax break for large corporations.

The details

The Senate's budget proposal totals $74.1 billion in general funding spending over fiscal 2027 and 2028, compared to the House's $71.5 billion. The Senate version projects a $159 million loss in revenue from increasing the state's standard deduction, but it also assumes $169.4 million in tax revenue from a newly legalized retail cannabis market and a new 11% sales tax on firearms and ammunition. Both versions largely reject tax cuts proposed in former Gov. Glenn Youngkin's version that would conform state tax policy to federal tax cuts.

  • The General Assembly money committees presented their respective budget amendments on Sunday, February 22, 2026.
  • The data center sales and use tax exemption is set to expire in January 2027.

The players

Louise Lucas

Chair of the Senate Finance and Appropriations Committee, who described the data center tax exemption as a 'blank check' to 'the world's most valuable corporations'.

Luke Torian

Chair of the House Appropriations Committee, who told reporters that the House would 'see' if there would be any movement on the data center sales and use tax exemption.

Nicole Riley

Director of Virginia government affairs for the Data Center Coalition, who warned that the Senate's proposal would 'effectively halt investment' and lead to job losses and revenue declines for the state.

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What they’re saying

“For years, Virginia has been writing a blank check to some of the world's most valuable corporations — a check that started at $1.54 million and has grown to $1.6 billion — while families struggle to pay for childcare, health insurance, and a place to live. This budget takes more than a billion dollars that had been flowing out of our treasury unchecked and invests it in the education, health care, and opportunity that every Virginian deserves. That is what it means to govern responsibly.”

— Louise Lucas, Chair, Senate Finance and Appropriations Committee (pilotonline.com)

“The data center industry supports tens of thousands of jobs around the state and generated more than $5 billion in state and local tax revenue in the last two years. The state's own studies say that data center investments, jobs, and tax revenues could stop, existing companies could leave, and the state and its localities could lose $1.3 billion in tax revenue with the elimination of Virginia's tax exemption program.”

— Nicole Riley, Director of Virginia Government Affairs, Data Center Coalition (pilotonline.com)

What’s next

The budget bills will now head to the chamber floors for a full vote before moving to a conference committee to work through the differences between the House and Senate versions.

The takeaway

The debate over the data center tax exemption highlights the ongoing tension between supporting economic development and investing in social programs. The Senate's proposal to end the exemption reflects a shift in priorities for Virginia Democrats, who are seeking to redirect funds towards areas like education, healthcare, and social services rather than continuing the tax break for large corporations.