Gov. Abigail Spanberger praised the compromise reached on data centers and took credit for her role in shaping it.
The Virginia General Assembly passed a two-year budget on Monday that keeps intact a tax break that saved data center companies $1.6 billion in 2025, in a compromise deal that will also add a new tax on energy used by data centers.
Senate Democrats led by State Sen. Louise Lucas (D-Portsmouth) had tried to end that tax break before its scheduled end in 2035. Democrats in the House of Delegates and Gov. Abigail Spanberger supported keeping the tax break in place to protect Virginia’s business reputation.
While the controversial tax break would remain, the budget proposal would establish a new tax on how much energy data centers consume that’s expected to raise $1.2 billion over the next two fiscal years.
After weeks of calling for an end to Virginia’s state tax break for data centers and a series of town halls seeking public input on the issue, Lucas struck a more conciliatory tone on Monday after the Virginia Senate passed the budget bill.
Lucas said she still supported ending the state tax break but the compromise she ultimately voted for was “a good start.” Lucas said state lawmakers could not let the state government shut down, which it will if the new state budget isn’t finalized by the end of the month. Monday’s budget compromise makes it likely the state will avoid that unprecedented outcome.
“At some point, you gotta give some to get some,” Lucas told reporters.
Speaking on the Senate floor, State Sen. Danica Roem (D-Manassas) expressed her disappointment that the tax break was set to remain in place and pledged to try again in next year’s legislative session to end it.
“It is so critically important that we are not subsidizing [the] corporate greed of a multitrillion dollar industry with individual multitrillion dollar players at this point,” Roem said. “We cannot afford to keep giving away billions of dollars to the richest corporations in America.”
The budget proposal also directs the state’s Joint Subcommittee on Tax Policy to study the data center tax break and other impacts and make recommendations.
House Speaker Don Scott told Dogwood Democrats had a “family feud” over data centers but ultimately landed on a compromise that balances Virginia’s business reputation with keeping the state’s tax base up.
“When people care about a lot of stuff, sometimes the passion will come out,” Scott said. “And we got more work to do.”
Spanberger praised the data center compromise and took credit for her role in shaping it. It will be up to her to sign the budget bill into law before the fiscal year ends at the end of the month. She can also send it back to the General Assembly with amendments and line-item vetoes.
“For the first time anywhere in America, Virginia will institute a statewide energy consumption tax on data centers—an idea I first proposed this spring—to ensure this industry pays its fair share and does not drive up costs for Virginia families,” Spanberger said in a statement.
While state leaders promised to continue looking at how to regulate the data center industry, climate groups criticized the budget compromise for putting corporate interests before public concerns.
“With this budget, the legislature has over-promised and completely under-delivered,” said Michael Town, executive director of the Virginia League of Conservation Voters. “Despite months of rhetoric about reigning in big tech and stripping away billions in tax breaks, lawmakers completely walked away from both promises.”
In addition to the new energy consumption tax, the budget proposal would require the Virginia Department of Environmental Quality to set new regulations around water use and noise for data centers, and it directs the State Corporation Commission to collect data on data centers’ energy, water, and generator use.
State Del. JJ Singh (D-Ashburn) called the compromise on data centers a good start but said there is a lot more work to be done.
“ There are a lot more serious conversations to be had about whether data centers and the growth of the data centers is appropriate for the future of the Commonwealth,” Singh told Dogwood.
