Virginia’s proposed FY 2027 Senate budget would end statewide sales and use tax exemptions for data centers, pulling back a core incentive that helped make Northern Virginia the world’s largest data center hub.
Lawmakers frame this as closing a $1.9 billion annual “loophole” and tying it directly to rising utility costs and broader ratepayer pressure from massive data center energy consumption.
JLARC’s 2024 report confirms the exemption saved the industry about $928 million in FY 2023 and warns that removing it would significantly raise operating costs, slow new builds to only “absolutely necessary” projects, and push future development to other states.
The same report notes that the current 2035 sunset already weakens Virginia’s competitiveness for long-lived AI and cloud infrastructure and suggests extending it if the state wants to keep attracting large campuses.
Industry, via the Data Center Coalition, argues that eliminating the exemption would “effectively halt” new investment, threaten tens of thousands of jobs, and potentially cost the state and localities $1.3 billion in tax revenue as projects and expansion shift elsewhere.
For AI infrastructure planners, this raises siting risk in Virginia: GPU-heavy builds may face higher capex/opex, more scrutiny on power and water use, and stronger political headwinds versus rival states still using tax incentives to lure hyperscale and AI clusters.
The full article is worth a read for anyone modeling long-term AI data center strategy and policy exposure in Northern Virginia.
Source: Proposed Senate Budget Would Eliminate Statewide Data Center Tax Exemptions | News | loudounnow.com
