Data centers save $2.7 million through tax exemptions, make up more than half of Virginia’s incentive spending: JLARC

RICHMOND, Va. (WRIC) — Virginia data centers have saved more than $2.7 million through tax exemptions in recent years, a state report found. During that same period, the Commonwealth also spent more than half of its incentive budget on them.

Between fiscal years 2015 and 2024, Virginia spent $5.2 billion on 97 incentive programs to attract businesses to the state, including grants, tax preferences, business loans and gap financing, per the Joint Legislative Audit and Review Commission (JLARC).

Of its total spending, the sales and use tax exemption for data centers accounted for 53%, or $2.73 million, between 2021 and 2024. This is 11 times larger than the second-largest incentive for manufacturing single sales factor apportion, which totaled $245 million at 5% of the state's total spending over 10 years.

In 2024 alone, spending on data centers accounted for 79% of the total at more than $1.02 billion. The exemption expenditure nearly doubled from the previous year because of the uptick in data center locations and expansions in Virginia, per the report.

MORE: Booming data center industry both helps and hurts Virginia, JLARC study finds

The figures are likely underestimated because of a recent change in the collecting method, JLARC noted. The actual amounts over the 10-year period for data centers might be even higher.

Data centers in Virginia

Virginia has emerged as the world's data center capital, hosting nearly 150 of these high-tech developments and accounting for about 35% of all data centers in the world.

One of the corporations at the helm of the booming industry in northern and central Virginia is Google.

The tech giant this summer pledged a $9 billion investment in the state's artificial intelligence infrastructure through the end of 2026. This includes plans for a data center campus in Chesterfield County, as well as the expansion of existing data facilities in Loudoun and Prince William Counties.

Google qualified for the state's sales and use tax exemptions, meaning the company met the minimum investment and job requirements within the data center’s locality.

Per a response to JLARC from the Virginia Economic Development Partnership, data centers also support 74,000 jobs, $5.5 billion in labor income and $9.1 billion in Virginia GDP annually.

Virginia's push for data centers has received mixed reactions from residents and leaders.

Those who oppose these developments are concerned about water usage, air and noise pollution and the loss of rural charm in certain regions. Data centers' demand for energy will also result in rate hikes in Virginians' power bills starting in 2026.