Senate proposes getting rid of billion-dollar tax break for data centers in Virginia

RICHMOND, Va. (WRIC) -- Virginia data centers may soon have to pay up. 

“They can keep building em, they just need to pay their fair share of taxes, that’s all,” Senator Louise Lucas (D-Portsmouth) told 8News.

Lucas, who chairs the Senate Finance and Appropriations Committee, included a provision in the Senate’s proposed budget that would eliminate a sales and use tax exemption that data centers in Virginia currently receive on certain equipment and software they purchase. 

In the last two fiscal years, data centers say that the tax break amounted to $3.2 billion. 

Lucas said that money is being taken from Virginians. 

“We got people who are struggling to put food on the table, I mean, to put a roof over their heads, to pay their car payments, send their kids to school, I mean, any number of items that affect hardworking Virginians, and I want that money to go back to them,” Lucas said.

However, Virginia’s Data Center Coalition says the measure would “effectively halt investment” by an industry that generates more than $5 billion in state and local tax revenue in the last two years.

Plus, certain labor unions said if data centers decide not to invest in Virginia, construction workers will pay the price. 

“If we lose these incentives, I have to pack up and go somewhere else and work and leave my family here,” said Dorian Hargrave, a union electrician. 

Plus, Republicans and Governor Abigail Spanberger (D-Virginia) don’t appear to be fully on board. 

“Virginia made commitments to certain businesses, whether we like those commitments later on should not be the question. When you make a commitment, you should live by it,” Senate Minority Leader Ryan McDougle (R-Hanover) told 8News. 

“So I think that there's many more conversations to be had before we see any finalized bill language or budget language. Importantly, we need to ensure that data centers are paying their fair share, and in fact, we had an important SCC ruling about a new rate class that was an important step forward. But we also need to have a larger conversation about the impacts and benefits of welcoming all types of businesses,” Spanberger said.

“I don't think that chicken's fully cooked yet,” Spanberger went on to say. 

Meanwhile, the House of Delegates' proposed budget keeps the tax exemption for data centers but would require data centers to meet certain clean energy standards to qualify for it. 

The House and Senate will have to agree on a single version of the budget to send to Spanberger’s desk. 

For her part, Lucas said she is committed to including the removal of the tax exemption in the final budget. 

“I think somebody asked me that question yesterday, want to know how strong I am on those data center tax, and I told them I was as strong as steel,” Lucas told 8News on Thursday.