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House budget drops environmental standards for data centers and creates a commission to study impacts and revenue.
Virginia House leaders have removed proposed environmental requirements for data centers from their latest budget plan, replacing them with a commission that would study the industry’s impact as budget talks continue ahead of a June 30 deadline.
Speaker of the House of Delegates Don Scott, joined by Appropriations Chair Del. Luke Torian, D-Prince William, and other bipartisan House members, unveiled the revised proposal in Richmond on Friday and described it as a compromise the Senate should accept.
The updated spending plan no longer ties the state’s sales and use tax exemption for data centers to environmental standards. That issue has held up negotiations for weeks and fueled speculation about a government shutdown if lawmakers do not complete a budget by the end of the month.
"This budget comes through for Virginians in a real and meaningful way without introducing a single new tax", Torian said in a statement. "It anticipates future federal funding cuts by establishing a reserve – so when Washington turns its back again on Virginians we are prepared to step in."
The House and Senate remain divided over whether data centers should keep their exemption from the state’s 5.3% sales and use tax. According to state data cited in the budget debate, the industry saves about $1.6 billion annually through the exemption. Senate lawmakers have argued the state should recover that money by ending the tax break.
The article says data centers regularly upgrade and replace expensive computer equipment, which is where much of the savings comes from.
The House’s earlier proposal would have required developers to limit data centers from co-locating with power facilities that emit carbon emissions. It also included energy efficiency rules for the facilities, including use of newer backup generator models that emit less carbon. Those provisions are no longer in the latest House version.
Instead, the new House budget calls for creating a commission made up of stakeholders and lawmakers to examine the costs and benefits of the data center industry in Virginia.
Under the proposal, the commission would report to the General Assembly by Nov. 1 on ways to make sure energy demand from data centers does not shift extra costs onto residential utility customers. It would also review local tax revenue effects and "other ways to generate revenue from the industry".
"(It will be a) full investigation into energy costs, financial impacts, air quality, water conservation, renewable energy, and community impacts", Scott said, "So the 2027 General Assembly can pass real national reform. Or if the governor would like, we could come back right after that report … for a special session."
Scott has strongly backed keeping the exemption. The article says he has cited the local tax revenue data centers generate and the union jobs tied to construction of the facilities.
Gov. Abigail Spanberger has also publicly supported preserving the exemption, saying Virginia should "honor its commitments" to businesses that have located in the commonwealth. On Friday, she praised the updated House budget.
"This proposal creates a clear roadmap for evaluating the impact of the data center industry in Virginia and for reassessing the state’s incentives into the future, with a focus on fairness to ratepayers and the needs of local communities", Spanberger said in a statement.
As of Friday afternoon, Senate members had not publicly responded to the revised House plan, and there was no comment from Finance Chairwoman Sen. Louise Lucas, D-Portsmouth.
Lucas has pushed to end the exemption since the Senate introduced its own spending plan earlier this year.
"I want (the money) to go towards hard working families. We’ve got people who are struggling to put food on the table, to put a roof over their heads, pay for their car payment, their kids school. I want that money to go back to them", Lucas said then.
The House is scheduled to return to Richmond to debate the proposal on June 18. The Senate, which has not yet released an updated budget proposal, is set to return on June 22. If a budget is not passed by the end of the month, state services and employee pay will be interrupted.
