Virginia General Assembly continues debate over sales and use tax exemption for data centers

Although the Virginia General Assembly has concluded its regular session, negotiations over the Commonwealth’s biennial budget, and the future of the sales and use tax exemption for data centers (Data Center Exemption), remain unresolved.

Legislators adjourned without final agreement on the budget. The Data Center Exemption continues to be a central point of disagreement between the House of Delegates and the Senate and is widely expected to be addressed in a forthcoming special session

As discussed below, several related data center measures also remain in conference or await further action.

Budget negotiations and special session

As noted in our prior alert, the House and Senate budget proposals take sharply different approaches to the Data Center Exemption.

During his closing remarks, the Chairman of Appropriations and House lead budget conferee (Delegate Luke Torian from Prince William County) highlighted the data center industry’s key, contributing role to Virginia’s economy, as well as the importance of maintaining the Commonwealth’s long-established, business-supportive reputation.

Negotiations between House and Senate conferees remain ongoing. As a result of these different approaches (proposed elimination of the Exemption by some members of the Senate versus proposed “conditions” to maintain the Exemption by the House), the Virginia General Assembly will need to reconvene in a special session to finalize the budget and determine whether, and in what form, the Exemption might continue.

The General Assembly has announced that the special session will reconvene on April 23, 2026.

Status of key data center legislation

In addition to the budget, several bills affecting data center development and operations in Virginia remain under consideration:

• Data center siting – HB 153 and SB 94 remain in conference between the House and Senate.
  
  
• Water usage reporting – HB 496 and SB 553 also remain in conference.
  
  
• Air permitting and back up generation – HB 507, addressing air permitting requirements tied to Tier IV generators, has passed the Senate.
  
  
• Commonwealth data center policy – HB 591, addressing broader policy considerations related to data centers, has been continued to the 2027 session.

These measures, taken together with the unresolved budget proposals, underscore the degree of legislative focus on Virginia’s data center industry.

What to watch next

Key upcoming dates in the legislative calendar include:

• April 13, 2026 – Deadline for the Governor to sign, veto, or take no action on legislation already passed by the General Assembly
  
  
• April 22, 2026 – Date the General Assembly reconvenes to consider any gubernatorial vetoes

While these dates do not resolve the budget impasse, they provide important context for the next phase of negotiations. Industry stakeholders can expect continued legislative activity in the coming weeks, with the Exemption remaining a focal point.

The Data Center Coalition provides information on these topics and other key industry trends.

Conclusion

Whether through an early sunset, new eligibility standards, or other budgetary compromises, the General Assembly’s ultimate resolution of the budget will have significant implications for data center owners, operators, developers and investors.

We will continue to monitor these events closely and provide updates as additional details emerge from Richmond, including developments from the special session on April 23.

For additional information or to discuss how these developments may affect existing or planned data center projects, please contact the authors.