Virginia lawmakers eye new limits on data center tax breaks amid backlash

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Virginia lawmakers are weighing tougher restrictions on the state’s data center industry as residents voice growing frustration over noise, rising utility bills and other quality-of-life concerns.

Republican state Sen. Glen Sturtevant and Democratic Senate President Pro Tem Louise Lucas have called on Gov. Abigail Spanberger to eliminate the commonwealth’s $1.6 billion annual sales tax exemption for data centers. Spanberger, who took office in January, has already signed several bills imposing new energy taxes on the industry and shifting grid infrastructure costs from residents to operators.

The environmental consulting firm Gasilov Group said 46 additional data center bills are pending in the Virginia Legislature next year, and a growing number of localities are considering pauses on new applications. Arif Gasilov, an energy partner at the firm, said the restrictions “do have the potential to slow growth down” and could push development toward states with fewer regulations. He cited a Gallup poll from May finding that 71% of adults did not want a data center built near them.

Manassas homeowner Patrick Harders said his utility bills have risen 30% because of the 63 data centers in his city, and he argued Virginia should move toward Maryland’s more restrictive model. He pointed to Montgomery County, Maryland’s recent 18-month moratorium on new construction as an example.

DataCenterMap estimates 68 companies operate 651 data centers in Virginia, mostly in the northern part of the state, compared with 58 in Maryland and six in the District of Columbia. Public backlash already helped kill a proposal for the world’s largest data center hub near the Manassas battlefield last month, after homeowners and preservationists won legal challenges.

Industry advocates counter that data centers generate substantial economic benefits. Virginia’s Joint Legislative Audit and Review Commission found the industry contributed 74,000 jobs and $9.1 billion to the state’s GDP in 2024. Loudoun County officials say data centers generate $26 in tax revenue for every $1 in services provided. Nicole Riley of the Data Center Coalition credited “smart, forward-looking policies” for Northern Virginia’s growth and urged continued market competition.

Nationally, New York became the first state to ban data centers last month when Gov. Kathy Hochul ordered a one-year moratorium, while Maryland Gov. Wes Moore has taken the opposite approach, declaring data centers “critical infrastructure” and streamlining permits. Former Democratic state lawmaker Chap Peterson warned that Virginia voters are losing patience with the industry’s environmental and infrastructure footprint.

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Read more: New laws amid public resistance could curb Virginia’s data center boom

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