With the start of the next fiscal year just weeks away, Virginia lawmakers remain at odds over whether to continue a sales tax exemption for data centers in the commonwealth.
State senators voted to end the tax break, a step that the House of Delegates rejected. Gov. Abigail Spanberger has said the state needs to honor its existing agreements but called for data centers to pay what she has described as their 鈥渇air share.鈥�
As July 1, the start of fiscal 2027, approaches, Virginia could be facing its first-ever partial government shutdown. However, one source familiar with the budget negotiations said an agreement is likely to be reached before the deadline.
The House of Delegates is planning to return for a special session on June 18. The Senate is scheduled to reconvene on June 22.
The debate is solely about whether data centers should continue to get a tax break on equipment and software. Because more data centers are popping up across the commonwealth and many are updating chips and equipment with the emergence of artificial intelligence, supporters for ending the exemption said it鈥檚 costing the state nearly $2 billion in revenue.
The exemption is scheduled to end in 2035, but senators want to end it sooner.
On Friday, Sen. Louise Lucas and House Appropriations Chair Luke Torian met with Spanberger to create a plan for a final budget. But after that meeting, Lucas said the governor and House 鈥渄ecided that they did not want to alter the freeloading policy for data centers.鈥�
In a post on the , Lucas said she proposed several consequences, but 鈥淒ata Center Diva and Amazon Don couldn鈥檛 understand that this is about the policy 鈥� fair taxation and protecting our resources and citizens.鈥�
Torian, meanwhile, said in a statement that the House is committed to working toward a budget agreement.
Spanberger said she鈥檚 confident 鈥渢hat General Assembly leadership will get a bill on my desk that I can sign on time. Because there is no other option 鈥� those responsible for funding our government have an obligation to deliver.鈥�
Some lawmakers have mentioned the idea of a 鈥渟kinny budget鈥� that would cover essential government services. In a t, Senate Majority Leader Scott Surovell referred to the concept as a 鈥淒C-style鈥� continuing resolution and said it would be a step 鈥渋nstead of resolving difficult problems & making choices between teachers and data centers.鈥�
Could marijuana marketplace plan be revived in budget talks?
After the General Assembly rejected her changes to the legislation that would have created a legalized marijuana marketplace in Virginia, Spanberger vetoed the plan.
However, it might be revived through the budget process.
Speaking to reporters at an event Monday, Spanberger said she鈥檚 had ongoing conversations with the lawmakers who proposed the bill, according to WVTF Richmond Bureau Chief Brad Kutner.
鈥淲e have the shared priorities of wanting to have a legal framework for a recreational market that can make sense of where we are today, that can put real constraints and guidelines on a market, with ensuring that we are working in the best interest of Virginians, certainly protecting kids, ensuring public safety and community priorities, but also ensuring that we have clear rules of the road,鈥� Spanberger said.
She declined to offer an exact timeline and didn鈥檛 disclose whether the marketplace could move forward as part of budget talks or next year, when the General Assembly returns for its regular legislative session.
Some state officials have said revenue from the marketplace plan had been included in projections for the fiscal 2027 budget.
The plan passed in Richmond would have had the retail marketplace opening Jan. 1. Anyone 21 or older would be able to buy marijuana and there鈥檇 be 350 retail stores across the commonwealth.
Spanberger, though, called for retail sales to begin July 1, 2027, and introduced several changes to criminal penalties tied to marijuana possession. Public consumption is currently a civil penalty, but Spanberger proposed changing it to a Class 4 misdemeanor.
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