Virginia Enacts Data Center Energy Tax to Raise $600 Million Annually

The Virginia General Assembly approved a two‑year budget that adds a 1.1 cent per kilowatt‑hour levy on electricity used by data centers, a sector that makes the state the nation’s leader with 398 operating facilities and dozens more planned. The levy is expected to generate about $600 million each year, offsetting an estimated $1.9 billion in lost revenue from previous tax breaks.

The measure, part of a $207 billion state budget, replaces proposals to eliminate a sales‑tax exemption and to impose stricter environmental standards. Governor Abigail Spanberger praised the compromise but said it is only the beginning of ensuring the industry pays its fair share. The Data Center Coalition condemned the tax as a barrier to jobs and investment, while the Virginia Sierra Club criticized the lack of strong clean‑energy requirements.

Lawmakers framed the tax as a response to the growing strain on the electrical grid and water infrastructure caused by AI‑driven workloads, aiming to fund road repairs, school expansions, and other public services in data‑center‑heavy counties such as Loudoun and Prince William.