By Shirleen Guerra | The Center Square
(The Center Square) — A new report says Virginia offers some of the largest tax breaks in the country for data centers but does not publicly disclose which companies receive them or how much the exemptions are worth.
The report, titled “Cloudy Data, Costly Deals,” was published by Good Jobs First, a nonprofit group that tracks state and local business incentives. It reviewed how 36 states handle data center tax programs, which support facilities that power cloud computing, online storage and AI systems.
According to the report, the state waives nearly $1 billion in sales and use tax revenue each year through its data center exemptions. The group also estimated that Virginia loses about 52 cents in revenue for every dollar it gives up through these programs.
Good Jobs First senior analyst Kasia Tarczynska told The Center Square the public has no access to information about which companies receive the tax breaks, how much they get or what they provide in return.
“This is $1 billion less for food assistance, public health care, roads, schools — public services that everyday Virginians rely on,” Tarczynska said. “Instead, these public dollars are benefiting some of the most profitable companies in the world.”
The report recommends that states disclose the names of all companies receiving data center tax exemptions, the amounts they receive and whether they meet job or investment goals tied to the incentives. It also calls for greater transparency around company ownership, wages, and any additional subsidies connected to those projects.
Virginia has more than 660 data centers, most of which are in Loudoun and Prince William counties, making it the largest data center market in the world.
The state’s data center tax exemption has been in place since 2010 and allows companies to purchase servers and other equipment without paying sales taxes.
According to the Joint Legislative Audit and Review Commission, the program provided about $928 million in tax savings in fiscal year 2023, with roughly 90% of the industry using it. The exemption is scheduled to expire in 2035.
A 2023 report from the Commission found that local governments collect substantial revenue from data centers through business property and real estate taxes. In some localities, the Commission said data centers make up as much as 31% of local tax revenue.
The Virginia Economic Development Partnership says companies must sign an agreement with the state and meet investment and job requirements to qualify for the exemption. According to the agency’s website, data centers must invest at least $150 million and create 50 jobs that pay 150% of the local average wage. Companies that fall short must repay the value of the tax break.