Four months. Three failed sessions. One "data center diva" insult.
And on Friday, June 12, Governor Abigail Spanberger ended it.
"Today, the House of Delegates put forward a substantive, specific budget proposal to deliver on so many priorities Virginians share," Spanberger said Friday. "I appreciate Speaker Don Scott, Appropriations Chairman Luke Torian, and the members of the House who came to the table in good faith to make it happen. It is a proposal I am proud to support."
The governor added: "Looking forward, I am confident that the General Assembly will send a budget to my desk that I can review and sign — on time. Because there is no other option." Taxfyle
The data center sales tax exemption — worth $1.6 billion annually and the single issue that has paralyzed Virginia's budget since February — survives. For now.
But the Senate hasn't agreed yet. And there are 15 days left.
The new House budget proposal — unveiled Friday and immediately backed by the governor — takes a fundamentally different approach to the data center fight than anything proposed before.
The revised House proposal removes the environmental requirements that had been included in earlier House budgets — provisions that would have required energy efficiency measures and restrictions related to carbon-emitting power generation for data centers seeking the tax exemption.
Instead of conditions, the House is proposing accountability through study.
The new House budget proposes creating a commission of stakeholders and lawmakers to study the impacts and benefits of the data center industry in Virginia — required to report to the General Assembly by November 1, 2026.
Speaker Don Scott described the commission's scope directly: "Full investigation into energy costs, financial impacts, air quality, water conservation, renewable energy, and community impacts — with a report due November 1. So the 2027 General Assembly can pass real, lasting reform. Or if the governor would like, we can come back right after that report is out in November for a special session."
In plain terms: the exemption stays. A commission studies everything. The 2027 legislature — armed with real data — decides what comes next.
The governor's endorsement of the House plan puts enormous pressure on the Senate. But Senate Finance Chair Louise Lucas isn't there yet.
Senate Majority Leader Scott Surovell said the House proposal "is a good first step, but we have a ways to go and we look forward to continuing the dialogue with them to ensure we have a budget to put on the governor's desk by June 22."
Lucas was more pointed: "The House and Governor insist on studying the impact of data centers when the issue has already been studied by the legislature. Virginians are dealing with the negative consequences of data centers today. They expect action now rather than waiting another year and want us to protect their interests." Savant Labs
The Senate's core position hasn't changed: a study commission is a delay tactic, not a solution. The Senate wants real, immediate action — whether that means ending the exemption, capping it, or structurally changing how it works. A commission that reports by November and maybe prompts a special session is not what they came to Richmond to accomplish.
But the Senate is now isolated. The House has a proposal. The governor is backing it. The Senate is the last holdout — with 15 days left.
Understanding the proposed commission matters because it's the vehicle through which Virginia's data center tax question will ultimately be resolved — whether through the commission's recommendations or through whatever the 2027 legislature does in response.
Speaker Scott described the commission's mandate: "It will be a full investigation into energy costs, financial impacts, air quality, water conservation, renewable energy, and community impacts — so the 2027 General Assembly can pass real, national reform." Quaderno
The commission would include stakeholders and lawmakers — meaning data center operators, utilities, environmental groups, local governments, and legislators would all have seats at the table. Its November 1 report would give the 2027 session a factual foundation for whatever changes come next.
The proposal also includes a $225 million reserve fund intended to help offset potential federal funding reductions — a nod to the fiscal uncertainty that has been a backdrop to the entire budget fight. SmartAsset
The budget itself is substantial. It includes nearly $350 million in increased funding for higher education, nearly $140 million in new funding for subsidized childcare, over $76 million in new funding for affordable housing, and $1.8 billion in state support for public education for 2026-2028 — including 3% raises, special education, at-risk students, school meals, and school construction. Savant Labs
This isn't a skinny budget designed just to keep the lights on. It's a full, substantial spending plan — and the governor called it one she's "proud to support."
Here's exactly what has to happen in the next 15 days:
June 18 — House returns to Richmond.
The House will vote on its budget proposal. With the governor's backing and Speaker Scott's leadership, passage in the House is expected.
June 22 — Senate returns.
This is the moment of truth. Senate Democrats — led by Lucas — will either accept the House proposal, propose amendments, or hold firm on their position. Given the governor's endorsement of the House plan, the Senate faces enormous political pressure to accept something close to what the House is offering.
June 22-28 — Conference negotiations.
If the Senate proposes changes, a conference committee reconciles the differences. Both chambers then vote on the final agreed budget.
June 30 — Hard deadline.
A signed budget or Virginia's first-ever government shutdown. Spanberger has made clear she believes a deal will happen. "There is no other option," she said. Taxfyle
We've covered this story since February. But now that we can see the likely resolution, it's worth stepping back to understand what the four-month fight was actually about — because it matters for how Virginia handles this issue in 2027 and beyond.
The Senate's position was never really about the $1.6 billion in foregone revenue. It was about accountability. Virginia created an exemption in 2008 that was projected to cost $1.54 million per year. It now costs more than 100,000% of that projection. Nobody was held accountable for that explosion. Nobody was required to justify the ongoing cost. The industry just kept growing and the exemption kept costing more — automatically, without any legislative review.
The Senate wanted to break that cycle. The House and governor wanted to preserve the economic flywheel while building a framework for accountability going forward.
The commission is the compromise. It doesn't end the exemption. But it creates — for the first time — a formal mechanism for Virginia to understand exactly what it's getting and what it's giving up. The 2027 legislature will have real data to work with, not projections.
Speaker Scott framed it this way: "We're not in a position to demonize any industry that's been good partners with us, but we are in a position to make sure that we hold them accountable. The question is not how we got here. The question is how we fix it — but fix it responsibly, in a non-disruptive way." AccurateTax
If the House budget passes — which now appears likely — here's the practical compliance picture for data centers and tech businesses in Virginia:
The exemption continues unchanged through at least 2027. Data centers that qualify under the existing rules — $150 million investment, 50 jobs — continue to receive the sales and use tax exemption on computer equipment and software purchases. No system changes needed. No new tax obligations.
The commission creates 2027 uncertainty. The November 1 report will almost certainly recommend some form of change to the exemption — whether a cap, a phase-down, new conditions, or a tiered structure. Data center operators should be preparing now for what a modified exemption landscape looks like starting in 2027.
The "honor our commitments" argument won this round. The governor's position — that Virginia should not retroactively change the rules on companies that invested based on existing incentives — carried the day. But the commission's findings may determine whether that argument holds in 2027 for new investments.
For tech businesses buying data center services in Virginia: No immediate cost changes. The services you're purchasing through Virginia-based data centers continue at current prices — the cost increase that would have come from removing the exemption is not happening in this budget cycle.
Virginia's resolution — if it holds — establishes a model that other states wrestling with similar exemption fights are watching closely.
Georgia, which faces a $2.5 billion data center exemption cost in fiscal 2026. Texas, which is expanding its own data center footprint aggressively. Pennsylvania, which is weighing whether to end its own data center exemption to fill a $6.8 billion deficit.
None of those states want to be the first to eliminate an exemption that's attracted billions in investment — and all of them are feeling the same fiscal pressure Virginia has been navigating. The "commission to study, legislature to act" model gives states a politically viable path: acknowledge the problem, gather real data, and defer the hard decision to a future session with better information.
Whether that model produces better outcomes than acting immediately is something Virginia's 2027 session will determine. But as a way to break a four-month budget impasse with 15 days to spare, it appears to be working.
Operating a data center or tech business in Virginia and want to understand exactly what the commission's findings might mean for your tax exposure starting in 2027 — or how to prepare for a potential exemption modification before the 2027 session? Book a free consultation with our team at sales.tax. We'll help you model the compliance implications of every likely outcome so you're not caught off guard when the commission reports in November.