Senators debate data center tax exemption at Chesterfield forum
TL;DR: Virginia state senators held a listening tour stop in Chesterfield County on June 16 to build support for eliminating a tax exemption for data centers, a move that could recover an estimated $2 billion annually in state revenue.
Quick facts
- Who: State Senators Louise Lucas and Mamie Locke; Chesterfield County residents; data center industry advocates and construction workers
- What: Public forum debating proposed elimination of state sales and use tax exemption for data center companies
- When: Tuesday, June 16, 2026
- Where: Manchester Middle School, Chesterfield County
The story
Virginia state senators held a listening forum Tuesday night at Manchester Middle School to debate the future of a lucrative tax exemption that has shaped Chesterfield County's economic development trajectory. State Sens. Louise Lucas and Mamie Locke are leading a push to eliminate the sales and use tax exemption for data center companies, arguing the tax break has ballooned in cost far beyond what lawmakers anticipated when the exemption was created in 2010. Critics estimate the exemption now costs the state roughly $2 billion annually in foregone revenue.
The exemption allows data center operators meeting certain infrastructure investment and job creation thresholds to purchase and lease computer equipment and software without paying retail sales and use tax. It is currently scheduled to expire in 2035, but the Senate has proposed accelerating that sunset to January 1, 2027. Dozens of Chesterfield residents turned out to voice concerns about how the policy change could affect the region, where data centers have become a significant economic driver. In recent years, the county has attracted major facilities, including Google's data center, and approved incentive agreements for additional projects that are expected to generate millions in annual local tax revenue.
Proponents of the exemption, including business leaders and construction workers, warned that eliminating the tax break mid-contract could deter future investment and harm the industry in Virginia, which hosts approximately 35 percent of the world's data centers. They argue the industry generates billions in economic activity and creates jobs. Lucas countered by framing the exemption's elimination as an investment in teachers, firefighters, safe roads, hospitals, health insurance, and housing affordability. The Senate has proposed using recovered revenue to fund tax rebates for residents.
The debate over the tax exemption is holding up Virginia's state budget negotiations, with a deadline of June 30 to reach final agreement. The House budget would keep the exemption in place but tie it to compliance with environmental standards, while the Senate seeks to eliminate it outright. This listening tour is part of Lucas's effort to build public support for the Senate position ahead of final budget negotiations.
Key players
- Louise Lucas: Virginia State Senator leading effort to eliminate data center tax exemption
- Mamie Locke: Virginia State Senator advocating for removal of data center tax exemption
- Mike Jones: Virginia State Senator co-hosting the listening tour
Key dates
- 2026-06-30: Virginia state budget deadline for final agreement on tax exemption
The case for
Eliminating the tax exemption would recover substantial revenue for the state budget, with critics estimating the exemption costs approximately $2 billion annually in foregone tax revenue. Those funds could be redirected to support education, public safety, infrastructure, healthcare, and housing affordability. The exemption was enacted in 2010 when the costs were far lower, and the actual fiscal impact has grown beyond original projections. Virginia still hosts about 35 percent of the world's data centers, suggesting the industry is robust enough to operate without the tax break or could transition gradually if the sunset date is extended rather than accelerated.
The case against
Data center companies made decisions to invest in Virginia based on the tax exemption and other incentives, and eliminating the break mid-contract could be seen as an abrupt shift in the rules of the game. The industry generates significant economic activity, creates jobs in construction and operations, and brings substantial tax revenue through other mechanisms (property taxes, business equipment taxes, and local incentives like Chesterfield's reduced personal property tax rate). Eliminating the exemption could cause companies to relocate to other states with more favorable terms, resulting in lost jobs and reduced future investment in Virginia and Chesterfield specifically.
Why it matters: The outcome will directly shape how much tax revenue Chesterfield County and Virginia can collect from data centers in coming years, affecting funding for schools, emergency services, roads, and other public services. For Chesterfield specifically, where data centers have become a major economic development focus, the decision could influence the county's ability to attract or retain major facilities like Google's data center and future projects, with cascading effects on local employment and tax revenues.
Places
Development timeline
- 2010Virginia enacts data center sales and use tax exemption: General Assembly creates the exemption to attract data center investment, originally scheduled to expire in 2035 [[source]](https://www.dlapiper.com/en-us/insights/publications/2026/03/virginia-general-assembly-proposes-to-eliminate-sales-and-use-tax-exemption-for-data-centers)
- 2019Chesterfield County establishes data center tax rate: County sets a 24-cent personal property tax rate for data centers to attract investment, subsequently becoming the lowest such rate in Virginia [[source]](https://richmondbizsense.com/2025/06/27/chesterfield-supervisors-approve-incentive-agreements-for-data-center-projects/)
- 2026-02-22Virginia Senate proposes accelerating tax exemption sunset: Senate budget proposal seeks to eliminate the sales and use tax exemption effective January 1, 2027, rather than the scheduled 2035 expiration [[source]](https://www.vpm.org/generalassembly/2026-02-22/virginia-budget-fy27-fy28-spanberger-lucas-torian-mcdougle-data-center-tax)
- 2026-06-16Listening forum held in Chesterfield on data center tax exemption: State Senators Louise Lucas and Mamie Locke host public debate at Manchester Middle School, drawing dozens of Chesterfield residents to voice concerns about tax policy impact on regional economic development [[source]](https://www.wtvr.com/news/local-news/chesterfield-county/data-center-listening-june-16-2026)
Related links
- Virginia senators bring data center tax debate to Chesterfield
- Chesterfield County Government
- Virginia General Assembly Budget Information
Read the original at WTVR CBS 6 Local →
Sources
- Virginia senators bring data center tax debate to Chesterfield
- Virginia General Assembly proposes to eliminate sales and use tax exemption for data centers
- Data center tax break takes center stage in Virginia budget plans
- Chesterfield supervisors approve incentive agreements for data center projects
- Data center 'listening tour' comes to Chesterfield on June 16