Virginia has a data center boon. Officials debate whether it's time to scrap its tax breaks

Virginia has a data center boon. Officials debate whether it's time to scrap its tax breaks Virginia senators are pushing to curtail a 5.3% tax break for data centers By OLIVIA DIAZ Associated Press and MARC LEVY Associated Press March 11, 2026, 8:12 AM RICHMOND, Va. -- Nearly two decades ago, Virginia gave tech companies a tax break on equipment and software, and they began to build. The state became a data center hub, and they kept building. Residents bemoaned the noise while they built some more. Artificial intelligence boomed, and the power grid strained — still, more building. Now, amid a growing national pushback on data centers, Virginia senators have voted to end a projected $1.6 billion annual tax break, requiring the industry to resume paying a minimum 5.3% sales tax. The proposal has left some opponents warning that it bring construction of data centers in Virginia to a screeching halt. “We have now left the ‘NIMBY’ phase: Not In My Backyard,” Republican state Sen. Mark Obenshain said last month. “And we've entered the ‘banana’ phase: Build Absolutely Nothing Anywhere Near Anything.” Over the past 18 years, Virginia became the world's largest data hub. The debate taking place there comes as dozens of communities nationwide are fighting data centers in local zoning meetings, politicians are growing anxious about AI's effect on household electricity bills and lawmakers are considering reducing tax breaks — or scrapping them altogether. The state tax department says the industry has invested more than $80 billion in Virginia and created thousands of jobs over the past two years. Obenshain is not the only one concerned about taxing it. The Data Center Coalition, which represents tech giants, said the tax would “effectively halt investment” from the industry. Just this month, Amazon Data Services bought land from George Washington University in northern Virginia for a data center, officials said. It's far from guaranteed that the state Senate's proposal will p...