The two houses of Virginia’s legislature, the Senate and the House, have passed two competing budgets that call, respectively, for the removal and approval of an existing data center sales tax exemption.

The current exemption means that the industry does not need to pay an additional 5.3 percent on data center computer equipment and software.

The Senate budget proposes removing this exemption from January 1, 2027, and estimates that this will result in a revenue increase of $317.1 million for the financial year 2027. By contrast, the House budget keeps the exemption.

But House Bill 897, voted through by the House last week, would require data centers to prove their green credentials in order to continue qualifying for tax breaks. This proposal would also extend the exemption from its current 2035 expiration date to 2050.

The Senate and the House will need to agree on a unified budget before it can be sent off to the state’s governor, Abigail Spanberger, for approval, leaving the fate of the sales tax exemption uncertain.

Although these proposals differ, both legislative bodies agree that the world’s largest concentration of data centers should be subject to stricter regulation.

“When asked earlier today how strong my position is on eliminating the tax break for data centers; I asked if they would like to learn about the strength of the three types of steel we used at the shipyard,” said Virginia state senator Louise Lucas on X.

More than 60 data center-related bills are set to be considered during Virginia’s legislative session, which started on January 14 and will end by March 14.