TL;DR
Virginia reported $1.6 billion in forgone tax revenue from datacenter exemptions for fiscal 2025, a 118% rise from the prior year. Good Jobs First and other critics say the eligibility rules are too lenient and that the giveaways have effectively become automatic.
What happened
Virginia's Annual Comprehensive Financial Report for the year ending June 30, 2025, shows the state exempted $1.6 billion in tax revenue tied to datacenter-related sales and use taxes. That total represents a 118% increase over the previous fiscal year. The state's qualification standard requires a minimum capital investment of $150 million and creation of 50 new jobs to trigger the exemption, thresholds that watchdog group Good Jobs First describes as modest compared with today's hyperscale facilities. The exemptions apply to purchases of computer equipment, software and related hardware. Good Jobs First warned the incentives are becoming effectively automatic and noted recipients can also pursue local property tax reductions. The disclosure arrives amid broader public pushback in several states over datacenter growth, including concerns about energy and water use and the visual footprint of large facilities. The Register requested comment from Virginia's government.
Why it matters
- The $1.6 billion in tax breaks represents a sizable and growing loss of state revenue in a single fiscal year.
- Low eligibility thresholds can make subsidies broadly available even for very large corporate projects, reducing selectivity.
- Virginia's large concentration of datacenters means state policy decisions have outsized effects on national hyperscale capacity.
- Public resistance and questions about resource use (energy, water) suggest reputational and infrastructure trade-offs for host communities.
- Watchdog groups argue the fiscal cost is unsustainable amid broader federal budget pressures.
Key facts
- $1.6 billion in tax revenue was forgone in fiscal 2025 due to datacenter exemptions.
- This figure is up 118% compared with the prior fiscal year.
- The report covering the disclosure is Virginia's Annual Comprehensive Financial Report for the year ended June 30, 2025.
- Virginia's eligibility threshold for the exemption is $150 million in capital investment and 50 new jobs.
- Exemptions apply to retail sales and use taxes on computer equipment, software and hardware purchases.
- Good Jobs First, a nonprofit focused on corporate and government accountability, criticized the incentives as effectively automatic.
- Recipients may also qualify for reductions in local property taxes, according to the reporting.
- Virginia is reported to have more than 600 datacenters, representing over 10% of estimated global hyperscale capacity, per the article.
- Good Jobs First said more than half of US states offer sales and use tax subsidies for datacenters, a trend noted in earlier reporting.
- Lawmakers and activists have raised concerns about datacenter impacts on energy bills, and Senator Bernie Sanders called for a nationwide construction moratorium (reported in December).
What to watch next
- Responses or policy statements from the Virginia government after being asked to comment (the state was asked for comment in the report).
- Grassroots campaigns and local opposition in states such as Arizona, Indiana and Maryland that are challenging new datacenter projects — this public pushback is ongoing.
- Whether Virginia or other states will change eligibility requirements or end datacenter tax exemptions (not confirmed in the source).
- Any federal action or broader legislative moves on datacenter construction or subsidies following recent congressional questioning and calls for moratoria (not confirmed in the source).
Quick glossary
- Datacenter: A facility used to house computer systems and associated components such as storage systems, networking equipment and infrastructure for powering and cooling servers.
- Sales and use tax exemption: A policy that removes the obligation to pay state sales taxes on certain purchases, often applied to specific industries or types of equipment.
- Capital investment: Funds spent to acquire, upgrade or build physical assets such as buildings, equipment or infrastructure intended for long-term use.
- Hyperscale: A level of computing architecture and facility scale designed to efficiently support very large applications and workloads, typically operated by large cloud and internet providers.
Reader FAQ
How much tax revenue did Virginia forfeit for datacenter exemptions in 2025?
$1.6 billion in fiscal 2025, per Virginia's financial report.
What triggers the exemption in Virginia?
The state’s reported threshold is $150 million in capital investment and 50 new jobs to qualify for the sales and use tax exemptions.
Who criticized the exemptions?
Good Jobs First and its executive director Greg LeRoy were cited in the reporting as critical of the practice.
Which companies received the tax breaks?
Not confirmed in the source.
Will Virginia change the tax exemption policy?
Not confirmed in the source.
ON-PREM Virginia's datacenter tax breaks cost state $1.6B in 2025 Trillion-dollar internet giants don't need freebies, watchdog warns, as giveaways double in a year Dan Robinson Wed 7 Jan 2026 // 13:59 UTC The…
Sources
- Virginia's datacenter tax breaks cost state $1.6B in 2025
- Fiscal year
- U.S. Customs and Border Protection Budget Overview
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