Client Alert: UPDATE: Virginia Enacts Energy Consumption Tax on Data Centers and Signs Broader Energy Affordability Package
Executive Summary
This update supplements our April 29, 2026, client alert on Virginia’s data center tax reform. On June 22, 2026, the Virginia General Assembly passed budget legislation (HB 30) that resolved the sales tax exemption dispute that had deadlocked the two chambers since March. The compromise preserves the existing sales tax exemption but imposes a first-of-its-kind energy consumption tax of $0.011 per kilowatt-hour on data center electricity usage, expected to generate up to $600 million annually. Governor Spanberger signed the budget into law on June 30, 2026, ahead of the June 30 constitutional deadline, and the new tax took effect July 1, 2026.
While the retention of the sales tax exemption provides near-term certainty for developers who relied on it, the new energy consumption tax introduces a material operating cost that must be incorporated into financial models. Critically, the tax expires at the end of the two-year budget cycle, and the legislation creates a joint legislative subcommittee to study the broader data center tax issue, signaling that this compromise is a waystation, not a final resolution. In the days following the budget signing, Governor Spanberger also signed a broader package of energy affordability legislation, including new restrictions on data center backup generator emissions, new tools for localities to assess data center impacts, ratepayer protections and legislation to rejoin the Regional Greenhouse Gas Initiative (RGGI).
This update supplements our April 29, 2026, client alert on Virginia’s data center tax reform. On June 22, 2026, the Virginia General Assembly passed budget legislation (HB 30) that resolved the sales tax exemption dispute that had deadlocked the two chambers since March. The compromise preserves the existing sales tax exemption but imposes a first-of-its-kind energy consumption tax of $0.011 per kilowatt-hour on data center electricity usage, expected to generate up to $600 million annually. Governor Spanberger signed the budget into law on June 30, 2026, ahead of the June 30 constitutional deadline, and the new tax took effect July 1, 2026.
While the retention of the sales tax exemption provides near-term certainty for developers who relied on it, the new energy consumption tax introduces a material operating cost that must be incorporated into financial models. Critically, the tax expires at the end of the two-year budget cycle, and the legislation creates a joint legislative subcommittee to study the broader data center tax issue, signaling that this compromise is a waystation, not a final resolution. In the days following the budget signing, Governor Spanberger also signed a broader package of energy affordability legislation, including new restrictions on data center backup generator emissions, new tools for localities to assess data center impacts, ratepayer protections and legislation to rejoin the Regional Greenhouse Gas Initiative (RGGI).