Delegate Sullivan’s data-center tax bill ties exemptions to clean-energy, sparks debate and public testimony

Delegate Sullivan told the Senate subcommittee that HB 897 would turn a generous tax exemption into an incentive for “the best of the best,” requiring data centers seeking the exemption to phase down diesel backup generators, adopt increasingly clean energy, pursue greater energy efficiency and avoid colocated fossil-fuel generation except for emergency backup.

Sullivan said, “If you want this very generous tax exemption, you have to make good on your commitments,” framing the bill as a way to align incentives with public benefits and to push large companies to invest in cleaner on-site power and energy-efficiency measures.

Why it matters: the bill would make eligibility for a substantial sales-and-use tax exemption contingent on operational and sourcing commitments that advocates say are needed given the industry’s rapid growth and local impacts. Supporters argued the change would protect neighborhoods from pollution and require companies to make verifiable improvements rather than simply claiming benefits.

Several conservation and legal-advocacy groups testified in favor. Blair Sandler of the Virginia League of Conservation Voters praised the negotiated language and urged the committee to use the exemption to reward companies that “drive innovation” and reduce harms to nearby communities. Nate Benferrato of the Southern Environmental Law Center said the proposal would “reign this program in” and ensure tax breaks go to companies meeting higher standards. Peter Anderson of Appalachian Voices called for a high bar so that companies unable to meet it would pay taxes like other businesses.

Industry testimony raised feasibility and competitiveness concerns. Nicole Riley of the Data Center Coalition said the sector has invested heavily in Virginia—citing recent state and local tax and investment figures—and warned that the bill’s renewable-energy standards exceed what utilities are currently required to provide and could force data centers to compete with utilities for scarce clean-energy resources. Riley said the industry needs time to plan, permit and interconnect large clean-energy projects and urged continued negotiation.

Committee action: after extended debate and public testimony, a motion was made to “pass the bill by indefinitely.” That motion carried, meaning the subcommittee did not move the bill forward this session. The committee record shows the measure was discussed at length but not advanced to a final favorable report.

Next steps: the committee’s action leaves the substantive issues—how to balance Virginia’s competitiveness with local environmental and public-health concerns—for further negotiation in the legislature and budget process. Supporters said they expect continued talks aimed at placing similar language in the final budget or a future conforming measure.