Virgina will hold its primary elections on Tuesday with the question of tax exemptions for data centers settled while the question of adding more is creating political waves.
"Before approving another project, the commonwealth must stop and take a hard look at where this is leading," said Republican state Sen. Glen Sturtevant.
"That is why I have called on Gov. Abigail Spanberger to immediately issue an Executive Order establishing a moratorium on data center approvals throughout Virginia."
The quotes come from a letter and an editorial the Senator released on Monday.
Sturtevant's request come on the heels of a data center electrical fault in Ashburn in late July.
The malfunction caused several data centers to temporarily disconnect from the grid, a move that flickered lights all the way to Chicago.
Municipalities across the country are trying to thread a public finance needle through new tax revenues a center could provide, environmental concerns, and growing public backlash.
Loudoun County Virginia is a hotbed of data center activity due to a large amount of unused fiber-optic cable and the 2010 Data Center Sales and Use Tax exemption that was recently amended.
"Governor Spanberger points to Virginia's new electricity consumption tax on data centers as proof the commonwealth is addressing the problem," said Sturtevant.
"But while that tax may generate state revenue, it does not produce a single megawatt of electricity or a single gallon of water."
Attorneys representing owners and developers of data centers are issuing alerts about the implications of Virginia preserving the exemption while also imposing a fee on electricity.
"The compromise preserves the existing sales tax exemption but imposes a first-of-its-kind energy consumption tax of $.011 per kilowatt-hour on data center electricity usage, expected to generate up to $600 million annually," writes Nicole E. Bemberis, an associate and Joseph L. Stiles, a counsel with Whiteford.
"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."
Large data center owners known as "hyperscalers," are typically self-funded but frequently rely on local tax abatements when scouting for new locations.
The arrangement can cause
Colocation models are facilities where multiple companies rent space at a center which could lead to questions about who pays for the energy consumption tax.
According to the legal minds at Hunton, "the Electricity Consumption Tax applies broadly to any person who owns, operates, or occupies a data center in Virginia, even if the data center operator is not claiming the DCSUT Exemption."
"A data center operator is subject to the ECT regardless of when the data center was opened or a lease to occupy the data center was executed."
Rep. Don Beyer is trying to retain his Democratically solid seat in the 8th Congressional District which covers Northern Va., by taking on candidates proposing data center moratoriums, stricter regulations, and eliminating tax breaks.
Candidates running for the 7th District Congressional seat which includes rural counties north of Richmond are being pressed to clarify their positions on data center growth.
In early July, Prince William County which is southwest from Washington D.C. killed a plan to build a 200-acre data center via a unanimous Board of Supervisors vote.
