Virginia lawmakers passed a $250B budget Monday, a bill that comes after weeks of acrimony between Democrats in the commonwealth’s Senate and House of Delegates over how to tax and regulate data centers. The debate holds significant implications for the future of data center development in a state that has the world’s densest concentration of these facilities.

The final budget includes neither the repeal of Virginia’s data center sales tax exemption passed by the Senate nor the new environmental standards for data centers passed by the House of Delegates. However, the compromise bill creates a new tax on data center energy consumption that would generate as much as $600M annually.

Data centers will now be charged just over 1 cent per kilowatt-hour used per month. If the state collects more than $600M through the tax in a given year, the surplus will be returned to data center operators by the end of the year. The new levy applies regardless of whether a data center acquires power from a utility, gets it behind the meter from a power plant or produces it on-site.

Lawmakers said the legislation is a temporary compromise that leaves few completely happy but is necessary to prevent a state government shutdown. The bill now goes to the desk of Gov. Abigail Spanberger, who before July 1 must sign, veto or recommend changes to the bill.

While she hasn’t definitively indicated which action she will take, the first-term Democrat said in a statement that she views the final budget favorably.

“This is a compromise proposal — one my administration helped craft — and it builds a strong foundation for further discussions about the future of this industry in Virginia on issues like environmental and community impact,” Spanberger said.

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