Virginia granted data centers $124.5m in tax breaks last year – DCD (datacenterdynamics.com)
January 07, 2022 By Dan Swinhoe
Data center tax breaks almost double 2017 figure
Virginia offered $124.5 million in tax breaks to data centers in 2021.
The number was detailed in the Commonwealths 2021 Annual Comprehensive Financial Report. The total amount of tax breaks offered to data center companies has risen by tens of millions of dollars each year, almost doubling since 2017.
Virginia offers Retail Sales and Use Tax Data Center Exemptions for data center developments that meet certain investment and employment thresholds. The exemption rate varies by county but is generally pegged at around the 5-7 percent mark.
The amount of abated taxes for the fiscal year 2021 was $124.5 million. That’s $14 million higher than 2020’s $110.5 million. The figure has steadily risen in recent years; 2019 saw Virginia offer data center tax abatements totaling $92.2 million, $79.2 million in 2018, and $65.2 million in 2017.
What the Commonwealth loses in sales tax revenue, it makes up for on taxes on data center computer equipment. BizJournal notes that in Loudoun County alone, data center computer equipment was assessed at $10.1 billion in tax year 2021; at the current tax rate of $4.20 per $100 of assessed value on that equipment, that accounts for roughly $424 million in personal property taxes in the year that ended June 30. This was actually below the $11.2 billion figure the county had expected, however.
States across the US have added their own tax exemptions in efforts to lure data center developments, but northern Virginia remains the biggest market in the world. In March last year, the state of Virginia officially reduced the threshold for which data center companies will need to qualify for tax exemption in the state, with the aim of helping less affluent regions to the south.
The same month saw southern Virginia localities comprising the Lonesome Pine Regional Industrial Facilities Authority — Dickenson, Lee, Scott, and Wise counties, as well as the City of Norton — agree to each set a tax rate of 24 cents per $100 on data center equipment. In September 2021, Prince Edward County in Virginia also voted to set a new lower tax rate on data center equipment in order to make it more competitive with neighboring counties in the state.
Meanwhile in May Prince William County voted to increase its taxes on data center equipment, saying the industry needed to pay its ‘fair share.’ Taxes on such equipment is set to increase by around 15 cents per year from the current $1.35 per $100 of valuation to $2 by 2025.