The US state of Virginia forfeited $1.6 billion in tax revenue through datacenter exemptions in fiscal 2025 – up 118 percent on the prior year – as the AI-driven construction boom accelerates.

Good Jobs First, a nonprofit promoting corporate and government accountability, warns these incentives have become essentially automatic.

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Virginia's qualification threshold requires just $150 million in capital investment and 50 new jobs, which is modest compared to the billions spent on today's hyperscale facilities. The exemptions cover retail sales and use taxes on computer equipment, software, and hardware purchases.

The disclosure is detailed in Virginia's Annual Comprehensive Financial Report [PDF], which covers the fiscal year ended June 30, 2025.

Good Jobs First claims the tax breaks are getting out of hand as the criteria to become a qualifying recipient are set at a low bar.

Greg LeRoy, executive director at the nonprofit, said: "Like 35 other states, Virginia is losing control of its spending by enacting virtually automatic sales and use tax exemptions, and sometimes other subsidies, for datacenter building materials and equipment."

Recipients may qualify for local property tax reductions on top, he added.

Virginia has the highest datacenter count globally – more than 600 according to some estimates – equating to more than 10 percent of estimated global hyperscale capacity.

In a statement to The Register, Virginia state deputy chief of staff Ali Ahmad, defended the tax breaks. He said:

"According to analysis published by Virginia's nonpartisan Joint Legislative Audit and Review Commission, data centers support 74,000 jobs, bring in $9.1 billion in Virginia GDP, and generate billions of dollars in local revenue that fund education, public safety, and critical local services. Datacenters offer the Commonwealth of Virginia a significant return on investment not covered in the intentionally narrow and inaccurate view this organization pushes."

Good Jobs First highlighted last year that more than half of US states offer economic development subsidies for datacenters exempting them from sales and use taxes.

LeRoy argues these breaks should end: "Given that every state that has studied its return on investment for datacenter subsidies has found a sharply negative result, we recommend that states now eliminate all datacenter tax exemptions.

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"Trillion-dollar internet giants don't need the tax breaks, and taxpayers cannot afford them with massive federal budget cuts coming."

Meanwhile, grassroots opposition to the datacenter construction frenzy is mounting. The Washington Post reported this week on public campaigns in Arizona, Indiana, and Maryland challenging new facilities over water and electricity consumption and their visual impact on rural landscapes.

In December, Democrat senators were questioned datacenter companies about rising energy bills driven by grid infrastructure costs often passed to consumers, while Senator Bernie Sanders called for a nationwide construction moratorium. ®