Will The Sun Set On Data Center Alley?

Loudoun Economic Development’s Executive Director Buddy Rizer told incoming members of the Board of Supervisors on Monday night that Virginia’s law exempting large data centers from paying sales tax on their equipment provides a major incentive for the industry’s growth in the commonwealth.

The large computer server complexes represent Loudoun’s fast-growing commercial sector.

In addition to having a key Internet exchange point located in Ashburn, the success of “Data Center Alley” has been bolstered by a change in the state tax code first adopted in 2009. Exempting the centers’ pricey equipment from sales and use taxes is not only an important factor when a company decides to locate in Virginia, but the benefits also come into play every time the centers refresh their servers—usually on a three-year cycle.

A concern Rizer highlighted during Monday’s orientation session for the supervisors who will take their seats next month is that the state law includes a sunset provision that hits June 30, 2020.

As companies are deciding whether to establish a data center in Loudoun or to keep their operations here, uncertainty about that tax break will increasingly come into play, he said, noting that other areas of the country, including North Carolina and Nevada, are becoming more aggressive with their data center incentives.

“They can refresh here or they can refresh somewhere else,” he said of the companies he is working to retain while also recruiting new users.

Rizer said he hopes the sunset deadline will be extended by the General Assembly or removed altogether.

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