The single most important bill every year is the budget. This year, the General Assembly adjourned without a budget in place. The issue is a fight between the House and the Senate over the tax status of data centers and what to do with the revenue if the status is changed. Governor Spanberger has called for a Special Session for April 23, 2026, for the budget. Only time will tell what the final decision is and whether the legislature will reach an agreement in time. Below are some of the major differences between the budgets, but the list is not exhaustive.
Data Center Sales & Use Tax Exemption
The primary issue at the heart of the current delay is the Data Center Sales & Use Tax Exemption. It is no secret that data centers have become a driving force in Virginia’s policy discussions. Zoning, water consumption, renewable energy goals, economic development, transmission infrastructure, and now the Commonwealth’s biennial budget are all impacted by one industry. This budget issue also demonstrates vast differences in a Governor’s introduced budgets and those passed by the General Assembly.
Former Governor Youngkin provided for a 15-year extension of the tax exemption if they met certain investment and job thresholds. The Senate version of the budget eliminates the tax exemption in 2027, 8 years earlier than originally conceived. Revenues from its cancellation are layered throughout the budget, including assisting with Washington Metropolitan Area Transit Authority (WMATA) shortfalls and supporting K-12. In this House budget, the tax exemption sunset remains untouched, but new clean energy standards are put in place.
Housing Funds
Both the House and Senate provide funding increases for the Housing Trust Fund and dedicated resources for new legislation, including HB820/SB490 (Helmer/Van Valkenburg), which directs the Department of Housing and Community Development, in collaboration with the Virginia Housing Development Authority, to create a two-year pilot program that would provide loan origination and servicing activities for mixed-income housing. In total, the House provided for just shy of $38 million for housing priorities, and the Senate allotted $50 million.
Medicaid
One of the major issues heading into Session was what to do regarding federal changes to Medicaid. In the House, they provided $79.1 million to keep health insurance premiums for those between 138% and 200% of the federal poverty level unaffected. The Senate provides $200 million for a state-level healthcare exchange for households with incomes below 400 percent of the federal poverty level, and this program is authorized to start in 2026 if “feasible and practical”.
Sales Tax- School Construction
For several years, there have been discussions of allowing all localities to assess a 1% sales tax, if approved by referendum, to fund school construction. Current law allows only qualifying localities to do so, and in defining a qualifying locality, it specifically names: Charlotte County, Gloucester County, Halifax County, Henry County, Mecklenburg County, Northampton County, Patrick County, Pittsylvania County, or the City of Danville. This Session, there was again legislation to expand this authority statewide, but both HB334 (Rasoul) and SB607 (Lucas) failed to pass. However, this legislative concept is included in the Senate budget.
Standard Deduction
The introduced budget and the House both provide for the standard deduction to be permanent at $8,750 for single filers and $17,500 for joint filers. The Senate increases levels to $9,200 for single and $18,400 for joint filers, but this only runs through 2030.
Tax Rebate
Only found in the Senate version of the budget is $499 million for a one-time rebate to taxpayers. These rebates would be $100 for single filers and $200 for joint filers.
State employee and teacher salaries
The Governor’s introduced budget and the House version both include a 2% pay increase for state employees and teachers. The Senate version ups this to 3%.
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