Virginia HB30 / $0.011/kWh / effective Jul 1 2026 / Spanberger to sign by Jun 30 / $600M cap / Illinois DCIP / DCEO application freeze effective Jul 1 2026 / Pritzker directive Jun 5 / existing agreements honored / 2 days notice for last-minute filings / PRICE vs SUBTRACT-INCENTIVE comparison / first head-to-head structural natural experiment

Plain-English background. Data centers are huge users of electricity, and US states have spent the last 10-15 years competing for data center investment by offering tax breaks. The two main breaks are (a) a sales-tax exemption on the hardware (servers, switches, cooling equipment, etc.) — every state with a major data center industry has some version of this — and (b) property-tax abatements at the county level for the buildings themselves. The state-tax part is bigger by far. Virginia's exemption alone is worth $1.4B-$2B/year to the industry. Illinois's program offered 20-year sales-tax exemptions plus 20% wage credits. For about 18 months, the political question in roughly 14 states has been: "who pays for the new power lines and generation built specifically to serve data centers — the residential ratepayers or the data centers themselves?" Two structurally distinct answers have emerged. **Answer 1 — PRICE the externality (Virginia).** Don't repeal the existing tax breaks; add a new line item on top. Virginia's $0.011/kWh consumption tax is the cleanest example. It's a per-unit-of-consumed-electricity charge that applies regardless of who supplies the power (utility, co-op, competitive retailer, behind-the-meter self-supply, all the same rate). $600M annualized revenue cap, with excess refunded pro-rata. Two-year sunset (Jul 1 2028). Spanberger has called this her own proposal and is expected to sign before the June 30 budget deadline. **Answer 2 — SUBTRACT the incentive (Illinois).** Don't add a new tax; just stop giving the existing one to new entrants. Pritzker's June 5 directive doesn't repeal Illinois's Data Center Investment Program (DCIP) — existing agreements are honored — but it instructs the Department of Commerce and Economic Opportunity (DCEO) to stop processing NEW applications starting July 1, 2026. New data centers built in Illinois after July 1 pay the full sales tax. The directive came after Pritzker's broader regulatory framework (rate classes, mandatory interruptibility, water permitting, NDA bans with local governments, mandatory community-benefits agreements) failed to pass the Illinois General Assembly in the 2026 spring session, so Pritzker did what he could by executive directive and explicitly called on the legislature to pass the rest in the fall veto session. The two policies converge on the same operating-economics outcome — higher cost per kWh of data center capacity in that state — through completely different mechanisms. VA is a per-kWh consumption tax; IL is the removal of an upfront sales-tax exemption. The structural difference matters because the two mechanisms have very different secondary effects. - **Predictability**: VA's tax is a known $/kWh number. IL's freeze creates uncertainty (will the legislature reauthorize the program in the fall veto session, with what conditions?). - **Who bears it**: VA's tax follows the consumed electron, so behind-the-meter self-supply is not a workaround. IL's freeze hits the IT equipment purchase, so building a self-supplied facility doesn't avoid it either — but moving the IT-equipment purchasing entity across state lines could. - **Reversibility**: VA's tax sunsets in 2 years and requires legislative re-authorization. IL's freeze is an executive directive that the next governor or the current governor could lift overnight. - **Revenue vs cost-of-development**: VA collects $600M/yr until the cap binds. IL doesn't collect anything; it just stops giving up future revenue. What happens on July 1 specifically. Virginia: every meter in a Virginia data center begins accruing the $0.011/kWh charge at 12:01 AM. First quarterly return due September. Illinois: DCEO will not accept new applications for sales-tax-exemption certificates starting July 1. Any application submitted before that date that is already in process will be honored. Hyperscaler campuses currently negotiating site selections in Illinois have a 2-day window to file applications and lock in 20-year exemptions before the freeze. Why other states are watching. The fall 2026 legislative sessions in NY, MA, NJ, OH, GA, AZ, NC, IA, TN, IN, NV, FL, IL (veto session) will produce new data center bills. Each state's drafters now have a 6-month track record from VA and IL to copy. If VA's tax goes live cleanly and IL's freeze proves politically durable through the November election, both structures spread. If either one produces a backlash — hyperscaler announcements pulling out of VA, court challenges in IL, big primary losses for the legislators who backed them — the other approach wins by default. July 1 is the start of that comparison clock.

Primary source · Virginia Mercury — Virginia legislators advance $205B budget including new tax on data centers (Jun 22 2026) + Data Center Knowledge — Virginia Approves First-Ever Data Center Power Tax + Croke Fairchild Duarte & Beres — Governor Pritzker Directs DCEO to Pause Data Center Investment Program Agreements Effective July 1, 2026 + Gov. Pritzker Newsroom — Gov. Pritzker Pauses New Data Center Tax Incentives (Jun 5 2026) + Capitol News Illinois + Multistate — State Data Center Policy Shifts as Governors Impose New Restrictions (Jun 22 2026) ↗