Due to the recent surge in artificial intelligence (AI) use, large data centers are proliferating across the globe. Hyperscale facilities, which comprise at least 5,000 computer servers and 10,000 square feet with a power draw exceeding 100 megawatts, numbered 1,136 worldwide as of March 2025.
As their quantity, size, and visibility continue to grow, concerns about potential effects on nearby residents likewise increase. Economic impact, including possible tax fluctuations in surrounding areas, plays a prominent and proper role in emerging conversations. Residents have a right to the facts about tax policies affecting them.
Unfortunately, much of the readily available information about data centers is either confusing or misleading, and this confusion extends to tax details. Numerous sources conflate subsidies with tax exemptions and tax exemptions with revenue reductions, focus on predictions instead of knowable facts, and emphasize policies applied to data centers without clarifying that the policies apply to other businesses as well (with a few examples here, here, and here).
Loudoun County, Virginia, home to the largest and oldest data center in the world, provides both a policy example and a prime source of comparison-ready statistics. Other regions struggling to shape their approaches and avoid unnecessary worry can look to the county for ideas.
Local residents benefit from the county’s data center tax structure, with the facilities generating more than $26 in taxes for each dollar they receive in tax-funded services. The data centers’ taxes fund schools, emergency services, and infrastructure improvements. Data centers in the county pay $609 per square foot in property taxes, three times more than other businesses. They provided $875 million in local tax revenue in 2024, $35 million more than the general operations budget for the Loudoun County government.
From 2016 to 2025, the real property tax rate in Loudoun County decreased every year, going from 1.14% of assessed value to 0.81%. Real property tax revenue comprises 60% of the local government’s budget in most of Virginia, but just over 50% in Loudoun County. The personal property tax rate on vehicles also dropped from $4.15 per $100 of assessed value in tax year 2025 to $3.09 per $100 in 2026, and the $25 registration fee was eliminated.
Computer equipment in data centers is assessed at the same general personal property tax rate as other businesses. Although some specific data center computer equipment and software are exempt from sales tax, the operating company must meet investment and job creation requirements to qualify. (For example, the center must invest $150 million in new capital and create at least 50 new jobs paying at least 150% of the area’s average wage.) Moreover, these sales tax exemptions for business-related items and services are common and extend to a plethora of other industries.
Notably, the county organizes this data center information neatly on a dedicated page on its website, with common tax law questions and links to the answers making up a significant portion of the page. The page also features a prominent link to outcomes, along with contacts to obtain any information not explicitly stated on the site. In stark contrast to some other municipalities, Loudoun County empowers residents to quickly find answers to an exhaustive list of questions.
Conclusion
If lawmakers wish to promote progress, mitigate negative side effects, and foster a relationship of trust with their affected constituents, they must craft clear legislation, conduct ongoing research into its outcomes, and publish accessible results.
As City Journal’s Judge Glock, a Virginia resident, notes, “For residents and businesses alike, Loudoun offers a model that the rest of America would do well to study.”