Illinois Gov. Pritzker to Propose 2-Year Suspension of Data Center Tax Incentives
TL/DR –
Illinois Governor JB Pritzker plans to call for a two-year suspension of tax incentives for data center development, amid scrutiny over their rapid expansion and impact on communities. Under the proposal, he will instruct key Illinois agencies to study the effects of existing data centers on the state’s energy grid and consumers and the financial impact of the centers on the economy. Pritzker’s office stated that the intention is to ensure these centers are financially sustainable over time, protect consumers from rising energy costs, and ensure fair resource allocation.
Illinois Governor Proposes Suspension of Data Center Tax Incentives amid Scrutiny
Illinois Governor JB Pritzker is set to propose a two-year halt on tax incentives for data center development in his forthcoming State of the State and budget address, according to a policy shift first shared with NBC News. The proposal, aiming at assessing the infrastructure’s impact on the state’s economy and energy grid, requires the approval of Illinois’ Democratic-led General Assembly.
The proposed pause, effective from July 1, targets Illinois’ data center tax credit program. The governor plans to instruct state agencies to evaluate the impact of existing data centers on consumer energy costs and the state’s economy. The primary goal is to ensure the financial sustainability of these data centers, protect consumers from escalating energy costs, and ensure fair resource allocation.
Data centers, large structures housing computer servers for the ever-growing AI demands, have been facing backlash across the US, with communities from Oregon to Virginia and Indiana calling for data center development control due to increasing electricity costs and water usage.
Amid incentives for data center construction, governors including 2028 potential candidates have also started steering towards more oversight. Both Pennsylvania Governor Josh Shapiro and Florida Governor Ron DeSantis have recently introduced guidelines and restrictions around data center growth respectively.
In Pritzker’s proposal, new data centers wouldn’t access tax incentives for two years starting July. Similar proposals have been made in other states, like when Georgia lawmakers forwarded a bill to curb existing tax incentives to Governor Brian Kemp in 2024, which he vetoed.
Despite initially promising local property tax boosts and job creation, the surge in data center development has led to growing concerns about community disruption and fears about unpredictable AI advances that could render these enormous structures obsolete. Issues such as these led to the recent rejection of a proposed data center in neighboring Indiana’s St. Joseph County.
The pause in data center tax credits is a significant statement from a governor keen on business attraction, according to Kady McFadden, a political strategist in Illinois. The proposal balances business growth with consumer impact, taking into account that Illinois exports 20% of the electricity it produces. Governor Pritzker also plans to highlight the rising energy costs, attributing them to cut tax credits and loans for affordable, clean energy resources by the former Trump administration.
Speaking recently, Pritzker expressed reservations about future data center development. “I do not want to add data centers that are not paying their fair share… If they do threaten to raise rates, we’ve got to slow them down and make sure they understand their responsibilities… And we’re going to be looking at that in the legislature this spring,” he said.
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