Illinois Governor Orders Pause on Data Center Tax Credits

Illinois Governor JB Pritzker has issued an executive order halting state tax incentives for data centers across Illinois. The move by the Democratic governor, who is seeking a third term, stems from the state legislature's inaction on his proposal to increase electricity rates for data centers to prevent their high energy consumption from impacting local residents' utility bills. Pritzker had initially requested this legislative action in February.

This gubernatorial order also reflects a broader trend of increasing community resistance to data center development. Industry researcher Data Center Watch reports that approximately $64 billion worth of projects nationwide have faced delays or cancellations due to public pushback. An example cited in the article is the Naperville City Council's decision in January to reject a proposed data center in the Chicago suburb, following residents' concerns about potential rises in water and energy costs.

The decision places Governor Pritzker at odds with organized labor, a traditional Democratic constituency that advocates for the continuation of tax breaks to support union jobs in data center construction. Climate Jobs Illinois, a coalition of 15 unions, released a statement urging Pritzker to reverse his order, arguing it would not lower utility bills or protect the grid but instead divert investment and union jobs to neighboring states like Indiana, Kentucky, and Ohio.

Pritzker's order will not retroactively affect agreements made before July 1, and companies can still pursue local tax relief. According to the Illinois Department of Commerce and Economic Opportunity, the state had provided nearly $1 billion in data center tax incentives between 2020 and 2024, attracting over $15 billion in investments. Ohio also recently paused its data center tax incentives for a similar review.