Gov. JB Pritzker to suspend tax breaks for data centers, urging more discussion
Illinois Governor JB Pritzker announced a halt on new state tax incentives for data centers, effective July 1, and called on lawmakers to pass new reforms during the fall veto session. This action addresses growing concerns about data centers' impact on energy affordability, water resources, and the strain on the state's power grid. The governor seeks a comprehensive framework to ensure responsible industry growth and protect communities.
Illinois Governor JB Pritzker has announced an immediate pause on all new state tax incentives for data centers, directing the Illinois Department of Commerce and Economic Opportunity to cease processing new agreements from July 1. This move fulfills a proposal made earlier this year and comes amidst increasing concerns regarding the data center industry's impact on energy affordability and water resources across the state. A state report indicates that 27 data centers benefited from over $983 million in these incentives between 2020 and 2024.
The governor's decision follows the failure of House Bill 5513, known as the POWER Act, to pass by the spring session deadline. The proposed legislation would have mandated data centers to use and pay for their own renewable energy, track water usage, and enter community benefits agreements with host municipalities. Lawmakers and environmental groups had advocated for the bill, with some legislators sending a letter to Pritzker calling for a tax credit pause after the bill stalled.
Data centers have significantly strained Illinois' energy infrastructure, contributing to increased demand and prices for consumers. ComEd, the utility serving northern Illinois, reported that data center demand has raised costs by $13 billion over the past two energy auctions on the PJM interconnection, with projections of an additional $37 billion increase over 25 years. ComEd currently has nearly 100 data center requests in its pipeline, potentially drawing more than 30,000 megawatts, exceeding its historic peak. Labor organizations, however, criticized the pause as "shortsighted," arguing it would divert investments and union jobs to neighboring states.
In addition to the incentive pause, Governor Pritzker proposed six principles for reform, urging lawmakers, consumer advocates, labor groups, and environmental stakeholders to collaborate on legislation. These principles include requiring data centers to pay for their energy and water demand, support new renewable energy generation, track and report water use, adhere to air quality standards, enter community agreements, and allow utilities to prioritize residential and business customers by interrupting data center service during periods of high demand. Consumer and environmental advocates have expressed support for the governor's framework.