Gov. JB Pritzker’s office will halt tax breaks that had been offered to incentivize the construction of data centers in Illinois, after state lawmakers failed to advance legislation reining in developments powering the artificial intelligence industry and driving up energy costs for residents nationwide.
The Democratic governor directed the state Department of Commerce and Economic Opportunity to put a pause on processing applications for the tax breaks as the new fiscal year begins July 1.
In his State of the State address earlier this year, Pritzker had called on the Illinois General Assembly to put a two-year pause on tax breaks for data center projects, which have become increasingly unpopular due to the vast amounts of electricity and water they suck up from neighboring communities, driving up energy bills.
State legislation aimed at addressing the issue stalled out in Springfield before lawmakers adjourned for the summer earlier this week.
Pritzker once again called on them to address the issue during their fall veto session, under a seven-point regulatory framework that includes a higher electricity rate class for centers to pay, an extended pause on tax breaks and environmental protections.
“Illinois has an opportunity to continue leading in technological innovation and economic growth, but we also have a responsibility to protect working families and local communities as the data center industry rapidly expands,” Pritzker said in a statement.
“I am directing my administration to pause the processing of data center agreements while we continue working with the General Assembly and stakeholders on a comprehensive framework that protects affordability, safeguards our natural resources, and ensures responsible growth across Illinois. I look forward to continuing these conversations and getting this done the right way for Illinois working families and communities,” the governor said.
Governments across the country have broadly shifted approaches along with public sentiment against data centers, once viewed as promising new economic engines for local development. About 70% of respondents to a March Gallup poll said they were opposed to data centers.
In a midterm election year, Pritzker — who is mulling a 2028 presidential run — has joined Democrats across the nation in highlighting affordability issues under President Donald Trump’s administration.
Businesses and community groups banded together as the Illinois Clean Jobs Coalition applauded Pritzker for offering “the solutions Illinoisans — and this moment — are demanding.
“Now is the time to begin negotiations on policies that will stop rising utility bills, protect our water, and end backroom development deals, and we look forward to working with the Governor, legislators, and stakeholders to get this done in the Fall veto session,” coalition leaders said in a statement.
But business leaders from the Illinois Manufacturers’ Association warned Pritzker was “risking growth, job creation and the next generation of technological breakthroughs.”
“Data centers are key to a modern economy, making cloud computing, artificial intelligence, analytics and advanced manufacturing possible,” IMA president Mark Denzler said in a statement. “While balanced regulations are important, this pause in tax incentives threatens ongoing investment in Illinois.”
Consumer advocates at the Illinois Public Interest Research Group supported the executive action, with tempered optimism.
“While the governor has proposed a strong policy framework, the devil is in the details,” Illinois PIRG director Abe Scarr said in a statement. “We look forward to working with our partners and other stakeholders to implement strong standards that protect the environment, protect consumers and keep Illinois on track to hit our climate and clean energy goals.”