Gov. JB Pritzker will propose ending tax incentives for data centers in Illinois

Illinois Gov. JB Pritzker is expected on Wednesday to request a two-year moratorium on tax incentives given to develop data centers amid growing scrutiny because of their rapid expansion and impact on communities.

Pritzker plans to advocate for policy changes at his State of the Union address and budget in Springfield under a proposal first shared with NBC News.

At the center of the plan is a two-year moratorium, effective July 1, of Illinois’ data center tax credit program. Pritzker will direct key federal agencies to study the impact of existing data centers on the nation’s power grid and consumers and analyze the financial impact the centers have had on the economy. Specifically, the governor’s office said it is trying to make sure the facilities are financially sustainable in the long run, protect consumers from rising energy costs and ensure efficient allocation of resources.

The Democratic-led General Assembly in Illinois must approve Pritzker’s proposal.

Data centers are large buildings that run computer servers that power the growing demands of artificial intelligence. Illinois will be slowing its expansion as a public backlash grows across the country, with residents from Oregon to Virginia to Indiana asking local officials to hold back data center upgrades amid rising electricity and water costs.

While many states are rushing to create incentives for companies to build data centers, some governors — including potential 2028 candidates — have also moved toward more regulation. Pennsylvania Gov. Josh Shapiro, a Democrat, recently announced a set of criteria for data center developers to qualify for state subsidies, and Florida Gov. Ron DeSantis, a Republican, has placed restrictions on data center growth.

In Pritzker’s proposal, tax incentives would not be available for new data centers for two years, starting in July. In 2024, Georgia lawmakers sent Gov. Brian Kemp, Republican, a bill that would have ended existing tax credits, but Kemp opposed it.

Data center development once promised an improvement in local tax bases and the promise of jobs. But as they have expanded, residents have shared concerns about disruptions to their communities related to their benefits. They also expressed fear of the unpredictability of advances in artificial intelligence that could leave large buildings in ruins. Recent wildfires in neighboring Indiana have prompted local officials to reject a proposed data center in St. Louis. Joseph County.

“As a governor who has long prioritized attracting business to the state, Gov. Pritzker’s decision to temporarily suspend tax credits intended to attract data centers to locate in Illinois is an important statement—one that leaders should pay attention to,” said Kady McFadden, an Illinois political strategist who specializes in climate policy, in an email. “It is clear that the governor recognizes that these centers are becoming increasingly unpopular politically and should not lead to higher utility bills for families. This is a wise decision on the governor’s part as Illinois begins a legislative discussion about the future of data centers in the state.”

Pritzker’s office stressed that Illinois continues to welcome business growth but is trying to balance the growth with its impact on consumers. Illinois produces more electricity than it uses, according to the governor’s office, exporting 20 percent of the electricity it produces.

Pritzker is expected on Wednesday to blame the Trump administration for rising energy costs, saying they are being driven by tax credit cuts and loans for low-cost, clean energy utilities.

Pritzker spoke this month about his doubts about future data center development.

“I don’t want to add data centers that don’t pay their fair share and make sure we don’t affect housing prices in any way by having data centers in the state to the extent that we do,” he said. “If they threaten to raise rates, we have to slow them down and make sure they understand what their obligations are. And we’ll look at that in the Legislature this spring.”