The crackdown on new data center construction continues in the Midwest as Illinois Gov. JB Pritzker (D) joins Ohio in suspending new tax incentives for data centers starting July 1 while calling for a study of the impact of existing data centers on energy, the economy and local communities.
The pause in tax incentives comes after the Illinois State Legislature failed in its spring legislative session to advance the POWER Act, a Pritzker-backed bill that would have established new rules, including banning data centers from passing costs on to consumers and showing how they will power their operations with clean new energy.
Illinois still has opportunities to lead in technology innovation and economic growth, Pritzker says, but it also has a responsibility to protect working families and local communities as the data center industry rapidly expands.
“I am directing my administration to halt the processing of data center deals while we continue to work with the General Assembly and stakeholders on a comprehensive framework that protects affordability, safeguards our natural resources and ensures responsible growth across Illinois,” he said in a news release. “I look forward to continuing these conversations and doing it the right way.”
Pritzker said conversations about reforming data center development and placing guardrails on the industry should include lawmakers, consumer advocates, labor organizations, environmental advocates, utilities, local governments and industry leaders.
As part of the proposed restrictions, the governor’s office says data centers must pay their fair share of electricity, water and infrastructure costs through a dedicated rate class and cost allocation system; ensure grid reliability by requiring that data centers go temporarily black when they do not provide sufficient clean energy and that data centers generate or finance new clean energy resources to meet their own energy needs rather than shifting costs to ratepayers.
In addition, data centers would be required to obtain comprehensive water permits, disclose water use, and ensure that their operations do not deplete Illinois’ water resources or pollute the air.
Pritzker is also seeking a ban on non-disclosure agreements between data centers and local governments, requiring them to post public notice when applying for permits and requiring them to enter into community benefit agreements with the communities where they are located and regularly report their energy and water use.
State records show 28 applications submitted for tax incentives between 2019 and 2024, with all but one approved for the program, according to the Data Center Investment Report. Developers and operators with projects in the state include Digital Realty, NTT, Microsoft, Equinix, Iron Mountain, Stack, CoreSite, T5, QTS, Aligned, CyrusOne, Serverfarm and EdgeConneX.
To qualify for Illinois’ current data center tax breaks, facilities must invest at least $250 million over 60 months and create a minimum of 20 good-paying jobs, while meeting specified efficiency and sustainability standards. Eligible projects receive exemptions from various state and local taxes, with potential additional construction wage credits for projects in underserved areas.
By May 2025, Illinois has 201 data centers, with a total investment of nearly $15.8 billion, according to the state.
Jack Lavin, president and CEO of the Chicagoland Chamber of Commerce, has opposed any pause in data center tax incentives, which he previously issued a statement saying would “eliminate a proven economic development tool.”
More states and quotes by adding restrictions
As ENR previously reported, Ohio Gov. Mike DeWine (R) recently halted his state’s tax break for new data centers because costs had skyrocketed to more than $1.5 billion by 2025 for the program.
Meanwhile, efforts to halt or prevent data center construction are gaining ground across the country. In a closely watched action, the New York state legislature on June 4 approved a one-year moratorium on licensing data centers with a peak demand of 20 MW or more. The bill includes additional regulatory provisions, including labor standards and energy efficiency standards that establish a minimum requirement for the use of renewable energy; a community benefit expense and forces utilities to place large data centers in a separate class of service.
The moratorium, which was shortened to three years in its original form earlier this year in a legislative compromise, awaits the signature of New York Gov. Kathy Hochul (D). He told reporters in late May, before the bill passed, that a ban required “not necessarily a statewide approach, but it’s something I’m looking at intensely.”
In April, the Maine Legislature passed an 18-month moratorium on the development of data centers of 20 MW or larger, but it was vetoed on April 24 by Gov. Janet Mills (D), who had wanted a shutdown for a $550 million data center redevelopment project in Jay, Maine. However, he signed a separate law barring data center projects from accessing state business development tax incentives.
In addition to New York and Maine, 14 states have introduced legislation calling for some sort of ban on data center construction, according to the National Conference of State Legislatures. Of these, six have not passed.
In the absence of state legislation, city and counties have been passing their own bans, including Denver in May. And in Monterey Park, California, a voter-decided ban proposal appears to have passed through a ballot initiative, a first in the US.
Brian Turmail, vice president of partnerships and brand image for AGC of America, notes in an email that “policy varies from state to state as elected officials work to balance the need for economic development with a growing backlash to new data center projects based on a lot of misinformation. It remains to be seen how this pause will affect Illinois’ ability to remain competitive and add new jobs.”
With new data centers driving much of today’s demand for construction projects and employment, Turmail adds, “imposing limits on new data center projects not only undermines needed upgrades to our technology infrastructure, but also threatens to undermine construction employment levels.” AGC is sharing information about the economic benefits of building the data center with its chapters and members, he notes.
The call to pause the study of tax incentives for data centers represents a turnaround for Pritzker, who in 2019 signed and promoted bipartisan tax incentives aimed at attracting large investments in data centers, highlighting their importance to the state’s infrastructure and economy.
Existing agreements under the Illinois Data Center Investment Program will be honored, the governor’s office said.
