Pritzker to Hit Pause on Data Center Tax Breaks

Illinois’ data center boom may be headed for a time-out.

Gov. JB Pritzker is expected on Wednesday to call for a two-year suspension of the state’s tax incentives for new data centers, a sharp pivot for a governor who has long touted business recruitment. The proposal, first reported by NBC News, would take effect July 1 and halt eligibility for Illinois’ data center tax credit program while the state studies the industry’s impact.

Under the plan, Pritzker will direct state agencies to examine how existing facilities are affecting the power grid, consumer energy bills and the broader economy. The goal, according to his office, is to ensure data centers are financially sustainable, don’t drive up utility costs and fairly allocate infrastructure resources. The Democratic-controlled General Assembly would need to sign off.

The move comes as hyperscale facilities tied to artificial intelligence demands proliferate nationwide, often with rich incentive packages attached. Illinois has been part of that push. But backlash has been building from Oregon to Texas to Virginia, where residents have raised concerns about electricity consumption, water usage and limited permanent job creation.

Pritzker signaled earlier this month that he’s wary of approving projects that could push residential rates higher.

“If they do threaten to raise rates, we’ve got to slow them down,” he said, adding that lawmakers will take up the issue this spring.

Other governors are recalibrating, too. Pennsylvania’s Josh Shapiro recently outlined new criteria for developers seeking state resources, while Florida’s Ron DeSantis has backed guardrails around growth. In Georgia, lawmakers passed a bill last year to curb incentives, though Gov. Brian Kemp vetoed it.

A freeze in Illinois could complicate land purchases and speculative infrastructure wagers in exurban and industrial corridors that have been marketed as prime data center territory, the outlet reported. The sector has been one of the few bright spots for large-scale development sites amid sluggish office and uneven multifamily growth.

Pritzker’s office stressed that Illinois still exports roughly 20 percent of the electricity it generates and remains open to business, but the message is clear that the AI gold rush won’t grow unchecked for the next couple of years.

— Eric Weilbacher