Illinois Legislative News: June 29, 2026
Third Reading Consulting Group
Gov. Pritzker Directs Two-Year Data Center Incentive Pause
On June 5, Gov. JB Pritzker announced a two-year pause on state tax incentives for data centers. He instructed the Illinois Department of Commerce and Economic Opportunity to pause processing agreements for the Data Center Investment Program effective July 1, 2026, while clarifying that existing agreements will continue to be honored. The program was created in 2019 and provides qualifying data centers with exemptions from various state and local taxes to encourage data center development across the state.
Qualifying data centers are eligible for exemptions under the Retailers’ Occupation Tax Act, the Use Tax Act, the Service Use Tax Act, the Service Occupation Tax Act, and the Chicago Use Tax. In underserved areas, data center owners or operators could also receive a credit equal to 20% of the wages paid to construction workers on the project. From 2020 to 2024, 27 data centers received more than $983 million in incentives under the program. Due in large part to state incentives, Illinois ranked third among states in total data center projects in 2023, according to Silicon Report, but it has since dropped to seventh.
Although the moratorium was initially proposed as part of Gov. Pritzker’s FY 2027 budget proposal in February, it was not included in the enacted FY 2027 budget package. Gov. Pritzker’s June moratorium announcement came after the Illinois General Assembly failed to pass the Protecting our Water, Energy, and Ratepayers Act, or POWER Act (HB 5513 / SB 4016), or any other meaningful changes to data center regulation. Instead, Gov. Pritzker issued the moratorium unilaterally. The Governor’s Office has defended the moratorium on the grounds that it has administrative authority over application processing, but the pause could be subject to litigation if a party argues that the governor exceeded his executive authority.
In a June 5 press release, Gov. Pritzker called on legislators to pass comprehensive data center reforms during the fall veto session. He said those reforms should be based on the principles that data centers should pay their fair share of electricity costs; energy reliability should be prioritized for Illinois working families and businesses; data centers should support the development of new clean energy resources; Illinois water resources should be protected; strong clean air standards should be maintained; and Illinois communities should have greater transparency and a meaningful voice in data center policies.
Illinois is not the only state looking to roll back data center exemptions. Arizona enacted a three-year moratorium on tax exemptions for data centers as part of its FY 2027 budget on June 13. Texas, Virginia, Georgia, and Indiana are also considering legislation that would reduce tax incentives for data centers.
Important Upcoming Dates – Statewide
November 3 – Illinois General Election
November 17-19 – Veto Session Week 1
December 1-3 – Veto Session Week 2