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The data center market is expanding in Illinois, thanks to a new incentive program signed into law by Gov. Pritzker. McGuireWoods Consulting vice president, James Sherwood, played an instrumental role in the legislative effort to develop a tax incentive program for data center companies that invest in Illinois. Successful applicants to the program receive a tax exemption for up to 20 years from a variety of state and local taxes if they create at least 20 jobs and spend $250 million over a five-year period.
“For the past several years, Illinois has been surrounded by states with data center incentive programs,” Sherwood said. “Chicago is a tech hub, but companies looking to build new facilities in the Midwest have previously gone to Indiana or Iowa to save on costs.”
Since the creation of the program in 2019, numerous companies have completed successful applications. Facebook recently announced an $800 million facility outside of Chicago, and Illinois is beginning to recruit companies with data center needs to the state. A recent report from the real-estate firm Cushman & Wakefield ranked the Chicago-area as the second-best data center market globally, behind only Northern Virginia, based on standards such as low land costs, reliable utilities, tax incentives and a large number of projects in development.
“Data centers are crucial infrastructure and provide search engine, cloud computing, and other web-based services on which the economy now depends. Data centers contribute significantly to job growth and increased income at the federal, state, and local level,” said Dale Mullen, partner with McGuireWoods LLP and team leader of the firm’s data centers practice. “Markets worldwide are competing for the business, and this program places Chicago in a strong leadership role.”
Since the passing of the legislation, Sherwood continues to work with companies to navigate the application process for the incentive program. Although the benefits of the program are substantial, the application process can be complicated and time consuming.
“I coordinate with the state agency, work through the intricacies of the application and help finalize the contract with the state,” Sherwood said. “Applicants could potentially save millions over the life of the program, but there are a series of hurdles on the front end that can be a challenge to navigate.”
There are currently 52 data centers in the Chicago-area, with more applications coming into the program each year. According to the Illinois Department of Commerce and Economic Opportunity, the state’s incentive program has drawn in more than 370 jobs and $4.5 billion in private investment.