HB3565 amends the Illinois Income Tax Act to expand the state’s data center construction employment tax credit. Under current law, a taxpayer awarded a credit by the Department of Commerce and Economic Opportunity for a qualifying Illinois data center can claim a credit tied to wages paid to construction workers on certain projects in economically distressed areas. This bill adds a new incentive: if the taxpayer is awarded a DCEO credit for a qualifying data center located in an opportunity zone, or for a data center developed by a minority-owned business, women-owned business, or business owned by a person with a disability, the taxpayer may claim an additional income tax credit equal to 5% of the investment in qualified tangible personal property used to construct or operate the data center.
The bill also clarifies that, beginning with taxable years on or after January 1, 2026, the additional 5% credit applies to data centers in a “qualified area” or developed by a “qualified business enterprise,” and that the credit may be carried forward for five years after the property is placed in service. It preserves existing rules on pass-through entities, revocation of certification, transferability under agency rules, and the prohibition on reducing tax liability below zero. The bill is effective immediately, which would allow the new framework to take effect upon enactment, subject to the taxable-year timing specified in the text.
Impact
HB3565 would modify Section 229 of the Illinois Income Tax Act and expand the state’s data center tax incentive structure by adding an investment-based credit on top of the existing employment-related credit. It would affect taxpayers receiving DCEO certification for qualifying data center projects, especially those located in opportunity zones or developed by minority-owned, women-owned, or disability-owned businesses. The bill would also reinforce the role of DCEO and the Department of Revenue in administering and enforcing the credit, while continuing to define eligible areas and eligible business enterprises by reference to existing state law.
Sentiment
No committee transcripts or recorded votes were provided, so there is no direct evidence of debate, support, or opposition in the available materials. Based on the bill text alone, the measure appears to be framed as a pro-investment and economic-development incentive, with a particular emphasis on encouraging data center development in distressed areas and by historically underrepresented business owners. The caption and structure suggest a generally favorable policy orientation toward business expansion and targeted tax incentives.
Contention
The main potential points of contention are the fiscal cost of the new tax credit, the use of tax incentives to attract data center investment, and the targeted preference for projects in opportunity zones or involving minority-owned, women-owned, or disability-owned businesses. Critics could question whether the credit will produce enough economic benefit to justify reduced income tax revenue, while supporters are likely to emphasize job creation, capital investment, and equitable access to development opportunities. Because no hearing record is available, specific stakeholder positions cannot be identified from the provided materials.