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HB 3574

PROCUREMENT-DATA RESIDENCY

104th Regular Session Introduced by Murri Briel and 17 co-sponsors

The bill requires State data to be stored and processed in the United States, with credits and incentives for Illinois data centers and opportunity zones.

Rule 3-9(a) / Re-referred to Assignments
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Bill Summary · HB 3574

Summary — HB 3574 (Procurement — Data Residency)

Sponsor: Rep. Justin Slaughter (Chief Senate Sponsor: Sen. Lakesia Collins)
Introduced: Feb 18, 2025. House passed (3rd reading) Apr 10, 2025 (114–1). Referred to Senate Assignments; Rule 3‑9(a) / Re‑referred to Assignments (June 2, 2025). Companion: SB 1835.

Purpose / Intent

HB 3574 creates a State data‑residency requirement and a procurement incentive for vendors who store Illinois “State data” within the United States — especially within Illinois and within federally designated opportunity zones — with the intent to improve data control, promote in‑state data center investment, and direct economic benefits to opportunity zones.

Key provisions

  • Adds Section 45‑115 to the Illinois Procurement Code establishing a “State data residency credit.”
  • Contract requirement: Any State contract advertised/entered on or after the act’s effective date that provides for storage of State data must require that the State data be processed, stored, and disposed of within the territory of the United States, unless otherwise authorized by the Chief Procurement Officer.
  • Earned credit (bid preference): Upon contract closeout and agency certification that State data was not processed/stored/disposed outside Illinois during the contract term, the Chief Procurement Officer issues an earned credit certificate:
    • 2% of the contract value if State data was stored within Illinois (outside opportunity zones).
    • 4% of the contract value if State data was stored within Illinois and all or part of the data was stored within a designated “qualified area” (an opportunity zone).
    • The credit may be applied as a bid preference on a future State contract of equal or greater dollar value and expires 3 years after issuance.
  • Data center procurements (RFPs): Proposals for data centers hosting State data receive scoring incentives:
    • +10% of total available points if the data center is hosted within Illinois.
    • Additional +10% (totaling up to +20%) if the data center is located in a qualified area (opportunity zone).
  • Exemptions and limits:
    • Contracts primarily for telecommunications services (≥50% of contract value) are excluded from the earned‑credit provisions.
    • Certain categories of information are excluded from the definition of “State data,” including some public safety data maintained outside the U.S., information subject to international government exchanges, and criminal justice backup/recovery exchanges.
  • Compliance and oversight:
    • Vendors must maintain detailed records and allow access to the Chief Procurement Officer, State Purchasing Officer, or contracting agency; records retained at least 3 years post‑contract.
    • The Chief Procurement Officer may refuse to allocate credits if not in the State’s best interest; that decision is administratively reviewable.
    • Chief procurement officers may adopt rules to implement the section.

Who is affected

  • State agencies that procure IT, cloud, and data center services.
  • Vendors, cloud providers, and data center operators bidding on State contracts — especially those providing storage of State data.
  • Opportunity zone communities in Illinois (potentially benefit from incentives).
  • Procurement administrators (new certification, monitoring, and recordkeeping duties).

Potential impacts and considerations

  • Likely to encourage bids from vendors with in‑state or U.S.‑based data centers and to incentivize locating infrastructure in Illinois opportunity zones.
  • May increase costs or reduce vendor pool where vendors rely on cross‑border or foreign cloud infrastructure.
  • Requires administrative processes for certification, monitoring, and enforcement; possible interaction/conflict with federal law, international agreements, or cross‑border public‑safety arrangements.
  • Provides economic development incentives targeted to opportunity zones via procurement scoring and bid credits.

Legislative status (select actions)

  • Filed Feb 7, 2025; House first reading Feb 18, 2025.
  • Committee hearings and substitute considered Apr 22–24, 2025; reported favorably as substituted.
  • House amended and passed Apr 10, 2025. Arrived in Senate Apr 14; assigned to Senate rules/assignments; re‑referred under Rule 3‑9(a) on June 2, 2025.

Compiled from official sources — confirm details with the bill’s official record.

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