558 N. Main St., Prineville, OR 97754 | (541) 447-6205
When Facebook, the social networking giant, located a data center in Prineville, local officials negotiated a tax deal that minimized the taxes and fees that the corporation would have to pay for the next 15 years.
The lowered tax burden created a business atmosphere that made it attractive for Facebook, and presumably other future businesses to establish a presence in Crook County. In the case of Facebook, the result has been a number of full-time family-wage jobs, as well as construction jobs, and a good neighbor that has been generous in supporting local charities and athletics.
Now, the state of Oregon has inserted itself into the business deal that Facebook has negotiated with Prineville and Crook County, and is attempting to levy taxes against the company on its “intangible assets.”
The Oregon Department of Revenue has stated that they believe they have the right to not only tax the company on its intangible assets, but to apply the tax retroactively to the time when Facebook first began construction in Prineville.
Michael Olson, a principal appraiser analyst with the Department of Revenue recently stated that “there are a lot of obstacles that have to be overcome” before the state can support assessing intangibles.
The position that the Department of Revenue is currently taking is indefensible. The State of Oregon should be encouraging business to locate within the state. That means that the state should honor any agreements that have been negotiated in good faith between local governments and corporations.
It appears that local government is trying to put out the welcome mat for business and industry while at the state level, Oregon is attempting to drive business out of the state.
Facebook is not the only corporation that the state has gone after. In 2008, the revenue department adopted a rule, essentially a new interpretation of state law, declaring cable companies “communication” businesses suitable for central assessment, and centrally assessed cable giant Comcast. The corporation sued, and won. However, the revenue department has not dropped the issue and has filed notice that it plans to appeal the case to the Oregon Supreme Court.
In his ruling on the case earlier this year, Judge Henry Breithaupt wrote “without exaggeration it appears that the position of the department is that ‘data transmission,’ a component of the definition of communication, includes whatever the department says it includes so long as the tremendously broad and expansive definitions of ‘data’ and ‘transmission’ are arguably applicable.”
The state’s position is ridiculous. Taxing corporations on their intangibles will have a chilling effect on the business climate in Oregon. Why would a corporation that is deciding where to locate risk being taxed on intangibles rather than real measurable assets? The message that Oregon is sending to corporations is establish a presence in our state at your own risk.
Facebook is rightly worried about what the Department of Revenue is attempting to do. The corporation has spent millions of dollars building a state-of-the-art data center in Prineville. The deal that the company struck with Prineville and Crook County is good for Facebook, and good for Crook County.
Now the state is trying to put its hand in the cookie jar and take all the goodies. The Department of Revenue needs to back off, and Oregon needs to honor the deal that has been struck with Facebook, as well as every other deal that has been negotiated between corporations and local government. No wonder Oregon is lagging behind much of the nation when it comes to unemployment and job creation.
