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When Oregon passed legislation creating enterprise zones in an attempt to attract new business, no one apparently stopped to consider if it might contradict existing laws .
Facebook and other data centers were attracted to Oregon by the enterprise zones. Then, earlier this year, the Oregon Department of Revenue decided that a law that is more than 60 years old and was intended to apply to railroads, telephone companies, and electrical utility companies applied to data centers as well.
The result is that if the revenue department gets its way data centers will be assessed as if they are utilities. That would mean that Facebook would be taxed not only on the value of their real property in Oregon, but on the value of tangible and intangible assets the company holds world wide as well as on the value of its good name.
The policy called central assessment is done by a number of states, but Oregon is unusual in attempting to tax intangible assets. Based on the central assessment policy the Oregon Department of Revenue sent Facebook a new tax bill this fall. Amid protests from members of the Oregon State Legislature the bill was quickly withdrawn, but the matter is far from settled.
Other high tech companies that were considering locating facilities in Oregon have put their plans on hold, having a chilling effect on the local economy.
As Facebook spokesman Cory Owens recently said, the result would be a potential tax liability to the company of hundreds of millions of dollars.
Owens was quick to point out that the company is not trying to get out of paying taxes. Rather he is concerned that the state of Oregon live up to the agreement they made that attracted Facebook to the state in the first place.
“It’s not about the tax bill,” he said. “It’s about the certainty as we move ahead in the world market.”
Fortunately Crook County Representative Mike McLane has authored a bill that would provide certainty to the situation. Simply put the bill would prevent the department of revenue from applying central assessment to companies located in enterprise zones, not just now, but into the future as long as the company continues to meet the conditions of the enterprise zone.
“If the legislation passes they can say the Legislature stepped up and took care of the problem and Oregon has honored their agreement,” Owens said.
However, the upcoming legislative session may not exceed 35 days and there are crucial budgetary issues that must be addressed at the same time.
While McLane’s bill does not address the entire complexity of the issue, it would provide certainty to Facebook and other data centers.
If Oregon wants to ensure corporations that the state is indeed open for business then it is critical that the Legislature pass McLane’s bill, and does so quickly. Then in 2013 when the Legislature has more time they can deal with the more complex issues brought up by central assessment.
