Facebook's data center tax bill shrinks

The state of Oregon is telling Facebook it doesn't owe a big tax bill, and legislation is moving to preserve the decision .

Here’s a quick update on the Facebook tax situation – you know, the one where Facebook is disputing property taxes on its Prineville data center in Oregon.

Well, the Associated Press (AP) reported late last week that Oregon state tax authorities will change the rule that caused the tax troubles to begin with. The state’s Department of Revenue said Thursday it will change its rules so data centers like Facebook's are assessed by local tax authorities, not by the state, according to the AP.

The trouble began last summer when Facebook was told by the state to assess any property “real and personal, tangible or intangible," in relation to its property taxes. Concern arose that Facebook might be taxed on assets such as the value of its brand. The tax bill is associated with the data center Facebook chose to build in Crook County, Ore., and as part of the deal, Facebook promised jobs for 55 full-time employees in exchange for tax breaks. A few months later, according to reports, tax authorities said Facebook faced an annual tax bill of $390,000. That amount was reduced, and authorities said the tax bill would be $26,000. But Facebook still had concerns, and began asking state lawmakers to pass legislation to exclude companies that own or lease a data center in enterprise zones from having their value assessed by the state. (You can read more here, in my blog about the issue.)

The state’s decision is good news for Facebook, but it may only be a temporary measure. In the AP article, Gov. John Kitzhaber reportedly says the state’s tax laws need to updated, but a comprehensive review and overhaul on such complexities likely won’t be addressed until 2013.

That said, Rep. Mike McLane (R-Bend) and other Oregon lawmakers are pushing legislation next month that’s designed to protect the kind of data center investment Facebook and others have made or are making throughout Oregon. According to this article, McLane proposed HB 4067 after the Oregon Department of Revenue notified Facebook that its recently built Prineville data center would be taxed like a utility. The trouble is, the law to tax as a utility -- on the books for years -- negates an agreement that Cook County made with Facebook to allow the data center to qualify as part of a county enterprise zone, which offers various property tax exemptions for 15 years. In the Oregon Catalyst article, McLane is quoted as saying the state’s move has created “a climate of uncertainty and undermined the integrity of our enterprise zones,” adding that other data center projects that are eyeing as a landing spot will locate elsewhere, and Oregon will lose out.

HB 4067 excludes a company owning or leasing a data center in an enterprise zone from central assessment by the state during the period of enterprise zone exemption, and extends the exclusion from central assessment after expiration of the exemption if company continues to comply with certain provisions of the enterprise zone agreement.

HB 4067 has 47 cosponsors, and according to the Oregon Catalyst article, has the support of a majority of House members, 13 senators, both speakers, as well as caucus and key committee leaders.

McLane doesn’t think the issue can wait until 2013,as the govenor suggests. In the Oregon Catalyst article, he states: “The problem with waiting until the end of 2013 is that Oregon will lose billions worth of data center investment. The data center industry and technology are moving so fast that companies need to be assured of what the terms are long-term or they will locate to other states. In this session, with our high unemployment and general fund problems, that would be a travesty.”

Regardless, Facebook’s tax bill owed to Oregon just got a lot smaller.

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