(Photo above:Facebook Data Center, Prineville, Oregon. Photo by Alan Brandt.)
Senate Bill 611, which addresses a complicated tax issue called central assessment, will impact Facebook and Apple centers in Prineville. Sponsored by the Committee on Finance & Revenue the measure grants property tax exemption to property of centrally assessed companies in amount of positive value obtained by subtracting from real market value of company’s real property and tangible and intangible personal property. At issue is the state’s decision to include value of telecommunication brands and other “intangibles” when assessing their property tax liability.
It became a critical issue last fall, when the state Supreme Court ruled telecom companies are subject to “central assessment” by the Oregon Department of Revenue. Although lawmakers exempted data centers from central assessment in 2012, that exemption only applied so long as other tax breaks were in effect.
Comcast, which had fought the issue in court for years, said the tax methodology added several million dollars to its annual tax bill, which the company complained was more than six times the average it paid in other states. the issue became particularly concerning when Google Fiber indicated the issue could stand in the way of the company’s plans to bring gigabit internet speeds to the Portland area. (A gigabit is 1,000 megabits per second, 25 times faster than the current threshold for broadband service.)
Amazon testified that central assessment was standing in the way of its plans to build as many as eleven more Oregon data centers.
The bill does the following:
• completely exempts data centers from central assessment, no longer requiring they have another tax deal in place.
• caps central assessment using a formula based on the historical cost of companies’ equipment.
• establishes a new program, to be overseen by the Oregon Public Utility Commission, effectively exempting companies that provide gigabit internet service from central assessment. The commission would review qualifying speeds periodically to ensure they remain state-of-the-art.
The Senate Committee on Finance and Revenue made central assessment its top priority heading into the current legislative session and work has dragged on all month as committees finessed language to suit cable TV companies, data centers, phone companies and satellite TV broadcasters.
According to the Associated Oregon Industries (AOI) the Senate Finance and Revenue Committee is engaged in some heavy lifting early in the 2015 Legislative Session on the issue of how to create certainty for centrally-assessed internet and communications companies that are reluctant to invest in Oregon due to the uncertain nature of how their intangible property will be assessed and taxed.
“The Senate’s work on this issue has the potential to be a real asset for Oregon as it looks to attract hundreds of millions in potential investment from internet and communications companies such as Google. The key to this investment; however, will be in creating certainty for what intangible assets will be taxed, and what the level of taxation will be.
Oregon is one of only a few states that tax intangible property. And because it is such a meaningful revenue source for Oregon’s local governments, lawmakers are very reluctant to do away with it altogether.”
The Senate Finance and Revenue Committee originally took up the issue with SB 570 and SB 571. The major issue in SB 570 is the details on how to cap assessments on the value of intangibles, including determining the “original cost” of the intangible assets, which assets to include, and the methods for depreciating those assets. While SB 571 deals exclusively with data centers. Currently, data centers located in Enterprise Zones are exempted from intangibles taxes, but there is a strong push from the internet companies and the economic development community to exempt data centers from intangibles taxes altogether.
