Facebook, together with a group of private and public-sector organizations, including Google and Rackspace, is supporting a push by an Oregon lawmaker to alter the state’s tax code to prevent it from charging companies with data centers in certain parts of the state higher tax rates than they expect.
Facebook is in danger of being taxed more than it has expected since it made the decision to build a data center in Prineville, Oregon.
In a jointly signed letter of support for upcoming legislation, Facebook, Google, Rackspace, Adobe and others say the state’s Department of Revenue’s central assessment of the companies’ value that includes the value of their brands bypasses their agreements with local governments to build data centers in “Enterprise Zones” – low-tax areas designated to attract projects like data centers to boost local economies.
“Central assessment of data centers and their enterprise-level intangible assets – such as a company’s worldwide ‘goodwill’ or intellectual property value – can dramatically increase a company’s tax liability,” the letter read.
The letter is addressed to Oregon representative Mike McLane, who is preparing a bill that, if passed, will limit authority for central assessment of data centers in Enterprise Zones. McLane is expected to introduce the bill in the upcoming legislative session.
Communications or marketing?
The Department of Revenue, tasked with assessing property value for taxation purposes, has defined Facebook “as a communication company based on Oregon statutes,” Derrick Gasperini, spokesman for the department, said.
Because the company fell under the “communication” definition, the department was required to centrally assess the value of its property – both tangible and intangible – according to a letter to Facebook by the department’s acting director Karen Gregory.
The department’s preliminary assessment concluded that the value of Facebook’s property in Oregon was US$102m. “The counties do have to use the value that we assess [a property] at to determine the tax,” Gasperini said.
Facebook says it is not a communications company, according to Gregory’s letter, and therefore should not be centrally assessed. Supporters of McLane’s legislation said the authority to do so was historically given to the department to assess utilities, railroads and airlines and could circumvent Enterprise Zone agreements.
Facebook is disputing being classified as a communications company, saying it is instead a “marketing company”, according to Gregory’s letter.
The state’s definition of “communication” includes “data transmission services by whatever means provided”, which Facebook says does not apply to its data center.
Corey Owens, associate manager of public policy at Facebook, said, “Facebook’s operation in Oregon is limited to data storage and processing and does not include data transmission.”
Gasperini acknowledged that the definition of a communications company currently on the books was outdated. “What makes someone a communication company is different now than what it was 30 years ago,” he said.
