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Oregon Gov. Kate Brown (D) last week signed a bill that has, for now, put an end to questions about whether the state’s practice of taxing properties owned by utilities according to a company’s brand value would apply to data center facilities. Senate Bill 611 addresses potential use of the controversial practice by exempting data centers from a property tax structure known as “central assessment.”

Gov. Kate Brown (center) signs Senate Bill 611 into law
Gov. Kate Brown (center) signs Senate Bill 611 into law –

As reported in The Oregonian, the so-called “brand tax” was not levied by the state until 2009, “when the Oregon Department of Revenue began applying a 1973 law written for microwave towers to cable TV companies, eventually adding Internet service providers and data centers. The state’s tax court threw out that application, but the Supreme Court ruled last fall that the Revenue department was applying the old law correctly.”

The brand tax has not yet been assessed against data centers, but uncertainty around its potential application has led tech companies and telecom providers to pause and reconsider potential investment within Oregon. Comcast lost its court case challenging the law, including a subsequent appeal to the state’s Supreme Court.

Amazon came out as a vocal opponent of the brand tax, which requires that property tax rates increase on utilities as the company’s brand value increases. In February the cloud services and retail provider told lawmakers in Oregon that the state’s punitive tax structure has deterred it from building many data centers in the state.

“Eliminating the threat of central assessment will permit Amazon to continue to invest in Oregon,” said Eileen Sullivan, Amazon’s public policy manager. In a Feb. 4 address to a state senate committee, Sullivan argued that if the tax issues were addressed, Amazon could build up to 11 more data centers in the state to “go north of 10, to 12 or 15.”

Amazon’s four data centers reside on a 100-acre plot in eastern Oregon’s Port of Morrow; a fifth data center at the site has been put on hold pending re-evaluation of its financial feasibility and any possible tax reforms.

Tech companies such as Amazon, Apple, Facebook and Google were originally drawn to build data centers in Oregon through the creation of enterprise zones that waived sales taxes on their equipment and provided an exemption on property taxes. The savings to each could easily reach tens of millions of dollars each year.

ViaWest, however, recently questioned Amazon’s assessment of Oregon’s tax climate, as the data center provider announced plans to complete a third data center facility in the state. Dave Leonard, the company’s chief data center operator, called the region’s tax structure favorable. His analysis concluded that sales and equipment tax exemptions outweighed any potential brand tax levies.