Oregon Legislature nears final decision on tax breaks for Internet companies

The Oregon Senate expects to vote Tuesday on a bill giving tax breaks to Internet providers and companies that own data centers, the measure's sponsor said Monday.

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The bill is a response to an Oregon Supreme Court decision last year that led to substantial increases in the property tax bills for telecommunications companies. The decision threatened to halt the rapid growth of data centers, primarily in central and eastern Oregon.

The Legislature will follow up later with a new bill to fix provisions that displeased Google Inc., said Sen. Mark Hass, a Beaverton Democrat who sponsored the original measure. The company told lawmakers in a letter last week that it won't bring Google Fiber high-speed Internet to Portland without the changes.

"Some wordsmithing is necessary," Hass said Monday.

The provision that rankled Google was supposed to create incentives for Internet companies to invest in ultra-high-speed gigabit Internet services. But the bill says the tax break applies to service of "at least one gigabit," when a gigabit is at the high end, not the low end, of Google's offering.

"We are not aware of any consumer offering that offers speeds above a gigabit," Darcy Nothnagle, a Google lobbyist, said in the company's letter. "Today, services up to a gigabit (like Google Fiber) are among the fastest in the nation and have only recently come to market."

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The company also was disappointed with the 20-year lifespan of the exemption, saying major infrastructure projects are long-term investments.

The gigabit tax break was only one piece of a bill that was created to save the burgeoning data center industry and rescue Internet providers including Comcast Corp., Frontier Communications Corp. and Charter Communications Inc. from a large spike in corporate taxes.

Last year's decision by the state Supreme Court upheld the Department of Revenue's method of calculating property taxes for Internet companies. The method took into account the companies' intangible assets, including the value of their globally recognized brands, in addition to their tangible property, when calculating tax bills.

The method, known as central assessment, was a boon to local governments at the expense of Internet giants.

If the Senate signs off Tuesday, the bill would go to Democratic Gov. Kate Brown.