Crook County

Facebook is here to stay, and it might be bringing some friends with it.

After months of negotiating with state and tax officials, the multi-billion dollar company has been assured a fixed tax rate by Govenor Kitzhaber for the next 15 years, making Oregon seem like a pretty cushy haven for other internet conglomerates.

So what was the problem? When Facebook was staking out territory for their first company-owned data storage center in Crook County in Prineville, Ore., discussions with the state assured the company of significant tax breaks.

This incentive, along with the ideal weather conditions for data storage in central Oregon (the desert’s arid days and cool nights keep the servers and transmitters cool to conserve more energy), lured in the social media giant. Facebook catches a break and brings in some business—it’s a win-win, right?

Well, it seemed like it until the Oregon Department of Revenue classified Facebook as a “utility company,” because it’s in the communications business in Oregon’s eyes. The ramification of filing as a utility company is that instead of paying taxes on their property alone (excluding their buildings and other assets), Facebook would be lumped in with other communication companies like Google, Microsoft, and Yahoo. The result would cost them hundreds of thousands more in taxes, because they would be taxed not just on their land, but on their intangible assets by a “central assessment” tax.

Three months ago, tax officials told the Bend Bulletin that Facebook’s taxable assets would come out to $25 million, meaning their bill would increase from the agreed upon $26,000 to $390,000. And this was before the company went public.

Tax officials recounted their estimations the next day, reassuring Facebook that $26,000 was the correct amount, but the back and forth caused some concern for the company.

Facebook’s associate manager of public policy, Corey Owen, told the Statesman Journal: “When we came to Oregon, there was no understanding when we had conversations with the state or internally that we might be a utility company.”

Understandably, Facebook was upset with the way this was handled, and worried that they would be taxed on the popularity of their brand despite previous arrangements with local officials.

However, Oregon Representative Mike McLane wasn’t about to let Mark Zuckerburg block Oregon from Facebook’s business plan. He proposed a revision that would stop data centers like the Prineville facility (that own or rent the enterprise zone on which their centers are built) from being subject to state taxation. “One of the things that became clear is that we needed to provide some certainty,” McLane said to the Associated Press.

For a company looking to expand, certainty in the amount you’ll be spending is essential to your business plan, even if your pockets are $75 billion deep. And one thing that this decision will certainly do is secure development of the Prineville data storage center and encourage economic growth in one of Oregon’s most fraught counties.

Since Facebook built its facility over a year ago to help process the data of the company’s over 800 million users, jobs have been created in Crook County, which has a high unemployment rate at over 15 percent. Granted, the current amount of jobs at the facility is only 55—not nearly enough to make a significant impact—the overturning of the decision does bolster the growth of Facebook’s base in Oregon, and may serve as enticement for other companies looking to build data storage centers.

Ultimately, this decision was about bringing more big business to Oregon where Oregonians need it most. It may seem a bit trivial when a company worth $75 billion nitpicks over a property tax dispute, but sometimes giving an inch yields far greater benefits. For Crook County, this means more jobs, and potentially more data storage centers from similar companies.