Comcast Nabs Huge Oregon Tax Break Thanks To Loophole Intended For Google Fiber

from the unintended-consequences dept

For a few years now, the city of Portland and the state of Oregon have been jumping through hoops to try and make Portland as attractive as possible for Google Fiber. That has involved rewriting city ordinances so that Google can place its utility cabinets along public rights of way, something previously banned in the city.

But the state of Oregon also notably reworked state tax law to provide Google with significant tax breaks. But the effort turned into a comedy of errors after initial rewrites technically disqualified Google Fiber (the revision said companies only qualified for tax breaks if they offered broadband speeds of at least 1 Gbps, while Google offers speeds “up to” 1 Gbps). But after several years of back and forth, the state this week moved to finalize the changes and craft a special Google Fiber loophole:

“An unusual Oregon tax may be the major factor that delayed the company’s Portland rollout. The Oregon Supreme Court ruled in 2014 that cable TV and Internet companies are subject to “central assessment,” a rare practice dating to the 19th Century that levies property taxes based partly on the value of certain companies’ brands. Applying the tax to Google would have added millions of dollars – perhaps tens of millions of dollars – to its annual operating costs, and the company threatened to drop its Portland plans if Oregon lawmakers didn’t exempt it from the tax.”

But while Google Fiber has yet to even start construction, Comcast has already rushed in to nab the tax incentives. You see, Comcast offers something it calls “Gigabit Pro,” a two gigabit per second service it has been offering to select areas since last year. The service promises 2 Gbps fiber to housing developments and other easy-to-wire locations, though the availability of the offering has been murkily defined at best. It’s also aggressively expensive: in contrast to Google’s $70 1 Gbps offering, Comcast’s Gigabit Pro costs $300 a month, plus $1000 in installation and activation fees (and a $1000 ETF for good measure).

Ironically, Comcast has been trying to get out of paying Oregon’s central assessment tax for years, only to be defeated before the Oregon Supreme Court in 2014. But thanks to the city and state tripping over themselves to please Google Fiber, Comcast gets a major tax break while the state takes a notable income hit:

“If the application is approved, schools, libraries and local governments across the state would receive significantly less revenue,” wrote Mary Beth Henry, director of Portland’s Office of Community Technology, in a letter to state regulators. “This application was not the kind anticipated by the Legislature.”

Comcast, in other words, is now enjoying rich new tax breaks despite offering a service four times more expensive than Google Fiber — which few people in Oregon will actually be able to afford. And while few people actually like Comcast or its business practices, it’s hard to fully fault the company for simply taking advantage of law rewrites the state of Oregon apparently didn’t fully think through.

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Companies: comcast, google

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Comments on “Comcast Nabs Huge Oregon Tax Break Thanks To Loophole Intended For Google Fiber”

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25 Comments
tqksays:

Re: Re:

End corporate welfare …

You may do better by passing a law making it illegal for diseases to infect living things. “Shaking down the herd” defines civilization for that well connected minority. We’ve improved on that predator vs. prey equation. Wildebeast herds don’t need to worry about wildebeasts; only lions. In contrast, we do need to worry about predatory humans, and lions.

This whole “pass a law making Google GBit easier” is lipstick on a pig. This mess was destined to happen.

Anonymoussays:

I like you pointing this out, even though you got it wrong. Base level regulation is fair. Obvious google will win out. I have google coming to my area. A giga box will be 2 city blocks away by the end of 2016. I am excited. I am an avid file trader. Last year, ATT opened U-Verse to alternate ISPs. I like Sonic and so moved over to the no contract 24mB/2mB Sonic presentation at $20 less per month than ATT and no data caps.

Anonymoussays:

Re: Re:

“Base level regulation is fair.”

Fair tax breaks for everyone is fair but there should be a maximum price associated with those tax breaks. The whole point should be to encourage companies to make these services more affordable to consumers. If the companies take a hit on their profits by employing bottom up pricing, in opposed to top down pricing, they get a tax break. If they purely base their prices on profit maximization they pay the full tax because the public isn’t getting anything in return when prices are based solely on profit maximization.

So this is an example of poorly written laws. I doubt politicians are this stupid (though they are good at pretending to be), there was probably some back door dealings that contributed to these laws being written the way they were.

And a second thing to note is the extent that Comcast may have had prior tax breaks and government subsidies to build their network. If they had that might disqualify them from new tax breaks as they already had their chance and were given an unlevel first mover advantage playing field because of it. Now it’s someone else’s turn to get tax breaks, Comcast already took their tax breaks.

Capt ICE Enforcersays:

Actually happy for Comcast

You know, I can’t believe I am saying this, especially with how much I hate Comcast and how they are charging me an extra $30 for my internet without cap. But I am happy that they exploited this loophole. If your going to change a law, you should make that change for the benefit of all. Not just one or two individual companies/people. Favoritism sucks.

Anonymoussays:

Re: Re: Actually happy for Comcast

That’s true, but when there is no competition, measures like this one, applied on a temporary basis, make sense. Now, I have no idea if that was the case in Portland (I’d guess not), but I can see a case for favouring Google coming into that market with targeted legislation.

Anonymoussays:

Re: Re: Re: Re: Actually happy for Comcast

It would make more sense …. if there was actually competition.

Some of the more fotunate areas are served by Comcast, AND by Frontier (formerly Verizon) Fios.

The apartments I am at are served by Century Link and Comcast. … and Century Link does NOT offer broadband to this location. Google fiber has not hinted at coming around. And it’s not even like I’m in some ‘rural’ part of Portland, either.

That One Guysays:

How does that work again?

The Oregon Supreme Court ruled in 2014 that cable TV and Internet companies are subject to “central assessment,” a rare practice dating to the 19th Century that levies property taxes based partly on the value of certain companies’ brands.

Depending on how you define ‘value’, I’d think that Comcast wouldn’t be getting a tax break from such a law, but a hefty tax increase. Even when it’s not taking first place in ‘Most hated company in the US’, it’s always a strong contender, so I’d think that the ‘brand value’ would be pretty bad when it comes to all things Comcast.

Whateversays:

I am sitting here completely stunned that multi billion dollar a year profit spewing Google needs a tax break for anything. Considering all the shit they are in for their tax management techniques around the world, it seems almost laughable that anyone would give them a break.

Good on Comcast for screwing the stupid government solid. They earned it.

Gwizsays:

Re: Re:

I am sitting here completely stunned that multi billion dollar a year profit spewing Google needs a tax break for anything. Considering all the shit they are in for their tax management techniques around the world, it seems almost laughable that anyone would give them a break.

Why should we treat Google any different from other large corporation? Is it just because they are Google?

Not only did we gave General Motors $50 billion in bailout money, we also quietly gave them an additional $45 billion tax break. As a result, in 2011, GM’s effective tax rate was negative 1.5%. The IRS paid GM $110 million in 2011. And that tax break continues for a period of 20 years.

http://www.foxnews.com/opinion/2012/05/18/what-gm-bailout-really-cost-american-taxpayers.html

Anonymoussays:

Re: Re:

I don’t really see you complaining when other companies, such as other ISPs, receive tax breaks, subsidies, and often limitations on competition in exchange for all these promises that they do a very poor job (putting it generously) fulfilling and then they still impose top down pricing. Like when ISPs receive tax breaks, subsides, and regional monopolies to upgrade their network and when it’s all said and done their service is way way overpriced (especially when compared to other countries). Essentially the public got absolutely nothing in exchange for giving tax breaks and subsidies, they still paid top down prices to get the service and they helped fund those services in the form of special tax breaks and subsidies that not every business equally benefits from.

but your double standards here are nothing new and something we have all gotten very used to by now.

Whateversays:

Re: Re: Re: Re:

“I don’t really see you complaining when other companies, such as other ISPs, receive tax breaks, subsidies, and often limitations on competition in exchange for all these promises that they do a very poor job”

Actually, I am very much against all of it, especially when it’s not done on the basis of accomplishments and milestones, and rather on vague promises and low expectations. I don’t think any of it’s right, but if the rules are applied evenly, it’s a political choice rather than a crime.

What I object to on this story is that someone tried to write a law SPECIFICALLY to give a single company a boat load of cash and special exemptions to rules that even those evil, nasty, horrible existing ISPs wouldn’t have. MOre, they are giving it to one of the world’s single biggest companies with some of the fattest profits possible. They don’t need the money.

” Like when ISPs receive tax breaks, subsides, and regional monopolies to upgrade their network and when it’s all said and done their service is way way overpriced (especially when compared to other countries). “

When Americans stop thinking that everyone in every podunk burb should have equal access, then the insane subsidies will stop. American is too large and has huge areas of very low population density. Serving them isn’t worth doing – which is why you don’t see Google fiber lining up to provide service to rural Montana or even the suburban sprawl of a city. They want the meaty core with the most users per square mile and the least costs.

The government handouts stop the moment you stop trying to have “no backwoods shack dweller left behind” when it comes to internet service.

That One Guysays:

Re: Re:

I am sitting here completely stunned that multi billion dollar a year profit spewing Google needs a tax break for anything.

So then, would it then be safe to assume that you’re against tax breaks for other multi-billion dollar companies? I’m guessing ‘no’ based upon your second comment where you seem to be showing support for Comcast getting the tax break instead but I figured I’d have you clear it up so that there’s no possible confusion regarding your stance on the matter.

Zonkersays:

Some comments on this. First, in the first year since the tax break, there has been a lot of new Gigabit fiber development in the Portland metro area from numerous providers. Not just Comcast, but CenturyLink in the city, Frontier near the city, and a new locally owned ISP called Fibersphere speading to new housing/rental developments out into the suburbs.

I’ve already witnessed three new apartment/condo developments within blocks of my suburban office offering Gigabit service from Fibersphere, though I would like to see it spread to existing single family developments as well. This appears to be somewhat of an improvement in competition for the area, and Google still has yet to make up its mind on whether they will build Google Fiber in Portland (they have submitted applications for fiber huts and started hiring though, according to rumor).

I honestly don’t mind it applying to Comcast as well if it results in more Gigabit service availability in the area. Under central assessment, the property tax Comcast pays in Oregon has been 3.5 times higher than the average state. There is no Oregon sales tax and both income and property tax is higher than average to make up for that.

Also some more detail on the terms of the Gigabit excemption from OregonLive (the online version of The Oregonian newspaper):

Here’s how the gigabit program works:

? It effectively exempts qualifying companies from central assessment. They would still pay regular taxes on their real property.
? To qualify, the company must offer Internet speeds at 1 gigabit per second or above. And the service must be “symmetrical,” which means it offers the same speeds for downloads and uploads. (That conforms to Google Fiber’s service.)
? The service must be available to “50 percent or more of the customer base in the service territory in which the communication infrastructure is constructed or installed.” Google Fiber picks neighborhoods to serve based on residents’ commitments to sign up for the service. This provision would require a broader rollout than Google Fiber has committed to previously.
? Prices must be no higher that 150 percent of the U.S. average for comparable service. The Oregon Public Utility Commission will make that determination.
? The company must pay a $50,000 application fee, distributed between the PUC and the state Department of Revenue.
? The speed threshold isn’t fixed. The bill says the PUC “may update the standards for speed, type and price of service as the commission considers appropriate.”

The central assessment excemption was also extended to data centers to encourage Apple and Amazon to expand their operations in Oregon.

Justmesays:

Level Playing Field

i think narrowly targeted tax breaks should be prohibited, If you want to create an enterprise zone with lower tax rate for any business that chooses to participate then that’s not a problem. Or if you want to give tax incentive to certain business sectors, energy or manufacturing, that is fine. So long as it in no way limit competition or favor any one company or individual segment of that sector [i.e. oil,solar,bio]

But tax incentive’s done below a state level should be prohibited. Most cities lack the legal resource’s or level of leadership to negotiate against a large corporate legal department.

The County i live in negotiated a large tax break with a fortune 500 company in an effort to create jobs. But the agreement contains no actual job creation requirements, just goals. And as it currently stands, the county is bankrolling the companies payroll in full for 20 years.

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