Wednesday, June 03, 2009

NC Legislature Approves Tax Law Change For Apple


The General Assembly on Monday approved changing the state's tax law with hopes it will result in Apple Inc. announcing a $1 billion investment within days.

The Senate voted 40-8 to go along with conditions including that the company invest in a rural area. The final round of debate lasted less than a minute.

Sen. Tom Apodaca, R-Henderson, urged rejection. He had previously lambasted business recruiters and lawmakers for focusing on high profile, big companies and ignoring small businesses. Sen. David Hoyle, R-Gaston, said small companies near the site of a promised data center would benefit by providing services.

"There is a lot in this for small businesses," Hoyle said.

The legislation was sent to Gov. Beverly Perdue, who was expected to sign the bill into law quickly.

An Apple spokeswoman said the company had no comment.

The bill would give the qualifying company a break on state corporate income taxes. The tax break could be worth about $46 million in the next decade, assuming the lone, unnamed company projected to qualify reaches its $1 billion investment target within nine years of starting, according to a memo by legislative fiscal staffers.

The Associated Press reported last month that the unidentified company being targeted by the tax break is Apple, which is seeking a site for its East Coast data warehouse. These facilities, also called server farms, are huge, climate-controlled computer warehouses that can process vast flows of data needed as business functions and everyday life increasingly depend on Internet traffic.

Data centers are heavy users of power and water and are usually spread over large spaces. Google Inc. opened one last year near Lenoir in the western North Carolina foothills. In 2007, state and local governments offered Google an incentives package worth up to $260 million over 30 years, one of the largest in state history, to land the $600 million data complex.

If the Apple project also remained active for 30 years, its server farm could save more than $300 million on its corporate taxes, based on legislative staffers' estimates.

Sites in western North Carolina also are under consideration for the Apple facility, including in Catawba and Cleveland counties. Both counties posted April unemployment rates of about 15 percent.

Construction of the Apple site would be expected to employ hundreds of workers for more than a year, but the initial full-time work force of the data center would total fewer than 100, lawmakers said last week.

If ultimately approved by the General Assembly, the change would mean a significant tax break only to the rare company that meets all the conditions. The conditions are a sign the Legislature remembers a bad decision 21 years ago when the formula for calculating corporate income tax was changed to attract a single big company.

Qualifying companies would have to invest $1 billion within nine years, locate in one of North Carolina's poorest counties, provide health insurance, meet a wage standard, and forego other state grants or tax breaks. If a company met those criteria, it would benefit from the change if it had a relatively large share of its nationwide property and payroll in the North Carolina, but a small share of U.S. sales in the state.

The last time North Carolina changed how it calculates corporate income taxes was in 1988, and it was done to satisfy RJR Nabisco's plans to build a large cookie plant in Wake County and create 600 high-paying factory jobs.

Nabisco never built the plant. But the revised calculation meant a tax break that wasn't targeted, but primarily helped manufacturers, said Greg Radford, director of the state Revenue Department's corporate tax division. He said he could not estimate how much companies have saved as a result of the 1988 revision, which remains in effect.

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