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Oregon Gives Intel A Nike-Like Tax Deal

Mon, 12/09/2013 - 11:26am
Jonathan J. Cooper, Associated Press

PORTLAND, Ore. (AP) -- Gov. John Kitzhaber announced Friday that he's giving Intel a tax deal similar to the one he granted Nike a year ago.

The 30-year agreement promises that any changes to Oregon's corporate tax structure won't affect Intel Corp. The chipmaker secured the agreement in exchange for an expansion it announced in October 2012. The company is spending $500 million to expand a semiconductor plant in Hillsboro and must create at least 500 jobs to get the tax guarantee.

The Legislature gave Kitzhaber temporary authority to make tax guarantees to companies planning large investments. It came in response to a demand from Nike Inc., which said it would expand in Oregon if the state promised not to change a favorable tax structure.

Intel's deal comes a few weeks before Kitzhaber's authority to make tax guarantees expires at the end of the year.

The state taxes corporations based only on their Oregon sales. The so-called "single sales factor" is beneficial to large companies like Nike and Intel that have many employees and a lot of profit but relatively few sales in Oregon.

"Intel's commitment to Oregon is staggering, from its impact on job growth, to revenue for critical public services, to influencing an economy of innovation," Kitzhaber said in a statement.

Intel is Oregon's largest private employer, with about 16,000 workers in the state.

The tax guarantees for Nike and Intel promise that the single sales factor will remain in effect for those companies. The state is free to change the tax rate, but Nike and Intel would be exempt if the state decided to include measures such as payroll or property value in its corporate income tax calculations.

The deal would remain in effect even if Intel later eliminates the 500 additional jobs it's required to create.

In the early 1990s, Oregon calculated corporate income taxes giving equal weight to a company's in-state payroll, property and sales. The state began giving more weight to sales, eventually dropping payroll and property from the formula in 2005.

Critics say the single sales factor deprives the state of much-needed income from large corporations.

"It's more insulting than Nike, because Intel, unlike Nike, is a major proponent of wanting Oregon and other states to invest in education and create more engineers," said Chuck Sheketoff, director of the left-leaning Oregon Center for Public Policy.

Intel shares climbed 55 cents, or 2.3 percent, to close at $24.81 Friday. Citigroup upgraded the company's stock earlier in the day to "buy" from "neutral," saying demand for personal computers has stabilized.

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