Oregon's Tax Incentive Program Wins $25 Billion Investment From Intel

by Mike Godfrey, Tax-News.com, Washington

25 April 2005

Global chip-making giant Intel has reached an agreement with the state of Oregon that will grant the firm tax incentives on new investment in the state valued up to an estimated $25 billion over the next fifteen years.

"This proposal makes good policy sense and good economic sense," stated Tom Brian, chair of the Washington County Board of Commissioners, at a joint presentation with Intel Public Affairs Director Diana Daggett and local officials.

"On the policy side, we could extend our successful 1999 agreement - and the public services it supports - a quarter-century into the future. On the economic side, we could keep tens of thousands of jobs in Washington County and in Oregon at a time when our state is struggling to retain jobs, let alone create new jobs," he added.

The proposed 2005 Strategic Investment Program (SIP) agreement would require Intel to pay an estimated $115.3 million in property taxes and fees over a 15-year period beginning as soon as 2008 or as late as 2012. The amount is nearly twice that required by the 1993 Oregon law that created the Strategic Investment Program.

In 1999, Washington County negotiated a SIP agreement with Intel that set the stage for Intel to invest up to $12.5 billion over 15 years beginning in 2000. In addition to the tax payments required by the 1993 state law, the county required Intel to make guaranteed payments of about $2 million per year for 15 years, even if no investment were made. The county also required Intel to pay the equivalent of full taxes on all land and buildings associated with the SIP project.

Finally, the 1999 agreement allowed for tax savings to Intel for investment in machinery and equipment used for semiconductor manufacturing. This machinery and equipment costs billions of dollars to create and can become obsolete within two-to-three years.

Under the proposed 2005 agreement, Intel could invest up to $25 billion in Oregon over a 15-year period beginning as soon as 2008 or as late as 2012. Beginning in the 2015-16 tax year, the county would then collect guaranteed annual payments of $2.9 million to $3.6 million toward a total of $28.7 million.

Once investment were to begin under the 2005 SIP proposal, these guaranteed annual payments would be required over the life of the agreement, even if no investment occurred in subsequent years. As with the 1999 agreement, Intel would be required to pay fees equal to full taxes on all land and buildings associated with the 2005 SIP.

"As helpful as this proposal would be for stabilizing the long-term investment climate for Intel in Oregon, Intel would still be paying the equivalent of twice as much per employee as the property taxes paid per employee by the average Washington County business," observed Brian, adding:

"Intel’s payments per square foot would also continue to be among the highest in the county."

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