The underlying premise of a massive new gross receipts tax lawmakers passed earlier this session—House Bill 3427, the so-called "Student Success Act"—is that Oregon businesses aren't paying their fair share of the cost of government.
The new tax in that bill, which Gov. Kate Brown has already signed, would bring in an estimated $2.8 billion in 2021-2023 by applying a .57 percent tax on business-to-business transactions.
So, for instance, if a company buys a trainload of grain, the seller would pay the tax, or if a company builds a new building, the construction contractor would pay the tax.
One of the biggest critics of the new tax was Intel, the state's largest private employer. Gross receipts taxes hit manufacturers such as Intel hard, because they buy a lot of raw materials and make a lot of capital investments.
Late last year, The Oregonian reported Intel was planning a multi-billion expansion of its sprawling Washington County operations.
But a proposed new amendment in House Bill 2164, which is what lawmakers are referring to as a "clean-up bill" for HB 3427, would create a large carve-out for any company that is making a capital investment of "at least $1 billion over not more than 10 years and be made at a single eligible site or multiple eligible sites located on real property within this state," and meets certain employment requirements.
The raw material suppliers and construction and sub-contractors for such a project would not pay the new tax on sales or revenue generated from such a project under the amendment.
Although no company is named in the amendment, Intel would be an obvious beneficiary.
Intel spokeswoman Linda Qian said the company would welcome the amendment.
"We're glad to see the state recognizing the value of economic development; it's one of the reasons Intel has been able to innovate and invest more than $43 billion of capital in the state of Oregon over the last four decades," Qian said in a statement.
The amendment got a hearing in the Joint Committee on Tax Expenditures June 4 and drew support from the powerful co-chairs of that committee: state Sen. Mark Hass (D-Beaverton), who also chairs the Senate Finance Committee and state Rep. Nancy Nathanson (D-Eugene), who is also the chairwoman of the House Revenue Committee.
Not everybody loved the idea. State Sen. Chuck Riley (D-Hillsboro) questioned whether requirements for creating new jobs were sufficient. State Sen. Cliff Bentz (R-Ontario) and other Republicans asked pointed questions about why what is supposed to be a house-keeping bill might include a major policy and revenue shift.
They also noted the amendment would favor the state's largest companies over its smallest.
"Great big companies would enjoy cheaper means of growing than would small businesses," Bentz said.
Hass told Bentz that the original discussions about HB 3427 included a desire to include some incentives for economic development but those ideas didn't make it into the final bill. He also said that Ohio, another state that levies a gross receipts tax on businesses, uses a mechanism similar to the proposed Oregon carve-out.
Lawmakers have created controversial one-off tax benefits for the state's largest companies before. In 2012, then-Gov. John Kitzhaber called a special legislative session to bestow a deal on corporate income taxes for Nike. That deal was later extended to Intel.
This week's hearing on the proposed Intel amendment was informational only—meaning lawmakers did not take a vote on it—although the underlying legislation, HB 2164, is still very much in play.
Danny Moran, a spokesman for House Speaker Tina Kotek (D-Portland), says the amendment that could benefit Intel is unlikely to be adopted.
"There will need to be a bill that makes some technical changes to the revenue portion of the Student Success Act [HB 3427]," Moran said in an email. "The aspect of HB 2164 you referenced [the exemption for large capital expenditures] doesn't have legislative support and the technical changes will not move forward with that section. Any technical fixes will not change the overall revenue impact of HB 3427."
Daniel Hauser of the Oregon Center for Public Policy says he hopes Kotek is right.
"It's not in the best interest of Oregonians to exempt those with the deepest pockets from the new Corporate Activity Tax," Hauser said in an email.
"Not only will this give big businesses an unfair advantage over small businesses, it will also take away funding for education. At a time when the legislature is finding it difficult to come up with revenue to extend and expand the Earned Income Tax Credit, a credit for families struggling to make it on low wages, we should not be creating tax breaks for those who can make billion-dollar investments."