PORTLAND — Oregon regulators are scheduled to decide today how Internet service providers can qualify for new tax breaks, a decision that will affect millions of dollars in tax revenue.
The Oregon Public Utilities Commission is handling the implementation of tax breaks approved earlier this year by the state Legislature in order to encourage Internet providers to offer ultrafast gigabit service.
Lawmakers were vague about how companies qualify for the tax breaks, sparking a flurry of lobbying by Internet companies and local governments seeking a favorable decision from utilities regulators, the Oregonian reported.
Under an unusual Oregon tax law that applies to high-speed Internet service providers, Comcast and other companies pay tax based, in part, on the value of their brands. That adds millions of dollars to their annual property tax bills — money shared by schools, counties, cities and local agencies.
The Legislature said Internet providers could qualify for tax breaks if they offer gigabit service to a certain percentage of their “broadband” customers. The utilities commission must decide what speeds constitute “broadband,” and the threshold they choose will determine how easy it is for Internet companies to qualify for tax breaks. The more broadband customers an Internet provider has, the more customers it is required to offer gigabit service to in order to earn the tax break.
Internet companies argue that broadband should be very fast, as high as 25 megabits per second. Local governments, which stand to lose revenue, argue that the definition of broadband should be very slow — anything above dial-up.
Utility commission staff have proposed 10 Mbps serve as the broadband threshold, a speed already available to more than two-thirds of Oregon homes.
That’s too fast, according to Rep. Phil Barnhart, D-Springfield. When lawmakers voted for the law, he said, they intended to set a high bar for companies that want the tax break.
The 10 Mbps threshold, he said, would create an “absolute perverse incentive” for Internet companies to keep many customers’ service slow. If a greater proportion of customers are below the broadband threshold then a company would need fewer gigabit customers need to qualify for the tax break.
Wendy Johnson, who runs intergovernmental relations for the League of Oregon Cities, said the utility commission should honor the lawmakers’ intentions and preserve “millions of dollars” in local tax revenue.
“That’s why these exemptions have to be decided carefully,” she said.
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Information from: The Oregonian, http://www.oregonlive.com
