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Technology Stocks : America On-Line (AOL) -- Ignore unavailable to you. Want to Upgrade?

To: robert duke who wrote (6098)	3/4/1999 4:11:00 AM
From: puborectalis	Read Replies (1) \| Respond to of 41369

Every little bit helps!......... Tax Break for AOL Is Worth Millions By Dan Eggen and Craig Timberg Washington Post Staff Writers Thursday, March 4, 1999; Page B1 Tax exemptions approved last month by the Virginia General Assembly were written specifically to benefit America Online Inc. and could save the Dulles area Internet company $18 million or more in taxes on a planned data center in Prince William County, according to state officials and others. The legislation, introduced at the company's request, will save AOL an additional $4 million each year in ongoing sales tax payments even if that project isn't built, officials said. The bill, sponsored by Del. John A. "Jack" Rust Jr. (R-Fairfax), doesn't mention AOL or the Prince William project, and several lawmakers expressed surprise yesterday to learn that it was written to apply almost exclusively to that company and would provide big savings on a new project. It waives the 4.5 percent sales tax on certain computer servers and other equipment purchased by Internet providers that offer their own content. "This bill effectively impacts only AOL," said Virginia Tax Commissioner Danny M. Payne, adding that other firms that qualify could emerge later. "I'm not aware of any other service provider that is doing the things AOL is doing. . . . Any effect on any other provider would be minimal." AOL's tax break was one of the best-kept secrets of the 46-day legislative session that ended Saturday and was part of the state's effort to persuade AOL to build the data center in Prince William instead of in North Carolina. The few lawmakers who knew of the $550 million project were sworn not to talk about it on grounds that it might hurt the state's bid. The bill's backers – including deputies of Gov. James S. Gilmore III (R) – sold the break as a general updating of the tax code for the Information Age. Manufacturing equipment, telephone switches and other staples of traditional industry have long been exempt from state sales tax. "If we're going to exempt other systems, we should exempt the Internet as well," Rust said earlier this week. He couldn't be reached for comment yesterday. But several lawmakers said yesterday that they had no idea it was an AOL bill. "I wish I had known. You always want to have the information," said Del. C. Richard Cranwell (D-Roanoke), the House Democratic leader and a member of a committee that approved the bill. "If there was a 400 or 500 million dollar [project] pending . . . that concerns me because all that does is raise the burden on every other taxpayer in Virginia." AOL spokesman Andrew Weinstein declined to comment yesterday on the bill or the company's role in getting it approved. The incentive package underscores the growing clout of AOL and other technology firms in Richmond, where legislators also approved an AOL-backed measure that makes it a crime to send massive amounts of junk e-mail through the state's online service providers. Gilmore has scheduled a news conference for Wednesday to announce construction of the facility on 25 acres in Battlefield Business Park near Interstate 66. Government and company sources say the 250,000-square-foot building could employ as many as 375 people, including 175 new employees and 200 relocated from other AOL sites. North Carolina officials had offered AOL more than $28 million in tax credits over seven years. Officials there say they were told of AOL's decision to build outside Manassas on Feb. 22, five days after Virginia legislators approved the Rust bill. It's unclear how much the tax break would save AOL on the Prince William project because the company won't discuss the value of equipment it plans to install. But Rod Forsythe, a North Carolina economic development representative, said AOL told that state the data center would be worth $450 million, including $402 million in computer servers and other equipment. Sources in Virginia have cited a higher overall investment of $550 million in Prince William. Using the lower North Carolina cost estimates, AOL could save more than $18 million by avoiding Virginia sales tax on as much as $402 million in equipment. In addition, Payne's office estimates that even without new facilities, AOL will save about $4 million a year in sales taxes on equipment it buys for existing facilities. The company also is eligible for tax credits of $1,000 for each job above the first 100 new positions, Virginia economic development officials said. Prince William officials may offer additional tax breaks and other incentives. Virginia officials have approved large incentive packages for other high-technology firms, such as a $48 million deal for the Dominion Semiconductor computer chip plant in Manassas. But many of those projects have promised far more jobs than the 375 anticipated at the new AOL site, officials said. © Copyright 1999 The Washington Post Company Back to the top