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Wall Street Journal

December 14, 2012

Nike presses for 40-year tax deal in Oregon

By SHELLY BANJO

Oregon's governor has called the state's legislature into a special session Friday to appease one very powerful corporate citizen: Nike Inc.

The world's biggest sneaker maker is expanding its operations in the U.S. and has threatened to move if Oregon cannot guarantee its corporate tax structure will remain the same.

Gov. John Kitzhaber is asking lawmakers to grant him the authority to ensure that the state's method of determining corporate taxes won't change for companies, like Nike, that fit very specific criteria: Will invest $150 million in the state over five years and create 500 jobs.

Nike—the second-biggest company in Oregon by employees and revenue—is contemplating an expansion of its Beaverton, Ore., headquarters that would exceed those thresholds. Nike said it first wants assurance its state tax burden isn't going to increase. Under the proposed law, it could get such a promise for up to 40 years.

Oregon is the latest of a string of states to dole out billions in tax incentives that elected officials say create jobs and investment. State leaders say it isn't a tax break.

"We don't have the magnitude of resources available to a state like New York or California with which to woo companies," Mr. Kitzhaber said at a legislative hearing Thursday.

"Nike is a global company with a long history in Oregon," Nike's finance chief Don Blair said. "We support this proposed legislation as a way to help us continue to grow in Oregon." Nike was started out of the University in Oregon in 1964.

The footwear giant already enjoys a different tax structure than many other multi-state businesses. Under Oregon's "single sales factor" rule, which was fully adopted in 2005, companies like Nike pay state taxes solely on the fraction of sales they incur in Oregon.

Total sales, the number of employees, or property aren't factored into corporate taxes in Oregon, the way they are in the majority of other states.

Opponents of the measure question why Nike is asking for a guarantee now, since Oregon isn't weighing changes to the corporate tax structure.

"Nike put an economic gun to the governor's head and said you either guarantee the law won't change or we'll go elsewhere," said Chuck Sheketoff, executive director of the Oregon Center for Public Policy. "As it is Nike is paying 90% less than its fair-share in taxes."

Mr. Kitzhaber said Nike approached him about a month ago to detail plans to expand operations in Oregon and ask the state for certainty on corporate taxes.

Nike said it was entertaining offers from other states courting the company with incentives, according to Mr. Kitzhaber. He declined to name the other states.

"Nike didn't threaten to leave but said if you wanted to act right away we will commit to keeping the new expansion in Oregon," he said.

Write to Shelly Banjo at shelly.banjo@wsj.com

Corrections & Amplifications

Chuck Sheketoff, the executive director of the Oregon Center for Public Policy, maintains that Nike is paying "90% less than its fair share" in state taxes. An earlier version of this article quoted him as saying that Nike was paying less than 90% of its fair share of state taxes.

A version of this article appeared December 14, 2012, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: Nike Presses for 40-Year Tax Deal in Oregon.

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