Even though Amazon walked away from billions in subsidies in New York, the company may still wind up qualifying for federal tax breaks that are intended to help distressed communities by building a new data center in Virginia.
About 30 miles west of Washington, Amazon and its partners are preparing to build a facility to house infrastructure for the rapidly growing Amazon Web Services, according to Bloomberg. AWS went into contract on the property last year after executives held two meetings with Virginia’s embattled Governor Ralph Northam, who subsequently selected the area as a “qualified opportunity zone”. The property is 107 acres and the designation will entitle Amazon to claim millions of dollars in federal tax breaks.
But in yet another potential scandal, Northam claimed that he hasn’t discussed the tax break with Amazon executives and that he didn’t select that area as an opportunity zone to help attract Amazon. Amazon echoed these sentiments, saying that the opportunity zone designation was never discussed with officials in Virginia and that it played no role in the company‘s decision to build there.
The tax subsidy available to AWS, which hadn’t been previously reported, is the latest catalyst to spur questions about whether the opportunity zone program is simply a giveaway to wealthy individuals that expand in relatively affluent areas. As everybody knows by now, Amazon drew criticism for deciding to build in an opportunity zone in a gentrifying area of Queens – plans that were subsequently scrapped days ago.
Amazon didn’t comment on whether not it would forgo the opportunities from the subsidy, claiming simply that “AWS doesn’t disclose or discuss details about its data centers.”
The point of opportunity zones is to allow governors to select up to a quarter of their census tract to qualify for subsidies. Investors who help develop or fund businesses in these zones are often able to defer capital gains and profit taxes. Virginia chose a mix of poor and affluent areas, including two in Loudoun County, which had a median household income of $135,842 in 2017. This is more than double the national average and the highest of any county in the nation. In the county where Amazon is building its data center, the median income is $88,657.
A lot of the details of the negotiations haven’t been released publicly because Amazon and community officials often sign nondisclosure agreements. But public documents and interviews indicate that negotiations with Amazon about the data center and its new headquarters were closely aligned. The site that AWS chose for its data center is next to a larger tract of land that Virginia was pitching as a possible location for Amazon’s second headquarters. The economic development official in Virginia who nominated the census tract as an opportunity zone, Buddy Rizer, had been talking to Amazon executives about both properties and said he considered the matters separate because he didn’t believe Amazon would be able to use the opportunity zone credit at either location.
The overlap between these processes is drawing criticisms of the program. The main critique is simply that the law and regulations surrounding opportunity zones are very loosely written and they permit state and local officials to use federal dollars to draw the favor of large companies instead of focusing on blighted communities.
Greg Leroy, executive director of Good Jobs First, a Washington-based labor-funded organization critical of corporate subsidies told Bloomberg: “The idea that a company headed by the richest person on the planet could get a tax exemption in the richest county in the country completely summarizes the deceptive packaging of the whole program. Poor people are the bait. But the switcheroo is that the rich people get all the government handouts.”