Computer maker Apple Inc. (Nasdaq: AAPL) plans to locate a $1 billion data center in North Carolina, Gov. Beverly Perdue said Wednesday.
The move came after Perdue signed , which modifies the method by which capital-intensive businesses calculate corporate income tax liability in North Carolina.
“North Carolina continues to be a prime location for growing and expanding global technology companies,” Perdue said in a statement. “During these tough economic times, it’s important to make the investments that create jobs in areas that need them the most."
Apple has been rumored to be looking at sites in the western part of the state for an East Coast hub, but Perdue’s statement didn’t specify a location for the center.
Under the new legislation, a capital-intensive industry must meet investment and wage standards and provide its employees with health insurance in order to use the modified formula for calculating the state corporate income tax. It also must locate in one of the state’s more economically distressed areas.
The Apple facility is expected to employ at least 50 people, and it is expected to contract locally for services like server maintenance and repair, building and ventilation system maintenance, landscaping and security. Officials said spending on those services could range from $5 million to $6 million annually and create up to 250 jobs.
The state Department of Commerce projects that a data center investment of $1 billion would create more than 3,000 jobs in the regional economy, including hundreds of jobs related to construction and others created as a result of economic growth.
“We are very pleased the General Assembly has recognized the role capital-intensive industries play in the state’s economy and their relationship to small businesses in our communities," Commerce Secretary Keith Crisco said in a statement. "Technology-driven projects like this may bring fewer overall jobs than traditional industry, but they have a tremendous economic impact through locally purchased goods and services."
The announcement wasn’t unexpected. The Legislature quickly pushed through a bill that didn’t identify Apple by name but was designed to get the company to build in the state by giving it a break on state corporate income taxes as part of a capital-intensive project.
The tax break could be worth about $46 million in the next decade, according to a memo by legislative fiscal staffers.
Apple could, however, save more than $300 million on its corporate taxes if the server farm is in place for 30 years, based on the memo.
The company also must provide health insurance to workers, meet a wage standard and forego other state grants or tax breaks. The company would benefit from the tax change if it had a relatively large share of its nationwide property and payroll in the North Carolina, but a small share of U.S. sales in the state.
Also called server farms, the operations are huge, climate-controlled computer warehouses that can process vast flows of data moving along the Internet. They are heavy users of power and water and are usually spread out over large spaces.
Apple didn’t release specifics about how the center would be used. But the company has a similar farm in the San Francisco area and could use the new center to add capacity to store and move music, video and movies purchased through its popular iTunes Web site, which offers 10 million songs.
Apple also offers applications for the iPhone and its MobileMe service, which allows a user to synchronize desktop computers with other personal data devices.
Google Inc. opened a data center last year near Lenoir in the western North Carolina foothills. In 2007, state and local governments offered Google an incentives package worth up to $260 million over 30 years, one of the largest in state history, to land the $600 million data complex.
Opponents of targeted tax incentives for large companies have said for years they provide special treatment for one company in violation of the state constitution’s requirement of uniformity in taxation.
Bob Orr, a former state Supreme Court justice representing taxpayers in a pending legal challenge of Google incentives, said Apple’s preferential treatment is more egregious because a tax formula is being changed only to benefit the company.
It’s hard to justify a loss of future tax revenue during a time when lawmakers are facing a $4.6 billion budget gap next year, Orr said.
"We’re making draconian cuts in many important state services," Orr said, but at the same time "we’re giving a company – a multibillion-dollar profitable company – huge tax breaks for creating 50 jobs."