Amazon will pay $500,000 penalty after failing to notify California of tax breaks

Story updated on March 19, 2018

Amazon has agreed to pay a $500,000 penalty after failing to notify local governments for about eight years that they weren’t entitled to offer state tax breaks for companies that have data centers in their regions.

The U.S. Tax Court ruled that the company should have made the disclosure to the California Air Resources Board when developing its 2015 data center incentive proposal, and that it should have issued notifications for other incentive projects throughout the state.

The court determined that such requirements are imposed under the state’s “advance notification of abatement” law.

The Air Resources Board has said that “buying competitive benefits” for data centers is “the most effective way to combat climate change,” and that it wants companies to be at least three years in advance of making such announcements.

But Amazon said in a statement that the state’s early-notice requirements “would require” the company to make “very late, unexpected announcements regarding new programs. This is extremely burdensome and impractical for Amazon, a company that already invests millions of dollars in state-of-the-art facilities and invests many more millions in employee training and education to create more well-paying, state-of-the-art jobs, and yet which must comply with a burdensome program. And this burden can only add to the cost and complexity of doing business in California.”

The regulations would “impact Amazon’s ability to carry out its state and federal corporate responsibility obligations,” and could “hinder our ability to recruit and retain employees,” it said.

Amazon agreed to pay the penalty and the board’s attorneys filed a motion to dismiss its remaining case. An attorney for the state didn’t immediately respond to a request for comment.

Later this year, California officials expect to adopt an extension of the state’s Advanced Notice of Tax Incentive Program after proposals failed in the state legislature.

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