One more on the Nike deal

Carla Axtman

Well, they did it. Our legislature handed over some pretty significant power to our governor to negotiate special tax deals with big corporations. Rep. Jules Bailey seems to think that the list of stuff they did to the legislation made things palatable. A big majority of his colleagues agreed. Rep Lew Frederick didn't find that to be the case. He was obviously in the minority.

What went largely unnoticed in this bum's rush was what may be the real reason for the haste. The only reporter I saw really pick up on it was Sarah Mirk, at The Portland Mercury:

Potentially driving the deal is a lawsuit filed in July by California-based insurance company Health Net. The lawsuit argues that Oregon's current "single-sales factor" tax structure is unfair, demanding the state switch back to its old tax structure. That system—although more costly to companies like Nike and Intel—cost Health Net less.

If Health Net wins that lawsuit, the potential loss to the state is huge.

Jonathan Cooper, Associated Press:

But legislative analysts project that losing the other case, filed by Health Net Inc., would cost the state about $100 million a year in lost revenue, plus refunds.

Health Net, a California insurance company with operations in Oregon, filed the case in July in the Oregon Tax Court. The company argues that a multi­state tax compact that Oregon joined in the 1960s trumps newer state laws that differ from it. The provisions of the multistate compact would be more favorable to Health Net — and many other businesses in Oregon — than the newer state law.

The challenge is still in a very early stage and could take years to resolve, but officials are keeping a nervous eye on it because of the amount of money involved.

So while nobody in the legislature is seriously considering changing the single sales factor NOW, this lawsuit may eventually force their hand. The legislature just handed the governor the power to negotiate a contract to allow big corporations to keep this tax structure, presumably even if the state loses the suit. So, the state loses millions AND Nike won't have to pay. Or at least that's what I imagine Nike is trying to get in the negotiations with Kitzhaber.

I'm not a lawyer and I don't play one on this blog, so I have no idea how any of this would really shake out in court--and if any contract Kitzhaber negotiates would withstand a challenge should Health Net win.

By Carla Axtman Dec. 17, 2012