Cities vying for Amazon.com, Inc.’s HQ2 and its reported 50,000 jobs have been abuzz in recent days as reports have emerged that Amazon “has progressed to late-stage talks on its planned headquarters with … northern Virginia’s Crystal City, Dallas, and New York City,” according to the Wall Street Journal. While the New York Times has reported that “Amazon plans to split HQ2 between Long Island City, N.Y., and Arlington, Va.,” no definitive announcement regarding HQ2 has yet been made. Assuming that Crystal City, Dallas, and New York City are all still in the running for the potential headquarters, you may be wondering: which finalist city would allow for the lowest property tax bill?
While we may not know all of the incentives that finalist cities or states have offered to Amazon, the property tax rates that generally apply in these cities are public knowledge, allowing analysts to estimate Amazon’s potential tax liability for commercial real property in each location.
If Amazon were to place its headquarters in Long Island City, an area in the Queens borough of New York and invest $5 billion in commercial real property there, the annual property tax bill could be $375 million, according to a Bloomberg Tax Special Report authored by Katie Devinney and Ernst Hunter. This bill is based on “the highest [effective] rate applicable” in the area of 7.5 percent.
If Crystal City is selected, for 2018 the company would pay a countywide property tax rate of 0.993 percent, plus an additional 0.043 percent for the Crystal City Business Improvement District, for a total tax rate of 1.036 percent. If this tax rate is applied to an estimated $5 billion investment, Amazon would have an annual property tax bill of $68 million.
For Dallas, the property tax rate that might apply to the company could be as high as 3.02 percent, as calculated by Devinney and Hunter. This tax rate could lead to a whopping annual property tax bill of $151 million.
While I understand that no final decision has been announced, if Amazon were deciding between the alleged three remaining finalists based on property taxes alone, it looks like Crystal City would be the winner. Whoever Amazon’s new neighbors are, I hope they welcome the company with a casserole (or have one delivered by drone in 2 hours or less).
Continue the discussion on Bloomberg Tax’s State Tax Group on LinkedIn: How do property taxes factor in to companies’ business decisions?
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