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Arizona Governor’s Veto of Tax Break Prompts Threat From Apollo Group

April 14, 2011, 12:15 pm

Gov. Jan Brewer of Arizona has vetoed a bill that would have given a big tax break to the companies that own the University of Phoenix, Grand Canyon University, and others that derive substantial revenues from sales of services outside the state, as those institutions do with their distance-education programs. The Republican governor said the state could not afford it. In a statement to Dow Jones, a spokesman for the Apollo Group said the company, the corporate parent of the University of Phoenix, “may be forced to investigate options for locating employees in states whose policies are more fair and equitable.”

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  • barbarashell

    …so the mega millions they make now and the huge salaries paid to executives apparently are not enough for them to make a living in AZ? Will they change their name from Phoenix to “SCAM” ?

  • huntlambert

    Unfortunately just watch, soon every state and city will be recruiting them with huge incentives. We now live in a rent a company country where public entities need to buy private company loyalty. Sad but true. Our best bet is to be really high quality and high access as public providers and ignore them.

  • lizziec

    Up to this moment in time I’ve not thought very highly of Governor Jan Brewer. This changes my position at least on this issue.

  • auntieintellectual

    Don’t come here, Apollo Group, as people who talk tax breaks are considered traitors. You pay your taxes, and there will be food when we throw you in jail for misrepresenting your “educational programs”. Don’t pay your taxes, and well…what we have heah is a “failure to communicate”…

  • _perplexed_

    Follow the dollars: We pay taxes to the Federal government, and a portion of this revenue is made available to students, many of whom enroll in insitutions owned by the Apollo Group. Without the federal dollars that students use to pay, Apollo Group would earn a great deal less. The State of Arizona wants its cut, a portion of which will be passed on to Arizona residents either indirectly in the form of state-supported infrastructure improvements, or directly (as in the case of state employee salary). A portion of these dollars return to the Federal government as tax revenue, and so the great wheel turns…. Except the Apollo group says “No! Not us. We get to keep all of what comes to us. We alone must be exempt from the turning of the wheel.” If they want out I say: End federally-subsidized loans to the University of Phoenix students now.

  • 11274135

    Don’t do anything rash, LIZZIEC. She’s still a turkey. We’ll see how she does with the guns on campus bill headed her way. As to U of P: as far as I know U of P doesn’t own any real estate anywhere. Moving would be no huge deal for them. Of course, our U of P stadium might seem a little peculiar without them. It’s sort of peculiar anyway.

  • http://twitter.com/RussKnocke Russ Knocke

    a big veto

  • old nassau’67

    I have often wondered why the feds, in their need for $$, don’t tax any internet transactions originating or ending in the US. Could be as low as $1 or 10%, whichever is less. Easy to implement: just program the business’ computers to credit Uncle Sam. Progressive, in that the wealthier the household, the more likely to utilize the internet.
    As for internet companies fleeing Arizona: other states might offer incentives, then start taxing.
    “Come in”, said the spider to the fly.

  • selfg

    For what it’s worth, I believe UoP owns a good bit of expensive real estate (http://www.phoenix.edu/news/multimedia_gallery/photos.html). Two of the building pictured are in Phoenix, others are branch campuses (roll over the images to see where the buildings are located). I cannot say for sure that they own the ground the building are sitting on, but that would seem reasonable to assume.

  • sanjoaquin

    When I was a little child, I used to threaten to run away when I didn’t get what I wanted.

  • http://michaelhattem.webs.com/ natsteel

    “…a spokesman for the Apollo Group said the company, the corporate parent of the University of Phoenix, “may be forced to investigate options for locating employees in states whose policies are more fair and equitable.””

    Is “fair and equitable” the new “fair and balanced?” The Apollo Group obviously has different definitions for those two words than the rest of us.

  • missoularedhead

    I’m sort of flabbergasted that Jan actually vetoed a tax cut bill, actually. So flabbergasted that I’m having a hard time believing it!

  • mikpap

    Politically, not a very good move. The Uof P is likely here to stay because it meets a market need and, despite waht a lot of people would like to believe, offers the same quality of education people get at most traditional colleges. Yet, aside from these issues, Uof P represents jobs and infrastructure in a state that could use them. No doubt, they’ll be courted by a lot of folks.

  • nugatory

    Someplace in this discussion, it might be appropriate to look at the facts. Here is the Arizona Republic’s coverage. It looks to me like an issue that we would object to personally if the double-taxation were applied to us. I suppose Apollo can afford it and they can always move but for those who like to think in terms of principles rather than respond to issues based on “friends” and “enemies,” I see issues.
    ———————–

    Tax law
    The system is unfair, the businesses argue, because they are “double taxed” in 11 states. After they pay taxes on all of their customer sales in Arizona, 11 states tax the businesses based on services they sold to students in each of those states.

    Under the bill, Apollo and Grand Canyon’s can chose a “market” option, which means their income-tax bill would reflect only the students they serve in Arizona – not other states. The proposed legislation applies to businesses that sell 85 percent of their services out of state.

    It may also apply to businesses that operate call centers, process credit-card transactions or process insurance claims for out-of-state customers, according to the state Department of Revenue report.

    Apollo is Arizona’s fourth-largest employer with 12,000 workers.

    Read more: http://www.azcentral.com/business/articles/2011/03/13/20110313arizona-bill-apollo-tax-breaks.html?source=nletter-business#ixzz1JbtEFMrM

    —–
    The comment of one poster on the Republic site seemed helpful:

    [They pay tax in AZ as current tax law taxes service where they are generated.... Since Apollo is mostly online, and those services are rendered from AZ...AZ taxes the profit. However, many states are moving to a "market based approach". This approach taxes the same profit in the place where Apollo's market (students) reside. Therefore, Apollo is being taxed twice on the same income.

    This is a problem....not just for Apollo, but most online based business. Since AZ has many companies within this profile, its a big issue. The US Supreme court needs to look at the "market Based Approach" as there are some troubling constitutional issues associated with its use.]

    Read more: http://www.azcentral.com/business/articles/2011/03/13/20110313arizona-bill-apollo-tax-breaks.html?source=nletter-business#ixzz1Jc0vm5qd

  • gothamci

    hum?

  • 11274135

    U of P occupies a lot of space but owns very little of it. They just sold a big building in Phx a few weeks ago.

  • http://twitter.com/#!/ProprietaryEd ForProfitEd

    It may be a matter of moving their OPE ID to another state. Could this be more about an HLC investigation rather than tax breaks?

    It appears to be similar to Career Education Corporations AIU bouncing from Georgia to Illinois when it was placed on probation by SACS, moving HLC turf when HLC was viewed as friendly to for-profits.

    Bridgepoint’s Ashford University and EDMC’s Argosy University have had been pondering jumping ship from HLC to WASC. Now that the big six are under the microscope, the online giants may be running out of options.

    For-Profit Education is clustered in HLC turf and the schools use lead generators to capitalize on their NCA HLC fame.

    http://www.50states.com/college-resources/north-central-accreditation.htm

  • akprof

    This is the only action she has taken that makes any sense at all!! I’m certain that she will change her mind!

  • nugatory

    I don’t think “for-profit paranoia” is called for but this one person seems to insinuate it everywhere.

    This looks to me like a simple “double-taxation” issue, a subset of the larger issue of how to manage state taxation in cross state sales and services. For-profits are getting the news here but places like Buy.com and call service centers, etc. probably account for more floating tax revenue than Apollo. I agree with the other person who sees a probable Supreme Court resolution in the future. I can see decent arguments on all sides.

    As for the HLC to WASC issue, an old acquaintance works at EDMC and, though him, I know that EDMC has been teeing up a move to WASC for several years, at least a year before HLC came under fire for being “too lax” on one of the smaller for-profits. It was a condition of the new CEO’s acceptance. Separately, if you actually read the documents outlining the sequence of HLC events as I did, you see that ED nearly fell over themselves to seize a small window of opportunity to pursue an agenda against the regionals that presented itself during the standard HLC response period. HLC was on top of the particular issue but that, of course, had little to do with ED’s real motives. HLC is being exploited to serve a federal agenda to marginalize regionals, all of them once they get the process nailed in dealing with HLC. If we want this, fine. I’m not so sure. We may want to ask ourselves how much confidence we have in the feds ability to properly conceptualize and enforce regulation issues. You might ask how well they did with oil drilling, financial and insurance markets, etc. I guess they can blame those on regulatory capture. Of course as I write this, a third ATC employee has fallen asleep on the job in two weeks, with no capture or Apollo to blame there. Personally, I’ll take the diversity, including the downside of it, that comes from state regulation and regional guidance.

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