WASHINGTON — Just hours after Facebook officially went public on the New York Stock Exchange on May 18, 2012, Oregon Gov. John Kitzhaber (D) signed a bill that granted the multibillion-dollar company an enormous tax break on its data center in Prineville, Oregon.
The legislation, dubbed the "Facebook bill" by local media, changed the way taxes were assessed on tech companies' data centers. The move saved the social media giant millions of dollars.
To achieve and maintain this financial boost, Facebook has leaned on tried-and-true techniques: lobbying and campaign contributions. Starting in 2012, the company has given $34,000 in direct corporate contributions to the governor and 24 different Oregon state legislative candidates, according to a review of data collected by the National Institute of Money in State Politics.
Facebook is not alone among tech companies in turning its attention to state politics. Over the past decade, Silicon Valley firms have dramatically increased their lobbying expenses and political contributions. Political action committees run by Google and Facebook now dole out hundreds of thousands of dollars at the federal level every year, and their executives are in demand as fundraisers. But increasingly these contributions are also trickling into cheaper state elections. They tend to arrive just as state governments are considering legislation or regulations that could affect the corporate bottom line.
The most prominent example of this involves the pursuit of tax breaks for the massive data centers run by many major tech companies. These complexes house the servers that make up the infrastructure of the Internet. Every tweet you send, every email you write, every photo on Instagram, every post to Facebook and everything you search is housed in one of these data centers.
According to a July 2013 report by real estate giant CBRE Group, 17 states offer a variety of financial incentives for data centers, including cuts to or exemptions from sales taxes on business purchases, property taxes and electricity rates.
Whether this is an effective use of taxpayers' money is certainly debatable. The location of data centers are not based entirely, or even mainly, on which states offer tax incentives. The availability of cheap electricity, a temperate climate and a low potential for extreme weather events or earthquakes are the most important factors.
That's why Phil Mattera, research director at Good Jobs First, a labor-backed group tracking corporate subsidies, objects to the whole idea of offering tech companies tax breaks to locate in a particular state.
"The main reason why these companies are seeking to locate data centers in certain places is for cheap electricity," Mattera said. "So that's their primary motivation. In theory, they shouldn't be getting any subsidies or incentives on top of that."
Whether campaign contributions to state officials are an effective use of tech corporations' cash may be less debatable. Facebook operates a data center in Ashburn, Virginia. It gave $42,750 to state candidates as the Virginia legislature passed a bill to expand tax incentives for data centers in 2012.
With a data center in Washington state, Yahoo has made $43,600 in contributions to that state's legislators since 2008. Indeed, since 2010, Yahoo has made contributions to elected state officials in each state where it operates data centers and receives incentives, including $28,500 in Oregon, $13,750 in Nebraska and $11,750 in New York.
In Utah, eBay operates both a call center and a data center. The state provides tax incentives for both, and eBay has given $18,000 to the campaigns of state officials since 2004. Tech companies say they are simply seeking to engage with local elected officials in those states where they have operations.
A Yahoo spokesperson told The Huffington Post in a statement, "Our state public policy team is more active in those states where we have a physical presence. We feel it is important to engage where our employees live and work, and where our company invests in terms of facilities, hardware and people. We engage with policymakers at the state level on a variety of issues that impact our business, including privacy and security issues."
A Facebook spokesman likewise said that "whether Facebook has a physical presence in that candidate's district or state" is an important factor in where the company sends campaign contributions.
Tax breaks are not Silicon Valley's only goal when its companies pony up donations. As Yahoo noted, the tech industry has many "privacy and security issues" — from government responses to data breaches by hackers and the intrusions of the National Security Agency, to the implementation of "Do Not Track" regulations, law enforcement actions against online child pornography and the provision of online account information to the relatives of the deceased.
Candidates for state attorney general, in particular, have seen a large increase in tech company campaign cash. Attorneys general, of course, enforce many laws and regulations on privacy and antitrust matters.
Attorneys general also have the power to reach more or less onerous settlements over inappropriate corporate practices. Google was forced to pay just $17 million in a 2013 multi-state settlement over its tracking of consumers. Facebook entered into a settlement in 2007 with New York state in which it merely paid a fine and agreed to step up its policing of pornography and harassment.
"They all know that Congress isn't going to do anything for a while, so if laws get enacted in the states and if you have gotten a law that you don't like and were unsuccessful at lobbying against it," said John Simpson, director of Consumer Watchdog's Privacy Project, "it's probably where you're delighted to have an elected attorney general who's a friend of yours."
Among Silicon Valley tech companies, Facebook leads the way in giving to attorneys general. It has contributed $64,200 to 15 different attorney general campaigns since 2011, more than even Microsoft.
In Virginia's 2013 election, the social media giant donated to both Democrat Mark Herring, the ultimate winner, and Republican Mark Obenshain. It has also made contributions of $13,600 to Georgia Attorney General Samuel Olens and $10,000 to Utah Attorney General Sean Reyes since 2011.
"As Facebook works to achieve its goal of making the world more open and connected, we believe it is important to develop relationships with elected officials and candidates for public office, at both the state and federal levels, who share our vision," the Facebook spokesman said in a statement.
Last year, the National Association of Attorneys General agreed to team up with Facebook on a campaign warning teens and parents about privacy and Internet safety issues. Nineteen attorneys general even made public service announcements with Facebook's chief operating officer, Sheryl Sandberg.
This joint project did not proceed without criticism. Jeffrey Chester, executive director at the Center for Digital Democracy, said at the time, "Facebook’s practices regarding teens, especially its data collection and ad targeting, require an investigation — not just some glossy educational videos and tip sheets."
CORRECTION: An earlier version of this story misnamed the director of Consumer Watchdog's Privacy Project. He is John Simpson, not Sullivan.