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Tax incentive aimed at luring tech company to Utah

By Grace Leong - Daily Herald - | Mar 17, 2006

A state tax incentive program aimed at making Utah more competitive in recruiting business is starting to reap dividends. It has helped attract $3 billion — the largest single business investment ever made in Utah.

On Friday, the Governor’s Office of Economic Development Board approved an income and sales tax incentive to IM Flash Technologies Inc., a joint venture of Micron Technology Inc. and Intel Corp. that now occupies the former Micron plant in Lehi.

Headquartered in Lehi, IM Flash will make NAND memory chips at Micron plants in Lehi, Boise, Idaho, and Manassas, Va. A significant portion of these chips — typically used in portable music players such as Apple iPods, digital cameras, portable storage and handheld devices — will be shipped to Apple Computer. Apple is expected to pay Micron and Intel $250 million each.

Under the state’s Economic Development Incremental Tax Incentive, IM Flash will receive a rebate that won’t exceed 30 percent of state sales and income taxes paid over a five-year period. To receive the rebate, it has to create 1,850 new jobs in Utah during the next five years and commit to keeping operations here for at least 10 years.

“For instance, in year one, IM Flash has to pay state income and sales taxes, file a rebate on those taxes, and then in year two, they’ll get a rebate on taxes they paid in year one,” said Michael G. Sullivan, director of communications and legislative relations with the Governor’s Office of Economic Development. Twelve other companies in Utah have received the state tax incentive to date.

Hiring is under way for the 1,850 positions at the former 400-worker Micron plant in Lehi, which is expected to transition from testing computer chips to making NAND products by early 2007. Job openings are now available in operations, engineering, research and development, human resources, finance, accounting, information systems, sales and marketing.

“At the end of five years, if IM Flash earns a $10 million rebate, that means they would have paid $48.8 million in state income and sales taxes, which Utah wouldn’t have gotten if the Micron plant had stayed idle or gone overseas or to other states,” Sullivan said.

In addition, the company is expected to pay more than $1 billion in salaries to Utah workers over the next 10 years. “The salary structure at IM Flash is well above the Utah County median, which is currently $22,300 a year. Wages at IM Flash average about $50,000,” he said.

Trudy Sullivan, spokeswoman for IM Flash, says the company typically offers high-paying tech jobs because the potential for NAND products is tremendous — its market value reached $11 billion in 2005, and is expected to jump 40 percent to $14.8 billion this year.

“Our success and continued investment in Utah is tied to our cost competitiveness. This tax incentive makes Utah an increasingly supportive and competitive state to do business in,” Sullivan said.

Other factors behind IM Flash’s decision to locate in Lehi include the state’s highly educated and productive work force, and a $1 billion investment Micron had already made in the Lehi plant that would enable NAND memory chip production to ramp up very quickly.

“Micron has worked to diversify its portfolio, and IM Flash is an extension of its partnership with Intel. NAND’s market potential is the fastest-growing semiconductor segment now. We don’t have a crystal ball, but we’re not talking about the same level of volatility in market conditions that we saw 10 years ago when the semiconductor industry fell into a slump,” Sullivan said.

Stan Lockhart, IM Flash spokesman, agreed. “We also have a firm customer now. Apple has made significant commitment and investment to buy chip output from this plant. Plus we have other customers through Micron and Intel too,” he said.

“There’s a tendency in our industry for vendors to follow tech investment, meaning in future, there may be IM Flash vendors, or chip suppliers, that will locate in Utah near this plant.”

This story appeared in The Daily Herald on page A1.

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