The Washington PostDemocracy Dies in Darkness

Amazon is building warehouses in ‘opportunity zones’ that provide tax breaks and secrecy

The company has located delivery stations, fulfillment centers and even an air hub in regions that qualify for capital gains tax breaks under a 2017 law.

Amazon packages move along a conveyor at an Amazon warehouse facility in Goodyear, Ariz. Amazon has expanded into “opportunity zones” since 2018, according to a new analysis. (Ross D. Franklin/AP)

Amazon has been heavily expanding into areas that the government designates for special tax incentives, according to a new analysis that comes amid growing regulatory scrutiny of the e-commerce giant.

The company has located delivery stations, fulfillment centers and even an air hub in “opportunity zones,” regions across the country where investors can qualify for capital gains tax breaks under a 2017 law.

The initiative had bipartisan backing and was intended to incentivize investment in some of the most economically distressed regions of the country. But critics of the program have raised concerns that such programs further enrich wealthy investors and corporations for projects that would have happened without government assistance. And because there aren’t requirements that investors and corporations publicly report how they are using the tax breaks, it’s difficult to measure impact. Experts say it’s impossible to know if the program is having the intended effect of creating jobs and affordable housing — or simply exacerbating economic divides.

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Amazon has opened 153 facilities in these zones since 2018, accounting for more than 15 percent of the warehouses that it has opened in that time period, according to the analysis from Good Jobs First, a policy resource center working with subsidy data, shared exclusively with The Washington Post. And 18 more facilities are scheduled to open in these areas in 2022 and 2023.

The findings underscore one of the potential ways that Amazon could take advantage of federal tax subsidies as it rapidly expands its delivery network. The company’s relatively low tax bills have been at the center of a political firestorm. The Good Jobs First researchers say the company has received at least $650 million in government subsidies this year, but that the expansion into opportunity zones highlights how the company could be receiving other tax breaks that are opaque to the public and difficult to track.

“More sunshine” is needed to better track the opportunity zone program, said Greg LeRoy, executive director of Good Jobs First.

Amazon spokeswoman Julia Lawless said the company hasn’t used the benefit in any of the 171 sites identified in the Good Jobs First analysis. (Amazon founder Jeff Bezos owns The Washington Post.)

“We may use the [opportunity zone] benefit on future acquired sites as Congress intended it to help jump-start local economies in the types of areas we are investing in and creating jobs,” she said.

She added that the company “does not actively seek out” locations in the zones.

“If we locate in one of these areas, it’s because of our site selection criteria — from available land to access to talent — aligns with tracts that governments, across all levels, have previously identified for economic development; not because we utilized the [opportunity zone] benefit,” she said.

Opportunity zones could be a boon to big companies like Amazon, that buy and sell many assets, leading to capital gains. Companies can invest those gains into projects in opportunity zones, allowing them to defer tax payments.

LeRoy says Amazon has been particularly aggressive in “garnering available tax breaks.” The Good Jobs First report argues the expansion into opportunity zones is part of a much broader pattern, where Amazon’s rapid growth has been bolstered through government subsidies. This push into potentially advantageous markets comes as federal policymakers are applying increasing scrutiny to the company. Lawmakers have introduced legislation that takes aim at Amazon’s alleged anticompetitive behavior, and President Biden has elevated some of the company’s most prominent critics, including Federal Trade Commission Chair Lina Khan, to key regulatory roles.

Amazon has rapidly expanded amid an e-commerce boom, in part accelerated by the coronavirus pandemic. Good Jobs First estimates that Amazon has received $4.2 billion in U.S. subsidies, through property tax abatements, corporate income tax credits and even sales tax exemptions on building materials.

“You’ve got two functions of government fighting each other right now,” LeRoy said. “You’ve got state and local governments fueling this monopolistic grab in the retail space, accelerating the decline of brick-and-mortar retail. And you’ve got Uncle Sam finally smelling the coffee and realizing that maybe they have to look at the company through that lens.”

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Amazon has a high-profile and controversial history of seeking government subsidies to expand its corporate footprint. In 2017, the company launched a nationwide search for its second headquarters. Faced with the promise of 50,000 high-paying jobs, cities aggressively competed to offer the company tax breaks and other incentives to attract the office. But after the company in 2018 announced it would split the new headquarters between Virginia and New York City, it faced broad blowback from liberal politicians, unions and community activists, who argued taxpayer dollars should not be used to further enrich a tech giant, and that the project would exacerbate income inequality in the city. The company ultimately dropped its plans to open the New York campus, amid the criticism that the tax incentives would take government resources away from other key programs, but pushed forward in Virginia.

However, unlike the high-profile headquarters search, the subsidies and incentives that Amazon receives for smaller local projects, like warehouses, data centers and offices, often fly under the radar.

The role of opportunity zones in fueling corporate growth is especially opaque, said David Wessel, a senior fellow in economic studies at the Brookings Institution. The tax law does not mandate public disclosure of who is using the opportunity zone program, and whether their projects are resulting in jobs or affordable housing. There have been some media reports about how individual investors have benefited from them, but less attention on how large corporations have used them.

That could be problematic if companies are using them to fund projects that do little to benefit or encourage job growth in the community, but garner them large tax breaks.

“It’s an unanswered question just how aggressive corporations are in the opportunity zone space,” he said.

Lawmakers, including Rep. Bill Pascrell Jr. (D-N.J.) have been calling for more robust reporting requirements around opportunity zones, especially in the wake of a Government Accountability Office report that found the IRS does not have the necessary data to evaluate the efficacy of the program. Pascrell also criticized the fact that there is no cap on the amount that investors can receive through the program.

“Nationwide, there is concern that the benefits are mostly flowing to those zones that were already ripe for development and could provide certain returns on investments,” Pascrell said at a recent hearing.

Amazon is clapping back at politicians on Twitter

Political scrutiny of Amazon’s tax payments has escalated in recent years, especially after the company paid no federal taxes on profit of $11.2 billion in 2018. Democrats, including Sen. Cory Booker (D-N.J.) and Biden, repeatedly attacked the company for not paying its fair share of taxes during the presidential primary race. The company responded with an aggressive social media strategy, frequently tweeting at individual politicians.

“We pay every penny we owe,” the company said, saying the politicians’ complaints were about the U.S. tax code, not Amazon itself.