Twitter is expected to save about $22 million over the next six years, thanks to a potential tax break that passed a major legislative hurdle in San Francisco on Tuesday night.
The city's Board of Supervisors has approved an ordinance that exempts companies in a certain part of the city from paying a 1.5 percent payroll tax on new employees for the next six years. The Board must approve it again in a second vote taking place next week, according to AFP.
Although the tax break applies to companies in the city's "gritty" and "less fashionable" mid-Market and Tenderloin districts, mayor Ed Lee made it clear that the ruling was aimed at Twitter.
"This six-year payroll tax exclusion for new jobs created on Central Market Street and in the Tenderloin Area will create new jobs, generate revenue for the City and has the potential to create a new innovation cluster on Central Market," Lee said in a statement. "There is great synergy between Twitter and the arts organizations and small retail businesses who are looking to expand in the area. This new partnership with Twitter represents just one example of how the City can work collaboratively with businesses, community-based organizations, property owners, and area residents to catalyze meaningful change in this neighborhood."
The Board's budget analyst, Harvey Rose, estimated that Twitter will save around $22 million over six years.
VentureBeat's Anthony Ha also noted that the ruling means Twitter won't have to pay stock option payoffs if the company goes public. A recent share auction revealed that Twitter investors valued the company at $7.7 billion.
In January, Twitter threatened to move its headquarters from San Francisco's trendy South of Market (SoMa) district to Brisbane, California, which doesn't impose a payroll tax. The Board of Supervisors said it would consider passing a tax break if Twitter moved to the mid-Market area instead. In March, Twitter signed a letter of intent to rent the space if the supervisors approved the tax break and is expected to follow through on its promise.
Meanwhile startups outside the special tax zone, like Zynga, Trulia, and Yelp, have also reportedly issued similar threats to leave the city unless they too receive a tax break.