Apollo Group Threatens To Pull Employees From Arizona

Apollo Group Inc. (APOL) is threatening to move employees from Arizona after the company was denied a tax break for business conducted outside the state.

Phoenix-based Apollo, which operates the University of Phoenix, pays Arizona state income tax on all revenue, no matter where its 400,000-plus students are based. It also pays taxes in many of the other states where it conducts business.

At issue is a bill that would have allowed companies that derive more than 85% of sales from services provided outside the state to pay local taxes only on its in-state services. It proposed a formula similar to one in place for companies that sell tangible goods outside the state.

While Arizona's state legislature had passed the bill, Gov. Jan Brewer vetoed it Wednesday, citing the state's fragile financial situation.

"We are very disappointed in Gov. Brewer's decision to veto this important legislation that would restore tax fairness and make the state more attractive to business," Apollo spokesman Manny Rivera said in an emailed statement. "Apollo and other impacted companies may be forced to investigate options for locating employees in states whose policies are more fair and equitable."

According to a March story in the Arizona Republic, State Sen. Rick Murphy estimated Apollo and fellow for-profit college operator Grand Canyon Education Inc. (LOPE) would save about $20 million combined. Grand Canyon said it would save about $500,000 a year, according to the story. Apollo has about 10 times as many students as Grand Canyon.

Apollo declined to provide details of how much it had expected to save, and Grand Canyon wasn't immediately available for comment.

-By Melissa Korn, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com

Apollo Education Group, Inc. (NASDAQ:APOL)
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