Supreme Court to Hear Case Involving Investment Tax Credits

Article excerpt

The U.S. Supreme Court recently agreed to review a federal appeals court decision in Charlotte Cuno, et al. v. DaimlerChrysler Corp., which held unconstitutional the ability of Ohio and its municipalities to use investment tax credits for economic development purposes.

The Court also instructed the parties to explain whether Cuno had legal standing to bring the case, which signals that the Court might resolve this matter without answering the Constitutional question. The National League of Cities filed a brief in support of review on behalf of the City of Toledo and Ohio.

The case concerns a 1998 agreement whereby DaimlerChrysler would construct a new $1.2 billion vehicle assembly plant near an existing facility and, in return, the city and two local school districts agreed to provide approximately $280 million through local property tax exemptions and an Ohio investment tax credit.

A group of Toledo citizens and businesses subsequently challenged the constitutionality of the agreement under the Commerce Clause.

The federal Court of Appeals for the Sixth Circuit, which governs Ohio, Michigan, Kentucky and Tennessee, concluded that the Ohio tax credit was coercive because it rewarded companies that invest in Ohio but offered no such break if a company expanded in another state.

Congress responded to the Sixth Circuit's ruling with proposed legislation. On May 18, Sens. George Voinovich (R-Ohio) and Debbie Stabenow (D-Mich.) introduced S. 1066, the Economic Development Act of 2005, co-sponsored by the six other senators representing the states of the Sixth Circuit.

The bill clarifies that certain state and local tax incentives offered for economic development purposes--like the investment tax credit at issue in the Cuno case--do not burden interstate commerce. …