Big-dollar incentives could be outlawed

According to an article in the Nashville City Paper:

Millions of dollars in incentives states use to lure companies, such as Tennessee did for Nissan, may be outlawed depending on a U.S. Supreme Court decision expected next year. The high court has agreed to hear arguments March 1 on a case that could impact whether states are able to grant tax credits in their attempt to lure companies into their areas.

The case of Cuno v. DaimlerChrysler started after the auto manufacturer entered into an agreement with the city of Toledo to construct a new vehicle-assembly plan at an already existing manufacturing site. DaimlerChrysler received up to $280 million in tax incentives from the city and two local school districts.

The plaintiffs contend the incentives are unconstitutional and discriminate against interstate commerce by granting preferential treatment to in-state investment. While the district court ruled the investment tax credits and the property tax exemption given to DaimlerChrysler constitutional, the Sixth Circuit Court of Appeals overruled the district court’s decision on the investment tax credits in September 2004.

Federal Judge Martha Craig Daughtrey, a Nashvillian who serves on the Sixth Circuit Court, wrote in that court’s opinion that “while we may be sympathetic to efforts by the City of Toledo to attract industry into its economically depressed areas, we conclude that Ohio’s investment tax credit cannot be upheld under the Commerce Clause of the United States Constitution.”

Index Keywords: tax-incentives