Monday, March 20, 2006

Ohio tax incentives/ DaimslerChrysler v. Cuno

Ohio Governor Robert Taft issued a statement March 1st after oral arguments at the U.S. Supreme Court in the cases of DaimlerChrysler v. Cuno and Wilkins v. Cuno, stating that it was “important for companies to know that the outcome will have no impact on any new investments in the state because, through comprehensive tax reforms in 2005, the property tax on new machinery & equipment has been eliminated, and the existing property tax is being phased out over the next four years.”

At issue in these cases is whether the “dormant commerce clause” allows a state to try to attract new business investments by offering breaks in the state’s corporate income tax, where the amount of those breaks is based on the amount of a business’s new investment; and, secondarily, whether Ohio’s “investment tax credit” (ORC § 5733.33), which encourages economic development by providing breaks to taxpayers who install new manufacturing equipment in the State, is a violation of the U.S. Constitution’s commerce clause. (Art. I Sec. 8 Clause 3) District Court found no faults, dismissing the case in August 2001, but the 6th. Circuit Court of Appeals only affirmed in part.

Ohio to be sure is watching this case, but so are others with like concerns. A recent article posted on related that of all 50 states and the District of Columbia, all but five employ property tax abatements, tax increment financing, “enterprise zones,” or tax abatements within an enterprise zone collectively or in part as incentives to business – Ohio, Kentucky, and Indiana included.

Of the five not using all five types of incentive, though, Delaware still offers tax abatements; and Alaska, Idaho, West Virginia, and Wyoming tax increment financing.

Also, an article in this morning’s Enquirer relates amendments in the works with regards to tax breaks in Ohio’s “foreign-trade zones” .

· Ohio “investment credits” (ORC § 122.152)
· Kentucky “existing industry development” (KRS § 154.26)
“new industry development” (KRS § 154.28)
· Indiana “industrial recovery tax credit” (IC 6-3.1-11)
“venture capital investment tax credit” (IC 6-3.1-24)

· District court decision
· 6th Circuit Court of Appeals decision

· U.S. Supreme Court docket sheets and transcript of oral arguments

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