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Update on CUNO v. DaimlerChrysler
LEGAL BASIS OF CLAIM
The legal issue before the courts in Cuno v. DaimlerChrysler is
whether Ohio's tax credit incentive programs violate the U.S. Constitution's
"commerce clause". The Commerce Clause provides our federal Congress the
ability to regulate Commerce with foreign nations and among the states.
It also limits states' right to discriminate against interstate commerce as
opposed to intrastate commerce. Discriminatory taxation is prohibited.
The issue is whether economic incentives like Ohio's machinery and equipment
investment tax credit program are discriminatory.
COURT PROCEDURES
The first court to hear the case (N. District of Ohio at
Toledo), determined the parties' claims were not valid. The case was
dismissed on Defendants' motion. In September 2004, the plaintiffs appealed the
decision to the Sixth Circuit Court of Appeals which includes Ohio, Michigan,
Tennessee and Kentucky. A three-judge panel of the Sixth Circuit held
that the Ohio incentive program is a violation of the commerce clause; however
that the property tax credit was not a violation. The parties filed a Petition
for Rehearing En Banc, asking that the case be reheard before the full Court of
Appeals.
Kentucky, Michigan and Tennessee joined together to file an
Amicus Brief asserting that incentive programs are not a violation of the
Commerce Clause and asking the court to rehear the case with full panel. Joint
briefs were also filed by various Chambers of Commerce and the Manufacturers
Association in support of incentives. The Petition for Rehearing by Sixth
Circuit was denied.
The parties then filed a Motion for Discretionary Review by the
U.S. Supreme Court. The Motion was granted and the case will be taken up
by the Supreme Court this year. However, the Court has asked for briefing
on whether the parties have a right to bring this cause of action. If the Court
overturns the decision on procedural grounds, the constitutionality of tax
incentives in general will not be decided and future litigation of the issue is
likely. Kentucky has joined in an Amicus Brief that addresses both the issue of
standing and the substantive issues related to the U.S. Constitution.
Meanwhile, federal legislation has been filed in Congress. The
Legislative Committee stalled on hearing the bill when the U.S. Supreme Court
agreed to hear the Cuno case out of deference to the court. The proposed
legislation would give the states authorization from Congress, which has the
ability to regulate Commerce, to offer incentives and would make the legal
issue moot.
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