Chip Taylor

Investment tax credit held unconstitutional

Tax prof Paul Caron reports:

The Sixth Circuit yesterday held that Ohio's investment tax credit is unconstitutional because it grants preferential tax treatment to companies to expand within the state rather than in other states. Cuno v. Daimler-Chrysler, Inc., No. 00-07247 (6th Cir. Sept. 2, 2004): "[W]hile 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." The decision, if followed in other circuits, would invalidate investment tax credits in 40 other states. (Tax Prof Peter Enrich (Northeastern) was counsel for the appellants.)

Wow. Prof. Caron has links to the decision. I haven't read it, but my intital reaction is to think the decision is quite wrong.

I'm not a big fan of specialized tax credits. But I'm even less a fan of federally-enforced state tax harmonization and (at first glance) it looks like this decision points that way.

UPDATE: More here.

UPDATE: And here.