# Reply Brief — DaimlerChrysler Corp. v. Cuno > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0105%3A19 ## Record - **Collection:** Supreme Court brief - **Document type:** Reply Brief - **Published:** January 1, 2006 - **Citation:** 547 U.S. 332 ## Text 3") is paki No. 04-1704 IN THE Supreme Court of the United States DAIMLERCHRYSLER CORPORATION, Petitioner, V. CHARLOTTE CUNO, ET AL., Respondents. On Writ Of Certiorari Fe The United States Court Of Appeals For The Sixth Circuit t REPLY BRIEF FOR PETITIONER DAIMLERCHRYSLER CORPORATION CHARLES A. ROTHFELD THEODORE B. OLSON ERIKA Z. JONES Counsel of Record MIRIAM R. NEMETZ THEODORE J. BOUTROUS, JR-~ DAVID DEBOLD MAYER, BROWN, ROWE MATTHEW D. MCGILL - & Maw LLP MICHAEL S. DIAMANT 1909 K Street, N.W. Washington, D.C. 20006 GIBSON, DUNN & CRUTCHER LLP (202) 263-3000 1050 Connecticut Avenue, N.W. Washington, D.C. 20036 (202) 955-8500 Counsel for Petitioner i TABLE OF CONTENTS RO ee Fer CE ee ctesersenttionecnamenssnnsininnimnininiets il ITT sicennicinstinnpeaciccenincesiattiienieivaiianinianiitaieniaaaiigiie 2 I. RESPONDENTS’ NOVEL ARGUMENTS FOR TAXPAYER STANDING MUST _ BE TEI \scniseiceisingnecanenssileiciiiniiiasinddebsdiapéiinasssnoabieiiin 2 A. Respondents Cannot Satisfy The Minimum Article [Il Requirements for Federal i scicinscesiviitsidatlsabintednctsinabbiipininienenticatiti 2 B. Flast v. Cohen Does Not Endow Taxpayers With Standing to Bring Commerce Clause Chaldenges To State Taxe8.....0cccssoscsescscseseccecessessoesss 4 C. Respondents’ Other Arguments’ For Standing Are Meritless .................secccsessssssssreessseees 6 II. RESPONDENTS’ EXPANSIVE VISION OF THE DORMANT COMMERCE CLAUSE CANNOT BE RECONCILED WITH THIS COURT'S DECISIONSG.......... niciarticanenciptveinininieieincanieaseniee 9 A. Respondents’ View of the Dormant Commerce Clause Would Endanger Nearly Every Manner of State Economic Development Program ...........00ccsccccsesscsessosecsseesssees 10 B. The Ohio ITC Does Not Violate the Dormant Commerce Clause, Because It Does Not Impose A Burden On Interstate SE eae Se re. 13 C. Respondents Fail to Demonstrate That Ohio’s ITC Discriminates Against Interstate Bee ccinssbcnesecsscccitembigebeiitashitgciahbdiahatanipmaesnaniioadd 18 IT Moreover, this “injury” is unlikely to be redressed by the relief sought by respondents. First, if respondents’ view of the dormant Com- merce Clause prevails, the remedy that follows may be simply to invali- date the provisions of the statute that limit the credit to in-state invest- ments, as did the New York Court of Appeals on remand from Westing- house. See Westinghouse Elec. Corp. v. Tully, 63 N.Y.2d 191, 194 (1984). And even if the ITC were struck down in foto, respondents ac- knowledge that this only will cause states to offer a different menu of tax rate reductions or exemptions to businesses (Resp. Br. 47), and thus they concede that invalidation of the ITC will neither reduce their taxes nor provide additional funds for services. This failure of redressability is an reason respondents lack Article Ill standing. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 103 n.5 (1998). 5 provision that is a specific limitation on the exercise of [that] taxing and spending power.” Resp. Br. 11-12. Even assuming that, after Lujan, Flast’s “logical nexus” theory of taxpayer standing remains good law, see Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 203 (2000) (Scalia, J., dissenting) (noting that its “logical nexus’ analysis” has “fallen into desue- tude”), Flast cannot assist respondents in this dormant Com- merce Clause case. Respondents point to no case anywhere that has invoked Fiast to permit a taxpayer challenge under the Commerce Clause (much less the dormant Commerce Clause). Indeed, respondents themselves concede (at 12) that in the nearly 40 years since Filast, “only the Establishment Clause has been recognized,” as falling within its “narrow exception” to the “general rule against taxpayer standing.” Bowen v. Kendrick, 487 U.S. 589, 618 (1988). Respondents thus candidly seek to extend Flast far be- yond its historically limited reach—an extension that would grant any taxpayer standing to challenge, under the dormant Commerce Clause, any state tax, even those paid only by other taxpayers. They justify this proposed extension of Flast solely on the basis that the Establishment Clause and the dormant Commerce Clause share—in respondents’ view—“a similar historical role” as “specific limit[s} on dis- criminatory state taxation.” Resp. Br. 13. This expansive exception would certainly swallow the rule against general taxpayer standing; for if the dormant Commerce Clause meets the test for “a specific constitutional limitation” on the government’s “taxing and spending power” (Resp. Br. 12- 13), then all manner of taxation and spending would fall within the Flast exception. Many other provisions in the Bill _ Of Rights limit state (and federal) power to tax and spend. See, e.g., Arkansas Writers’ Project, Inc. v. Ragland, 481 U.S. 221 (1987) (invalidating state sales tax under the Free Press Clause). And state powers are further circumscribed, both explicitly and implicitly, by constitutional provisions vesting authority in the executive and legislative branches. Respondents offer no reason why their argument would not 6 similarly extend taxpayer standing to any state tax challenge predicated on a state’s alleged interference with the exercise of any enumerated federal power. Even if, by some principle not apparent from respon- dents’ reasoning, that remarkable expansion could be limited to the Commerce Clause, it would distort the Article III] standing requirement beyond recognition. The allegations in this case are fundamentally different in character from those made in Flast. In Flast, the taxpayer’s contention was “that his tax money [was] being extracted and spent in violation of specific constitutional protectiuns against such abuses of leg- islative power” (392 U.S. at 106); the decision recognized the plaintiffs’ “clear stake as taxpayers in assuring that they not be compelled to contribute even ‘three pence . . . for the sup- port of any one [religious] establishment.’” /d. at 114 (Stew- art, J., concurring) (citation omitted); see also id. at 106 (ma- jority opinion) (requiring a “nexus” between the alleged ille- gal conduct and plaintiffs’ status as taxpayers). But respon- dents are not challenging the use of their property to fund a program that violates their rights. See id. at 103-04 (noting that the concern of those who drafted the Establishment Clause was that “religious liberty ultimately would be the victim if government could employ its taxing and spending powers to aid one religion over another or to aid religion in general”). Rather, their argument is that others should be compelled to pay more taxes. This distinction strikes at the heart of respondents’ ar- guments for taxpayer standing. Though the failure to collect tax revenue might give rise to a cognizable injury io a com- petitor, respondents identify no decision—because there is none—where the Court held that the failure to collect taxes caused an Article [II injury-in-fact to taxpayers as such. C. Respondents’ Other Arguments For Standing Are Meritless Respondents make three additional arguments in support of their standing to pursue a dormant Commerce Clause chal- lenge. First, they contend that they have municipal taxpayer 7 standing because some of Ohio’s franchise tax revenue is remitted to municipalities. See Resp. Br. 15-17. But respon- denis offer no authority for this proposition and none exists. The theory behind municipal standing is that the taxpayer has a “direct and immediate” interest in the actions of the mu- nicipal corporation, Mellon, 262 U.S. at 486-87, but that the- ory has no application to a challenged state action, especially one that has only an attenuated relationship to the municipal fisc. Under respondents’ trickle-down theory of standing, taxpayers may locate injuries in the state-wide impact of state legislation on local revenue. Given the vast array of federal and state programs that provide blocks grants and other funds to municipalities, respondents’ theory is one of virtually lim- itless utility. In any event, respondents’ complaint nowhere alleges that the fisc of the City of Toledo is injured by the ITC. See J.A. 14a-3la. Respondents allege only that the ITC “depletes the funds of the State of Ohio to which Plaintiffs contribute.” /d. 28a (emphasis added). Respondents cannot here assert standing based on an injury they have not alleged below. Second, Respondents contend that so long as they have Article Ill standing to bring their challenge to the City of Toledo’s property tax abatement, they have “ancillary” or “pendent” standing to bring any additional claim “that can be spun out of the common nucleus of operative fact.” Resp Br. 18-19. This argument, however, is squarely foreclosed by numerous decisions of this Court holding that standing must be analyzed on a claim-specific basis. See, e.g., Allen v. Wright, 468 U.S. 737, 752 (1984) (“the standing inquiry re- quires careful judicial examination of a complaint’s allega- tions to ascertain whether the particular plaintiff is entitled to an adjudication of the particular claims asserted”) (emphasis added). As this Court explained, “standing is not dispensed in gross.” Lewis v. Casey, 518 U.S. 343, 358 n.6 (1996). “If the right to complain of one administrative deficiency auto- matically conferred the right to complain of a// administra- tive deficiencies, any citizen aggrieved in one respect could 8 bring the whole structure of state administration before the courts for review. That is of course not the law.” /d. Finally, respondents argue that this Court’s decision in Caterpillar Inc. v. Lewis, 519 U.S. 61, 75 (1996), dictates the waiver of prudential standing requirements in this case. Resp. Br. 27. But that decision is readily distinguished. Cat- erpillar concerned removal jurisdiction—not prudential standing. There, the Court overlooked error in the premature removal of a case when, by the time judgment was entered, the federal courts had jurisdiction over the case. See 519 U.S. at 73. It was in this context that the Court stated “con- siderations of finality, efficiency, and economy become - overwhelming.” /d. at 75. Here, respondents do not claim that they fall within the zone of interests of the dormant Commerce Clause. Unlike Caterpillar or the other cases cited by respondents, the Court here has an institutional in- terest in enforcing the prudential requirements for standing. This is because the “zone of interests” requirement ensures that the issues are argued by a “reliable” advocate, rather than a plaintiff whose interests are only “marginally ‘related to or inconsistent with the purposes implicit” in the constitu- tional or statutory provision on which he or she relies. Clarke v. Sec. Indus. Ass'n, 479 U.S. 388, 397 n.12, 399 (1987).° Respondents fall into this latter category and there- fore have no standing. For all these reasons, this Court should vacate the judg- ment below insofar as it invalidates the ITC for lack of stand- ’ Respondents also contend that enforcement of the prudential standing requirements would be “fundamentally unfair” in view of peti- tioners’ arguments below that respondents had standing. Resp. Br. 27. But when DaimlerChrysler made that argument, it did so on the basis of the unique claims of injury arising out of the seizure of Kim’s Auto’s property. See C.A. J.A. 200-01. Respondents have since abandoned any claim based on Kim’s Auto, apparently recognizing themselves that those injuries became unredressable no later than the close of the eminent do- main proceedings. Respondents’ claims of unfairness thus ring hollow. 9 ing and remand the case to the courts below with instructions that the ITC claim be dismissed.‘ II. RESPONDENTS’ EXPANSIVE VISION OF THE DORMANT COMMERCE CLAUSE CANNOT BE RECONCILED WITH THIS COURT’S DECISIONS Respondents’ central contention is that the dormant Commerce Clause bars all state “measure[s] that provide[] preferential tax treatment,’—i.e., “a lower effective tax rate”—‘“conditioned on in-state economic activity.” Resp. Br. 9. This contention, however, finds no support in this Court’s dormant Commerce Clause jurisprudence. Of course, as the late Chief Justice acknowledged, that jurispru- dence has not been a model of clarity or consistency, see Kassel v. Consol. Freightways Corp. of Del., 450 U.S. 662, 706 (1981) (Rehnquist, J., dissenting) (“[T]he jurisprudence of the ‘negative side’ of the Commerce Clause remains hope- lessly confused”), and the language employed in some of its opinions may, from time to time, have been more expansive than the holdings of those decisions. It is thus possible, as respondents demonstrate, to as- semble a collection of out-of-context phrases to support the propositions that the dormant Commerce Clause bars all “in- centive[s] ‘to invest . . . within [the State] rather than to in- vest .. . in other States,”” Resp. Br. 42 (quoting Maryland v. Louisiana, 451 U.S. 725, 757 (1981)), as well as “an[y] at- tempt to provide a positive incentive for increased business Respondents’ suggestion (at 28) that the “appropriate remedy is a remand of the case to the Ohio state courts,” is strange in light of their separate challenge to the City of Toledo’s property tax abatement. See Cuno v. DaimlerChrysler Corp., No. 04-1407, Pet. for Certiorari (filed Apr. 18, 2005) (presenting question whether Sixth Circuit correctly de- cided that City of Toledo’s property tax abatement did not violate the Constitution). As respondents note (at 18), under City of Chi. v. Int'l Coll. of Surgeons, 522 U.S. 156, 165-66 (1997), removal was appropriate even if only the property tax claim was within the federal court’s jurisdic- tion. Remand to the state courts would therefore be appropriate only if this Court determines that the district court also lacked jurisdiction over respondents’ other federal claim, an argument pressed by no party. 10 activity in [the State].” Resp. Br. 41 (quoting Westinghouse Elec. Corp. v. Tully, 466 U.S. 388, 393 (1984)). But the holdings of those cases do not advance any proposition nearly so broad, and the Court has repeatedly made clear that the States are free to take all manner of steps, including the use of their taxing and spending powers, to encourage local investment and development. See, e.g., Boston Stock Exch. v. State Tax Comm’n, 429 U.S. 318, 336 (1977). A close ex- amination of the facts of the cases cited by respondents dem- onstrates that the dormant Commerce Clause bars only state action that burdens, i.e., imposes a cost upon, interstate commerce and does so in a manner that discriminates against out-of-state actors or transactions. This Court has never found a dormant Commerce Clause violation where state ac- tion only reduces the cost of in-state economic activity, and respondents suggest no reason tethered to the text or history of the Commerce Clause to do so now. > A. Respondents’ View of the Dormant Commerce Clause Would Endanger Nearly Every Manner of State Economic Development Program The cornerstone of respondents’ dormant Commerce Clause argument—and the Sixth Circuit’s holding below—is that there is no constitutional distinction to be made between a state law that penalizes out-of-state actors or conduct, and a state law that accords benefits to in-state actors or conduct. See Resp. Br. 39-40; Pet. App. 9a. Indeed, respondents ndi- cule any such distinction as advancing a “triumph of form over substance,” claiming that, at least in the realm of eco- nomic action, every state-provided benefit necessarily carnes with it a corresponding penalty that is visited on those ineli- gible for the benefit. Resp. Br. 43; see also Pet. App. 10a (“economically speaking, the effect of a tax benefit or burden is the same”). Accordingly, in respondents’ view, the dor- mant Commerce Clause bars state action that “advantage[s] in-state economic activity.” Resp Br. 1. Respondents’ view, however, cannot be reconciled with this Court’s long-held view that “[d]irect subsidization of —__ 1] domestic industry does not ordinarily run afoul of [the Com- merce Clause].” New Energy, 486 U.S. at 278; see also Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 810 (1976) (noting that “[the business] remain[s} within Maryland in re- sponse to market forces, including that exerted by money from the State.”). Recognizing this, respondents now shrink even from using the word “subsidies.” This is peculiar be- cause a subsidy is surely the most direct of “advantages” a state can provide to in-state economic actors, and, at least until the case reached this Court, exactly what the respon- - dents alleged the ITC to be. See J.A. 28a. Respondents in- stead now recast the ITC as a “discriminatory tax prefer- ence[] favoring in-state business location.” Resp. Br. 1. Innocuous though it may seem, respondents’ newly minted terminology is an essential component of their argu- ment. It is only by disavowing their earlier acknowledgment that the ITC was, in form and effect, a subsidy, that respon- dents can now argue that their expansive view of the dormant Commerce Clause is sufficiently cabined and “leaves wide latitude for state programs in support of economic develop- ment.” Resp. Br. 48. Respondents contend that their version of the dormant Commerce Clause would ban only “preferen- tial tax treatment conditioned on in-state economic activity,” id. 9—more specifically, “‘any provision that reduces the taxpayer’s ‘effective [in-state] tax rate’ as the taxpayer en- gages in more in-state activity.’” Jd. 41 (quoting Walter Hel- lerstein & Dan T. Coenen, Commerce Clause Restraints on State Business Development Incentives, 81 Cornell L. Rev. 789, 815 (1996)). And though they remain silent on the topic of direct subsidies, respondents suggest that, under their view, not only across-the-board tax cuts, but also programs “ranging from worker training and infrastructure construction to low interest loans” all remain immune from dormant Com- merce Clause attack. Resp. Br. 48. Thus, ironically, even as they disparage as “formalistic” any distinction between benefits and burdens, respondents place great reliance on a formalism of their own design—a distinction between “tax breaks,” on one hand, and other 12 forms of cash and non-cash benefits provided by states to as- sist local industry, on the other. This distinction, though, is illusory. The ITC is a one-time subsidy available to any company, whether or not already doing business in Ohio, that is willing to build a plant or otherwise increase its capital in-. vestment. To be sure, the ITC will lower a firm’s “effective tax rate,” but it is obvious enough that a cash subsidy can do so just as surely and effectively. See West Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 194 (1994) (“effect [of tax] on Massachusetts producers is entirely . . . offset by the sub- sidy”). It is merely a question of accounting. More impor- tantly, though, respondents fail to offer any cogent rationale why a tax benefit that operates in the same manner as a direct subsidy—a benefit simple for in-state activity—should be treated any differently.° The one supposed “practical” difference respundents of- fer is “the relative ease with which tax breaks can be enacted and the difficulty and complexity of enacting expenditure programs.” Resp. Br. 48-49 (citing Dan T. Coenen, Untan- gling the Market-Participant Exemption to the Dormant Commerce Clause, 88 Mich. L. Rev. 395, 480-81 (1989)). Even if respondents’ highly questionable political theory - were to be accurate with regard to tax credits,’ respondents Suggest no reason why such “practical”—in fact, nakedly po- litical—considerations have any value whatsoever in inter- * Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520 U.S. 564, 589-590 (1997), also is of no assistance to respondents. Camps Newfound relied on Establishment Clause precedent to establish the dis- tinction between a cash payment and the exemption from a generally ap-. plicable “burden of property taxation.” Id. at 50 n.24 (quoting Walz v. Tax Comm'n, 397 U.S. 664, 673 (1970). But as nearly contemporaneous Establishment Clause cases demonstrate, tax credits—unlike exemp- tions—are indistinguishable from subsidies. See, e.g., Committee for Public Education and Religious Liberty v. Nyquist, 413 U.S. 756, 789-90 (1973). ® To support their theory, respondents rely solely on a law review article that, in tum, relies principally on a magazine article from 1988. See Coenen, supra, at 481 n.485 (citing Spending by Not Taxing, The Economist, Jan. 23, 1988, at 51). 13 preting the Constitution. If there is a constitutionally signifi- cant difference between subsidies to attract investment and tax credits to attract investment, it cannot be found merely in a theory that subsidies, for some reason, in some states, under some circumstances, might be more difficult to dispense. There is thus no basis for respondents’ proposed cate- gorical distinction between tax credits and subsidies (and similar non-cash benefits) provided by states. Accordingly, the limiting principle respondents attempt to erect in reliance on that distinction collapses of its own weight. If it is true that the benefit from the ITC creates a burden on businesses that invest outside Ohio, then other benefits to domestic in- dustry—be they subsidies, stadiums, or even schools—also impose burdens on interstate commerce, and would be im- proper under respondents’ sweeping vision of the dormant Commerce Clause. Contrary to respondents’ assertions, the legal principle they espouse cannot be cabined simply to “preferential tax breaks,” and this no doubt explains their ef- forts to abandon the use of the word “subsidy.” Respondents’ vision of the dormant Commerce Clause would all but obliterate the limitation this Court placed on its sweep in Boston Stock Exchange, there holding that nothing in that Clause “prevent[s] the States from structuring their tax systems to encourage the growth and development of intra- state commerce and industry.” 429 U.S. at 336. Under re- spondents’ proposed expansion, the States’ “police powers” to “encourag[e] domestic industry,” Bacchus Imports, Ltd. v. Dias, 468 U.S. 263, 271 (1984), would be supplanted by “na- tional control[}” over local economies, Resp. Br. 1, a notion at war with the very concept of a federal system of govern- ment. B. The Ohio ITC Does Not Violate the Dormant Commerce Clause, Because It Does Not Impose A Burden On Interstate Commerce Respondents argue that any state measure that provides a “lower effective tax rate . . . conditioned on in-state eco- nomic activity” violates the dormant Commerce Clause. 14 Resp. Br. 9. This theory must be rejected. In the realm of taxation, a lower effective tax rate for in-state actors is a nec- essary, but not a sufficient, condition for a dormant Com- merce Clause violation. Both the text of the Commerce Clause and this Court’s cases demonstrate that a state tax must also impose additional costs upon—and thus burden— out-of-state activity before a violation can be found. Respondents deem this description of the reach of the Commerce Clause “novel,” Resp Br. 39, and “radical,” id. 44, but that is wrong. This Court has consistently adhered to this basic limitation. See New Energy, 486 U.S. at 273 (dor- mant Commerce Clause “prohibits ... regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors”) (emphasis added); see also Oregon Waste Sys., Inc. v. Dept’ of Envtl. Quality of Or., 511 U.S. 93, 99 (1994) (dormant Commerce Clause bans differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter”) (emphasis added). And respondents concede as much, for nowhere do they argue that the dormant Commerce Clause implicates state measures that do not burden interstate commerce. The relevant question here is simply whether the opera- tion of Ohio’s franchise tax and ITC, regulates decisions to invest out-of-state by imposing financial burdens on such investments. Respondents contend out-of-state investments are so burdened by Ohio’s franchise tax because it is “a tax on the apportioned share of the total income earned by corpo- rations through the operation of an interstate business,” and because even though such an investment will necessarily “re- duce the share of the company’s total income that is appor- tioned to Ohio, a substantial proportion of the income earned through that new [out-of-state] investment is still likely to be apportioned to Ohio.” Resp. Br. 44, 45 n.13. If true, this would call into question the constitutionality of not just the ITC but the franchise tax itself. See Container Corp. of Am. v. Franchise Tax Bd., 463 U.S. 159, 164 (1983) (“[A] State may not, when imposing an income-based tax, ‘tax value 15 earned outside its borders.’” (quoting ASARCO Inc. v. Idaho State Tax Comm'n, 458 U.S. 307, 315 (1982)). But it is not true, and the very example that respondents herald in their brief demonstrates as much. See Resp. Br. 35 n.15 (citing Br. of Center on Budget and Policy Priorities (CBPP) as Amicus Curiae in Support of Respondents at A-1- A-7). In that example, before the “ABC Corp.” made its out- of-state investment, it owed $39,100 in Ohio franchise tax. See CBPP A-1.’ After ABC built its out-of-state plant, under the example’s assumptions, ABC’s tax liability to Ohio (at the same 8.5% rate), remained exactly at $39,100, even though net income increased by 50%. See id. A-5. The new income generated by the investment was attributed only to the State in which it was built; none of it was attributed to (and, thus, burdened by) Ohio. This demonstrates that under many (if not all) circumstances Ohio’s franchise tax does not reach the income generated by out-of-state investments. This is sufficient to defeat respondents’ facial challenge to the ITC. See United States v. Salerno, 481 U.S. 739, 745 (1987). Moreover, respondents are clearly wrong when, defying common sense, they assert that “many” of the tax-and-credit schemes invalidated by the Court involved taxes that did not impose burdens upon the out-of-state conduct that was sup- posedly the object of the state’s discrimination. Resp. Br. 45. Westinghouse certainly was not such a case. There the Court struck down a tax credit that depended on the ratio between in-state and out-of-state activity. See 466 U.S. at 400-02 & n.9. The Court recognized that because the tax credit was reduced when out-of-state activity increased—even when in- state conduct remained constant—the New York scheme had the “most pernicious effect” of “penaliz[ing] increases in the DISC’s shipping activities in other States.” /d. at 401 & n.9. The reduction of the New York tax credit functioned effec- ? ABC Corp. starts with all of its property, all of its payroil and one-tenth of its sales in Ohio. CBPP Br. A-1. The resulting Ohio appor- tionment value of 0.46, when multiplied by both ABC's net income ($1 million) and the Ohio tax rate of 8.5%, yields an Ohio tax of $39,100. 16 tively as a New York tax em out-of-state activity; it raised the cost of doing business out-of-state." So, too, in the other cases cited by respondents. Camps Newfound/Owatonna v. Town of Harrison, 520 U.S. 564 (1997), and Fulton Corp. v. Faulkner, 516 U.S. 325 (1996), both invalidated exemptions from state propery taxes: in Camps Newfound, an exemption from a Maine tax on real property that was fully available to non-profit entities unless they operated principally for the benefit of non-residents of the State, see 520 U.S. at 568-69, and in Fulton Corp., an exemption from a tax on the value of corporate stock that was tied to the extent to which the stock issuer did business in North Carolina, see 516 U.S. at 328. In each case, the Court reasoned that because the tax exemption—like the DISC credit in Westinghouse—was reduced or revoked when the taxpayer engaged in business outside the State or with out-of-state actors, the tax exemption discriminated against interstate commerce. See Camps Newfound, 520 USS. at 568-69; Fulton Corp., 516 U.S. at 333. And contrary to re- spondents’ suggestion (at 45) that these property taxes did not impose burdens on out-of-state conduct, the underlying property taxes manifestly applied—indeed, only applied—to . Respondents’ suggestion that this “pernicious effect” was un- necessary to the holding in Westinghouse because the Court was “focused primarily on the benefits provided for New York activity,” Resp. Br. 41, and that, by implication, the Court would have struck any tax credit that reduced an in-state exporters’ effective tax rate, defies any fair reading of the Court’s decision. See Westinghouse, 466 U.S. at 400 (“It is this sec- ond adjustment, made only to the credit and not to the base taxable in- come figure, that has the effect of treating differently parent corporations that are similarly situated in all respects except for the percentage of their DISCs’ shipping activities conducted from New York.” (emphasis added)). It is further belied by the state court’s actions on remand, where it severed only the portion of the tax credit formula that measured the ratio of in-state DISC activity to out-of-state DISC activity, effectively extending the DISC credit “to all of the DISC accumulated income attrib- utable to the parent corporation, without regard to the exports’ place of shipment.” See Westinghouse Elec. Corp., 63 N.Y 2d at 194. 17 those businesses that elected to engage in interstate com- merce, notably among them, the plaintiff in each action. In cases involving taxes on transactions, the out-of-state burdens are even more obvious. For instance, in Maryland v. Louisiana, the Court struck down Louisiana’s “first-use tax” on natural gas transported into the State from the outer- continental shelf where offsetting credits were granted only to Louisiana residents. See 451 U.S. at 754-760. Louisiana’s first-use tax thus was paid only by out-of-state gas consumers and thus functioned as a tax on interstate commerce itself. Respondents’ notion that these taxes did not impose burdens on interstate commerce is clearly wrong. In short, respondents thus have no answer to the argu- ment that a state tax does not violate the dormant Commerce Clause unless—at a minimum—it imposes actual burdens upon the out-of-state conduct against which the tax suppos- edly discriminates. And Ohio’s ITC simply does not impose any burdens on out-of-state activity. Indeed, respondents concede that it has little or no effect on business decisions because other State remain free to enact—and have en- acted—comparable provisions, Resp. Br. 1. Thus, the ITC cannot be said to “coerc[e]” businesses to invest in Ohio, as the Sixth Circuit incorrectly held. Pet. App. 6a. The ITC does not penalize or otherwise burden a company for invest- ing out of state and therefore does not violate the Commerce Clause. In the end, it is respondents, not DaimlerChrysler, who elevate “form over substance.” Resp. Br. 43. It is beyond dispute that Ohio could have reimbursed DaimlerChrysler for a portion of its capital improvements at the Stickney Avenue plant, or could have made a cash payout contingent on the company keeping its Jeep assembly plant in Ohio, and nei- ther offer would have regulated or burdened DaimlerChrys- ler’s decision to invest elsewhere had it ultimately done so. For this same reason, Ohio’s offer of an ITC to companies that make a capital investment does not regulate or burden interstate commerce. Respondents’ contention to the con- 18 trary is disproved by their own example. This Court accord- ingly should find that the ITC operates solely as a subsidy to in-state investment, and should reject respondents’ sugges- tion that such an in-state benefit necessarily creates out-of- state burdens. C. Respondents Fail to Demonstrate That Ohio’s ITC Discriminates Against Interstate Commerce Even if this Court were to accept respondents’ conten- tion that the benefit the ITC accords to in-state investors it- self reflexively imposes a burden on out-of-state investors, such a burden violates the dormant Commerce Clause only if it constitutes discrimination against interstate commerce. The ITC does not. Respondents do not dispute that a finding of discrimina- tion against interstate commerce requires a predicate finding that in-state and out-of-state actors are similarly situated. See General Motors Corp. v. Tracy, 519 U.S. 278, 298 (1997). Respondents also do not dispute that a corporation that in- vests in-state is not similarly situated, vis-a-vis the underly- ing franchise tax, to one that invests out-of-state. They ac- knowledge that when a firm invests in-state, it increases its Ohio apportionment value and, thereby, its exposure to _Ohio’s franchise tax, while a corporation with an Ohio pres- ence that invests out-of-state decreases its Ohio apportion- ment value and its exposure to Ohio tax. Resp. Br. 34. Re- spondents contend, though, that this is an insufficient basis to justify different treatment of in-state and out-of-state inves- tors. They argue, in essence, that in-state and out-of-state investors are situated similarly enough for dormant Com- merce Clause purposes, even if not for other purposes. In support of this argument, Respondents first contend that this Court, in Westinghouse, “directly rejected precisely th{e] argument” that differences in apportionment value can justify different treatment. Resp. Br. 34 (citing Westing- house, 466 U.S. at 400-02 n.9). Respondents are wrong. Though the Court noted that it was “not unmindful” of the fact that increased in-state business activity results in a 19 higher apportionment value, the Court did not conclude that such differences, as a categorical matter, foreclosed different treatment. This is unsurprising because the “similarly situ- ated” argument was not raised in Westinghouse—not by the State of New York and not by its amicus, the State of Cali- fornia. See Westinghouse Elec. Co., No. 81-2394, Br. of Ap- pellees (NY Br.); id. Br. of the State of Cal. as Amicus Cu- riae in Supp. of Br. of James H. Tully, Jr. (CA Br.); see also Westinghouse, 466 U.S. at 400 (corporations were “similarly situated in all respects except for the percentage of their DISCs’ shipping activities conducted from New York”).’ This Court is “not bound to follow [its] dicta in a prior case in which the point now at issue was not fully debated.” Cen- tral Va. Cmty. Coll. v. Katz, No. 04-885, slip op. at 5 (Jan. 23, 2006) (citing Cohens v. Virginia, 6 Wheat. 264, 399-400 (1821)). Finally, even if this Court finds the differences between in-state and out-of-state investors to be insubstantial, the out- of-state investors still suffer no coercion. To be sure, Ohio’s ITC is available only to those who choose to invest in Ohio. But as respondents themselves state, these investment tax credits have “minimal impacts on business decisions, largely because most jurisdictions offer comparable tax breaks.” Resp. Br. 1. Because of the widespread availability of these credits—a product of healthy competition among the states to create attractive investment environments—Michigan’s in- vestment tax credit did not impose an unconstitutional bur- den on DaimlerChrysler’s decision to locate its Jeep plant in Ohio, any more than Ohio’s ITC imposed a burden on its de- cision to expand its engine plant in Detroit, or its decision in December 2005 to invest $1 billion in two Missouri plants. See Gregory Cancelada, Chrysler Will Invest $1 Billion at Fenton, St. Louis Post-Dispatch, Dec. 13, 2005, at Al (not- 9 Rather New York and its amicus relied principally on the asser- tion that “New York taxes only the income reasonably allocated to it.” See NY Br. 8; CA Br. 9 (“New York is taxing only New York income.”). For the reasons explained above this assertion was not true. 20 ing various state and local tax incentives totaling more than $75 million). In choosing where to locate investments, com- panies like DaimlerChrysler make rational economic choices among states (and foreign countries) that remain free to in- clude tax credits and other tax breaks to reduce the cost of doing business in their locale. It is difficult, to say the very least, to divine “economic Balkanization” from a regime in which states are permitted to compete with each other to pro- vide the best economic inducements for investment. CONCLUSION The judgment of the court of appeals should be vacated in relevant part and the case should be remanded with in- structions that the respondents’ federal challenges to Ohio’s ITC be dismissed. Should the court reach the merits, the judgment of the court of appeals should be reversed in rele- vant part. Respectfully submitted. CHARLES A. ROTHFELD THEODORE B. OLSON ERIKA Z. JONES Counsel of Record MIRIAM R. NEMETZ THEODORE J. BOUTROUS, JR. DAVID DEBOLD MAYER, BROWN, ROWE MATTHEW D. MCGILL & MAw LLP MICHAEL S. DIAMANT 1909 K Street, N.W. Washington, D.C. 20006 GIBSON, DUNN & CRUTCHER LLP (202) 263-3000 . 1050 Connecticut Avenue, N.W. Washington, D.C. 20036 (202) 955-8500 Counsel for Petitioner February 21, 2006 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0105%3A19. Public record. Not legal advice.