Amicus Curiae Brief — DaimlerChrysler Corp. v. Cuno

6

activity. Because the states have at their disposal a broad

array of public policies, including tax policies, that they may

pursue to promote economic development in ways that do not

run afoul of the Commerce Clause, they would not suffer any

hardship if the use of the limited set of discriminatory tax

incentives at issue in this case were no longer available to

them.

ARGUMENT

I. There Is a Strong Public Policy Rationale For

Recognizing Respondents’ Standing to Bring Suit.

The Primary Victims of the Proliferation of Tar-

geted State and Local Business Tax Incentives are

Taxpayers Ineligible for Preferential Tax Treat-

ment Who Face Increased Tax Burdens and/or a

Reduced Level of Governmeit Services.

The central purpose of the Commerce Clause” was to

establish a naticnal economy and protect it from harm

resulting from discriminatory state economic policies de-

signed to favor in-state business interests and prejudice

interstate and foreign commerce.”

The current economic competition among the states is

reminiscent of their behavior under the Articles of Con-

federation. Moreover, in spite of the presence of the

Commerce Clause, most states have enacted, as a key weapon

in this war among the states, discriminatory tax legislation

? U.S. Const. art I, § 8.

> See e.g. Boris I. Bittker, On The Regulation of Interstate and Foreign

Commerce, 1-4 (1999); Hunt v. Washington State Apple Adver. Comm'n,

432 U.S. 333, 350 (1977); Boston Stock Exch. v. State Tax Comm'n, 429

U.S. 318, 328 (1977).

7

designed ‘to favor in-state business activities. Yet such leg-

islation has rarely been challenged.

One reason out-of-state businesses denied a state tax

incentive rarely bring suit is that a successful suit is unlikely

to result in the out-of-state business receiving the tax benefit

provided to in-state businesses. Instead, the taxing state is

likely to repeal the benefit provided to in-state businesses.

For example, if Ohio’s investment tax credit is found

unconstitutional, it is unlikely the State would extend the

credit to quali*ying out-of-state investments. Instead, since a

revised credit available to all manufacturers would result in

the loss of significant additional revenue and would no longer

give in-state businesses a competitive advantage, Ohio would

almost certainly remedy the discrimination by doing away

with the credit provision. Thus, while out-of-state com-

petitors might be able to “level the playing field” by bringing

suit, they would not be able to reduce their tax liability in the

taxing state. This outcome may not be of sufficient benefit to

merit the time and expense of litigation.°

* Not all of these discriminatory tax provisions are corporate income

tax incentives similar in kind to Ohio’s investment tax credit. For exam-

ple, New York State exempts from its petroleum business tax airlines that

service four or more cities in the State with direct non-stop flights

between these cities (N.Y. Tax Law § 301-e (McKinney’s 2006)). In

addition, New York exempts from the excise tax on beer the first 200,000

barrels brewed and sold in the State each year (when first enacted in 1989,

the provision exempted 100,000 barrels annually) by a distributor whose

principal executive office is located within the State (N.Y. Tax Law

§ 424(b) (McKinney’s 2006); New York Chapter Laws, L.1989 c.61).

* The New York State tax legislation in favor of certain in-state beer

businesses noted in footnote 4, supra, specifically provides that: “if the

exemption from tax . . . as added by section seventy-two of this act, shall

be declared unconstitutional such judgment of invalidity shall not result in

the extension of the exemption to out of state distributors who are brew-

ers, but shall result only in the denial of such exemption to all distributors

who are brewers.” (New York Chapter Laws, L. 1989 c. 61 § 364).

More importantly, discriminatory corporate income tax

incentives go largely unchallenged because the cumulative

~* tax benefits derived by multi-state corporations from the

proliferation of corporate income tax incentives far outweigh

the costs of any discrimination such corporations may suffer

in particular instances. A challenge to the constitutionality of

an incentive denied to a corporation in one state may put at

risk the tax incentives from which it benefits in other states.

The existing state of affairs works to the great advantage of

large multi-state corporations,° and they have little desire to

“rock the boat.” The ferocity of the corporate response to the

Sixth Circuit decision in this matter is testimony to the huge

stake large multi-state corporations have in maintaining the

status quo.

The primary victims of the states’ widespread use of

targeted business tax incentives are not out-of-state corporate

competitors but other taxpayers, who must pay more than

their fair share to support state and local government or face

reduced public services because powerful and influential

corporations have sought and obtained preferential treatment.

This shift in tax burden is well-documented.’

° A study of the corporate income taxes of 20 states over the period

1990-1998 by University of lowa economist Peter Fisher concludes that

as a result of the increasing availability of tax incentives, the effective

/->——-cerporate tax rate on manufacturing companies in these states fell by 30%

during the period. Peter Fisher, Tax Incentives and the Disappearing

State Corporate Income Tax, 42 State Tax Notes 767 (2002).

’ During the most recent 25-year period for which data are available

(1979-2004), the corporate income tax fell from 10.2% to 5.6% of total

state tax revenue in the states imposing corporate income taxes. U.S.

Census Bureau, State Tax Collections (1979-2004).

The average effective state-local corporate income tax rate has been

gradually declining since the mid-1980s. Congressional Research Service

Report for Congress, Average Effective Corporate Tax Rates: 1959 to

2002, p. 6 (September 5, 2003). ~

9

In Kelo v City of New London,® this Court addressed the

constitutionality of the use of the power of eminent domain

by the states in the name of economic development. Both the

majority and dissenting opinions in Kelo express concern for

the potential misuse by government of its power of eminent

domain, purportedly to promote economic development, to

further powerful private interests at the expense of the general

welfare.” Justice O’Connor’s dissenting opinion explicitly

warns that the inevitable fallout from the broad exercise of

the taking power in the name of economic development will

be that those with power and influence in the political process

will benefit, while those with fewer resources and less

influence will be victimized. '°

The same misuse and abuse of the public trust is not just

inevitable in the states’ use of targeted business tax in-

centives—it is business as usual in many state capitols.''

While the victims of states’ misuse of the taxing power may

not stand out as starkly as the victims of the government’s

misuse of the taking power, they are victims nonetheless.

Finally, a ruling in this matter that failed to address the

important constitutional question before the Court would

result in a continuing cloud of uncertainty for both state

governments and multi-state businesses regarding the validity

of tax statutes on the books providing targeted business tax

incentives in almost every state in the union. This uncer-

tainty, in turn, because it makes business decisions more

difficult to make, could damper economic activity, an out-

come that serves no one’s interests.

® Kelo v City of New London, 125 S. Ct. 2655 (2005).

* Id., at 2661-62, 2665-68, 2674-77. |

' Id, at 2677.

__"' See infra, Part IV, which addresses, inter alia, the political power

and influence of large corporations as a factor in the proliferation of

targeted business tax incentives.

10

Consequently, respondents should not be denied standing,

particularly at this late stage, to challenge Ohio’s investment

tax credit to protect their own, directly impacted economic

interests, and in doing so, the interests of the national

economy as a whole.

iI. Ohio’s Investment Tax Credit is Discriminatory on

its Face and Burdens Interstate Commerce in

Violation of the Commerce Clause.

A. Ohio’s Investment Tax Credit Discriminates on

its Face Against Out-of-State Manufacturers

Subject to Ohio’s Corporate Income Tax.

Despite the ardent assertions of petitioners to the contrary,

the investment tax credit provision of Ohio’s corporate

income tax is clearly discriminatory on its face, imposing

differential tax treatment on in-state and out-of-state

economic interests that benefits the former and burdens the

latter, providing a direct commercial advantage to local

businesses. This Court has consistently held that such

discrimination violates the Commerce Clause.'* It does so

even under the most favorable set of facts for its proponents,

which presumes the credit successfully attracts new in-

vestment from outside the state. The following example

illustrates:

Assume XYZ Corp. (“XYZ”) and PQR Corp. (“PQR”)

are identical in every respect. Both are manufacturers

with facilities in State B. Both sell their products in

State A. Neither has manufacturing facilities there.

Both are subject to State A’s corporate income tax, and

both face the same annual tax liability of $1 million.

State A, seeking to attract manufacturing activity, adopts

an investment tax credit under its corporate income tax

'2 Oregon Waste Sys. v. Dept. of Envil. Quality, 511 U.S. 93, 99

(1994); Boston Stock Exch., supra, 429 U.S. at 329; Bacchus Imports, Ltd.

v. Dias, 468 U.S. 263, 265 (1984).

11

equa! to 7.5% of the cost of production machinery and

equipment placed in service within the state. No more

than one-seventh of the total credit amount earned may

be claimed in a given year. XYZ, motivated by the

incentive, abandons its manufacturing facility in State B

and invests $100 million in a new facility in State A.

PQR chooses to continue manufacturing its products in

State B. All other variables remain constant.

As a result of its investment, XYZ earns $7.5 million in

tax credits, and claims one-seventh of that credit in each

of the next seven years, eliminating its tax liability in

each of those years.’ * PQR continues to pay $1 million

each year in corporate income tax to State A, a total of

$7 million. XYZ’s lower tax burden provides a direct

commercial advantage to XYZ over PQR in selling its

products in State A. XYZ’s lower tax burden is due

solely to the in-state location of its manufacturing facility.

The petitioners focus their attention on refuting the alle-

gation that Ohio’s investment tax credit discriminates against

'? Ohio’s corporate income tax business income allocation formula

includes payroll and property factors. Assuming State A’s formula were

identical to Ohio’s, XYZ’s new facility in State A would increase XYZ’s

property and payroll factors in State A, which would in turn increase the

share of XYZ’s total income apportioned to State A and consequently

increase XYZ’s tax liability in State A (without regard to any credit). The

operation of State A’s apportionment formula would thus serve to offset,

in some amount, the benefit of the investment tax credit claimed by XYZ.

While it is correct that Ohio’s corporate income tax business income

allocation formula operates in this fashion, this fact has no constitutional

significance. This Court has made abundantly clear in prior cases that

Ohio cannot, under the facts presented, assert that its investment tax credit

is a valid compensatory tax (See Fulton v. Faulkner, 516 U.S. 325 (1996),

setting out the stringent test a facially discriminatory tax must meet to

qualify as a constitutionally valid compensatory tax). Further, Ohio’s use

of a three-factor formula including payroll and property is a choice of its

own making. Ohio is free to adopt a single-factor sales apportionment

formula, under which new investment in Ohio would not, in and of itself,

increase the investing corporation’s Ohio income allocation percentage.

12

capital investment made outside Ohio. While such discrim-

ination is indeed present; the fundamental discrimination

inherent in Ohio’s investment tax credit, as demonstrated above,

is far more straightforward. As the example illustrates, the

discrimination puts out-of-state manufacturers doing business in

and subject to corporate tax in Ohio at a competitive dis-

advantage vis-a-vis in-state manufacturers doing business in

Ohio. This Court has, as a matter of course, struck down state

tax provisions that discriminate in this fashion.'*

Petitioners argue that both XYZ and PQR had an equal

opportunity to invest in State A and benefit from the

investment tax credit, and therefore there is no discrimination.

This argument is specious. It is irrelevant for constitutional

purposes that both corporations had the opportunity to locate

their facilities in State A. Businesses located in one state are

always free to relocate to another. A state may not, however,

discriminate against a business because it chooses to conduct

its operations elsewhere.'*

Nothing in this argument is meant to suggest that states

may not entice businesses to relocate by offering tax breaks;

they certainly may.'® What states may not do to encourage

in-state economic activity is to bestow a direct commercial —

advantage to in-state businesses by taxing them more fav-

orably than their out-of-state counterparts based solely on the

' See e.g. Westinghouse Elec. Corp. v Tully, 466 U.S. 388, 404 (1984);

Boston Stock Exch., supra, 429 U.S. at 329; Oregon Waste Sys., supra,

511 U.S. at 99.

'S See e.g. Boston Stock Exch., supra, 429 U.S. at 334-335; New

Energy Co. of Ind. v. Limbach, 486 U.S. 269 (1988) (striking down an

Ohio statute that provided a tax credit for sales of ethanol produced in

Ohio but not in certain other states).

'© Boston Stock Exch., supra, 429 U.S. at 337; en Imports, supra,

468 U.S. at 271;

13

situs of their activities... Ohio’s investment tax credit does

precisely this, and is therefore virtually per se invalid.'*

17

B. Because the Calculation of ‘tte Corporate

Income Taxes Takes Into Account the Business

Activities of Taxpayers Carried on Both Within

and Without the State, Any Provision Within

These Taxes That Treats Out-of-State Business

Activity Less Favorably Than In-State Business

Activity Based Solely on the Location of

that Activity Unconstitutionally Discriminates

Against Interstate Commerce.

A Commerce Clause tax discrimination issue faced by

tribunals in New York and Wisconsin highlights the discrim-

ination inherent in Ohio’s investment tax credit statute.

Under the structural framework of a state corporate income

tax, including Ohio’s, tax is imposed on an apportioned share

of the income earned by a corporation from its business

activities conducted both within and outside the state. The

calculation of state income generally uses some version of

federally reported income as its starting point. This federal

figure reflects, among other items, deductions for allowable

depreciation of property located both within and outside the

taxing state.'? Federal depreciation rules make no distinction

based on the state in which property is located. As a result,

state corporate income taxes generally do not impose differ-

ent depreciation rules for in-state and out-of-state property.

'? Boston Stock Exch., supra, 429 U.S. at 329; Bacchus Imports, supra,

468 U.S. at 273; Westinghouse Elec. Corp., supra, 466 U.S. at 404.

'* Oregon Waste Sys., supra, 511 U.S. at 99; Fulton, supra, 516 U.S.

at 331.

'? Ohio Rev. Code § 5733.04

14

In 1981, the federal Economic Recovery Tax Act

(ERTA)” was enacted. Among other provisions, ERTA

adopted new depreciation rules. The new depreciation

provisions, contained in I.R.C. §168, which allowed tax-

payers to accelerate deductions under rules known as ACRS

(Accelerated Cost Recovery System), were more generous

than the former rules set out in I.R.C. §167. Subsequently,

New York State, New York City and the State of Wisconsin,

concerned with the potential loss of revenues, enacted

provisions in their corporate income taxes that provided

accelerated depreciation under I.R.C. § 168 for property

placed in service within the taxing state while imposing the

less favorable depreciation rules of 1.R.C. §167 for out-of-

state property.’ New York City’s statute and Wisconsin’s

statute were both challenged, and both were found un-

constitutional.”

Citing Oregon Waste Systems v. Department of Environ-

mental Quality and Fulton v. Faulkner, the New York ap-

pellate court struck down New York City’s depreciation

provisions as unconstitutional, concluding that these provi-

sions were discriminatory on their face; that they had the

practical effect of discriminating against taxpayers doing

business in New York City who had commercial property

located outside of the State of New York; and that this un-

equal treatment resulted solely from the situs of their ac-

tivities.2*> The Wisconsin Tax Appeals Commission reached

the same result, concluding that the effect of the depreciation

2° Pub. L. 97-34, 95 Stat. 172 (1981)

7" Former NYC Admin. Code §§ 11-602(8)(b)\(11), 11-602(8)j),

11-602(8)(a)(10); Former Wis. Stat §§ 71.04(15)a), 71.04(15)b),

71.26(2)(a), 71.26(3\y).

22 Beatrice Cheese v. Wisconsin, 1993 Wis. Tax LEXIS 5 (Wis. Tax

App. Comm’n, 1993); RJ. Reynolds v. City of N.Y., 237 A.D.2d 6 (1997)

appeal dismissed 91 N.Y.2d 956 (1998).

23 RJ. Reynolds, supra, 237 A.D.2d at 13.

15

provisions was “to impose a higher franchise tax burden on a

business solely because some or all of its depreciable

property is located outside rather than inside [the State,

which] is clearly facial discrimination against interstate

commerce.””*

There is very little to distinguish the tax consequences of

the depreciation provisions struck down in New York and

Wisconsin from those of Ohio’s investment tax credit. Those

depreciation provisions granted more favorable income tax

treatment to property placed in service in the taxing state than

property placed in service outside the state. Ohio’s

investment tax credit, in the form of a credit against tax due

rather than a deduction from income, achieves precisely the

same result. It grants more favorable tax treatment to

manufacturing property placed in service in Ohio than it does

to manufacturing property placed in service outside Ohio,

resulting in a lower effective tax rate for in-state manu-

facturers solely because of the situs of their manufacturing

facilities.”°

The discrimination inherent in the depreciation provisions

adopted by New York City and Wisconsin is self-evident.

The statutes explicitly provided one set of depreciation rules

for in-state property and another set for out-of-state property,

and treated the former more favorably than the latter. The

statutes provided a double standard in favor of in-state

activities for all to see. The forbidden discrimination all but

jumped off the page.”° |

Ohio’s investment tax credit statute, in contrast, makes no

mention of out-of-state property.2’ This makes the discrim-

ination less obvious. But, as described above, state corporate

* Beatrice Cheese, supra, 1993 Wis. Tax LEXIS at 7.

* See e.g. Westinghouse Elec. Corp., supra, 466 U.S. at 388.

° Oregon Waste Sys., supra, 511 U.S. at 99; Fulton, supra, 5\6 U.S.

at 331.

7 Ohio Rev. Code § 5733.33.

16

income taxes are imposed on an apportioned share of the

income derived from a taxpayer’s activities both within and

without the taxing state. Consequently, state corporate

income tax provisions must address, either explicitly or im-

plicitly, both the in-state and out-of-state activities of tax-

payers. Ohio’s calculation of corporate income tax includes,

among other items of income and expense, deductions for

wage expenses incurred both within and outside Ohio, as well

as depreciation rules that apply to both in-state and out-of-

state property.”*

The credit provisions of a state corporate income tax are no

different from other provisions within such tax - they must

address both the in-state and out-of-state business activities of

taxpayers. When they fail to do so expiicitly, they do so

implicitly, by their silence. In other words, appropriately

restated, Ohio’s investment tax credit provides as follows:

qualifying in-state investment receives a 742% (or 13%)

credit; otherwise qualifying out-of-state investment, based

solely on the fact it is located out-of-state, receives a 0%

credit. This blatant discrimination, providing in-state busi-

nesses a commercial advantage, is patently unconstitutional.””

Viewed differently, if Ohio’s investment tax credit scheme

were constitutional, then a statute that provided a 7% credit

for qualifying in-state investment and a 3% credit for

qualifying out-of-state investment, certainly more favorable

to out-of-state corporations than no credit at all, would be

constitutional as well. Yet the impermissible discrimination

inherent in this hypothetical statute is self-evident. In short,

8 Ohio Rev. Code § 5733.04. Petitioner DaimlerChrysler Corporation

asserts in its brief (p. 24) that “Ohio does pot place a financial burden on

out-of-state capital investment. Rather, because Ohio’s corporate fran-

chise tax levies only against business value in Ohio, a corporation’s out-

of-state investment is essentially Ohio-tax-free.” As the discussion above

demonstrates, this assertion is untrue.

? Boston Stock Exchange, supra, 429 U.S. at 329.

—_—

17

Ohio’s investment tax credit statute can only be read to grant,

on its face, preferential treatment to in-state investment that

provides a direct commercial advantage under the state’s

corporate income tax to in-state businesses. The credit is

therefore per se invalid.*°

If the Court were to rule that Ohio’s investment tax credit

is constitutional, would this ruling validate the use by states

of more favorable depreciation rules for in-state property than

out-of-state property? If it would not, what constitutional

principle would distinguish the use of an income tax credit

from the use of an income tax deduction? If states may in

fact provide more favorable depreciation rules for in-state

property, may states also provide one-year expensing of in-

state property, while out-of-state property remains subject to

depreciation?’ May states allow a corporate income tax

deduction equal to twice the wages paid to in-state em-

ployees, but not out-of-state employees? A ruling upholding

Ohio’s investment tax credit would undoubtedly encourage

the states to test these waters.

The correct and better result, fully consistent with existing

precedent, is that Ohio’s investment tax credit is un-

constitutional.

Ill. The Central Purpose of the Commerce Clause Is to

Preclude Precisely the Kind of Parochial, Dis-

criminatory State Economic Policies Exemplified

By Ohio’s Investment Tax Credit.

The immediate impetus for replacing the Articles of

Confederation with the Constitution was the need for eco-

*° Oregon Waste Sys., supra, 511 U.S. at 99; Fulton, supra, 516 U.S. at

331. ,

*' New York Governor George E. Pataki has recently proposed leg-

islation that would do just this. See New York State 2006-2007 Executive

Budget, Article VII Revenue Bill, Part 1, available at http://publications.

budget. state.nt.us/fy0607artV IIbills/REVENUE.HTM.

18 f

nomic unity, unhampered by discriminatory and retaliatory

state reprisals against commerce from other states and

countries.” The Articles of Confederation had reserved to

the states, not Congress, the power to regulate foreign and

interstate commerce, a framework that proved unworkable as

states continued their economic warfare, carried on through

tariffs and duties.’> With each state “free to adopt measures

fostering its own local interests without regard to possible

prejudice to nonresidents . . . a conflict of commercial regu-

lations, destructive to the harmony of the states ensued.””*

The states remain free under the Commerce Clause to

engage in economic competition with one another by seeking

to make their tax regimes more favorable for business activity

than their neighboring states.’> A state, for example, may

choose to impose its corporate franchise tax at a low rate, or

impose no corporate income tax at all. Alternatively, a state

may provide a broad exemption from its sales and use tax for

business inputs. States are also free to compete through the

use of their spending powers—on public infrastructure, —

education, public health and safety, and so on.

What a state may not do—what the Commerce Clause was

specifically intended to preclude—is to engage in discrim-

inatory economic policies, including tax policies, that grant a

direct commercial advantage to in-state business activity and

undermine the goal of a national common market.*® Such

policies include taxes that impose differential tax treatment

*? Wiley Rutledge, A Declaration of Legal Faith, 25 (1947).

3 John E. Nowak and Ronald D. Rotunda, Constitutional Law, 158-60

(6th ed. 2000)

= Camps New Found./Owatonna, Inc. v. Town of Harrison, 502 US.

564, 571 (1997).

°° Boston Stock Exch., supra, 429 U.S. at 336-337; Bacchus Imports,

supra, 468 U.S. at 271.

*© Boston Stock Exch., supra, 429 U.S. at 329, citing Northwestern

States Portland Cement Co. v. Minnesota, 358 U.S. 450, 457 (1959).

19

on in-state and out-of-state economic interests that benefit

the former and burden the latter.’ The Ohio investment tax

credit does exactly this, undermining a central purpose of

the Commerce Clause and the Court’s negative Commerce

Clause jurisprudence.”*

While the precise reach of the Commerce Clause is a

subject of some debate, the authority and responsibility of the

Court to strike down facially discriminatory state tax

legislation is beyond question.”®

IV. The Public Welfare Would be Better Served by the

Prohibition of the Use of Discriminatory Tax

Incentives Than By Their Continued Proliferation.

Targeted Business Tax Incentives Are Ineffective

as a Policy Tool. Their Widespread Use Instead

Reflects Such Factors as Political Expediency, the

Political Power and Influence of Large Corpo-

rations, and Purposeful State Discrimination in

Favor of In-State Business Activities. A Pro-

hibition Against the Use of a Limited Set of

Discriminatory Tax Incentives Would Not Impose

Any Hardship on the States. States Have at Their

Disposal a Broad Array of Public Policies They

May Pursue to Promote Economic Growth and to

Compete for Favorable Business Activities Such as

Manufacturing, Including Tax Policies.

The public welfare of the states individually and of the

nation as a whole would be better served by the prohibition of

the use of discriminatory tax incentives such as Ohio’s

investment tax credit than by their continued proliferation.

*” Oregon Waste Sys., supra, 511 U.S. at 99.

= Camps New Found. Owatonna, Inc., supra, 520 U.S. at 571.

*° Boston Stock Exchange, supra, 429 U.S. at 329.

20

The states have at their disposal a broad array of public

policies, including tax policies, they may pursue to promote

economic growth generally, and, if they choose, to compete

directly with other states for certain favored business activ-

ities such as manufacturing. With respect to tax policies,

states may, under the Commerce Clause, tax corporate in-

come at low rates, or not at all, exempt most business inputs

from sales tax, or unconditionally exempt certain industry

sectors from real property tax. States may also choose to

compete through the use of their spending powers—on public

infrastructure and public education, for example. All of these

policies might serve to improve a state’s business climate.

None raises constitutional concerns.

Most states have chosen, however, to make targeted busi-

ness tax incentives the central component of their economic

development strategies, and their use has proliferated over the

past decades.*” This widespread and growing use of targeted

business tax incentives is not, however, an indicator of their

success as a public policy tool. To the contrary, several

decades of research and analysis point to the conclusion that

these incentives are largely ineffective.*' The persistent

* See e.g. Peter D. Enrich, Saving the States From Themselves: Com-

merce Clause Constraints on State Tax Incentives for Business, \10 Harv.

L. Rev 377, 382-389 (1996). New York currently offers over two dozen

different credits under its corporate franchise tax (N.Y. Tax Law § 210

(McKinney’s 2006)).

*! See e.g. Robert G. Lynch, Rethinking Growth Strategies: How State

and Local Taxes and Services Affect Economic Development, Economic

Policy Institute (2004), which reviews the findings of hundreds of studies

examining the effects of state and local tax incentives and concludes that

these incentives are largely unsuccessful in stimulating economic activity

and creating jobs in a cost-effective manner.

Robert Ady, a prominent site location consultant, concluded:

“[1]n the facility location process, taxes are not relatively important

when compared with other cost factors such as labor, transportation

and utility and occupancy costs. . . . In summary, site selection data

21

growth in their use is attributable instead to a variety of other

factors, some relatively benign, others more insidious.

First, businesses championing targeted business tax incen-

tives offer public officials a very attractive proposition—that

the targeted business tax incentives that they are advocating

will create_new jobs and improve the state’s economy.

Elected officials are thus presented with a win-win-win

opportunity under which the citizens win increased job

opportunities, the targeted businesses win higher profits, and

the elected officials win both business and popular support.

Sometimes, the incentives are even advertised as being able

to “pay for themselves,” allowing the positive outcomes listed

above to be accomplished without any reduction in the state

revenues needed for public education and other state

responsibilities-yet another “win.”

If it all sounds almost too good to be true, that’s because it

is. It’s just wishful thinking. As previously noted, a wealth

of studies show that targeted business tax incentives have not

worked effectively.” Nonetheless, many governors and state

legislators are frequently seduced by this pitch for targeted

business tax incentives because it offers easy answers to

difficult public policy issues. In turn, they frequently make

this pitch themselves.

Second, even if elected officials suspect that targeted business

tax incentives may not work as promised, these officials may

often be as interested in the symbolic content of their actions as

in their concrete effects. By creating the appearance of being

do not suggest any correlation between low taxes and positive

economic growth, or between high taxes and slow growth. The

location requirements are too many, the process too complicated,

and other factors too important to justify a strong relationship.”

Robert Ady, Discussion, New England Economic Review, March/

April 1997, at 77.

* See e.g. Lynch, supra, note 41.

~

f

22

proactive in pursuit of economic growth, they can take credit for

subsequent economic successes, whatever their actual causes,

and avoid most of the blame they might otherwise receive for

any bad economic news that befalls the state.*? Stated more

cynically, elected officials genuinely wish to implement policies

that will have a positive impact on their state’s economy. But,

as a close second choice, they desperately wish to take action

that gives that appearance.

Third, targeted tax incentives offer state officials a par-

ticularly convenient mechanism for the delivery of benefits to

private businesses in their state. Because these tax breaks

involve a reduction of public revenues rather than an ap-

propriated expenditure of public funds, they do not directly

compete with other programs for scarce budget resources. In

addition, the likely loss in state revenues from tax incentive

legislation is generally difficult to predict, and may well be

understated by its proponents, purposefully or otherwise. In-

deed, many proponents of tax incentives make the argument

that adopting a particular incentive will not result in any loss"

of state revenues—the incentive will “pay for itself’ as a

result of the increased economic activity it generates.

Further, even in those instances where a reasonable esti-

mate of the cost of a targeted tax incentive is available; the

distribution of the tax benefits within the targeted industry is

almost always hidden. This lack of information facilitates

the enactment of tax incentives that may deliver the lion’s

share of their benefits—sometimes tens of millions of

dollars—to a handful of large corporations.** Such largesse

*} As one sociologist summarized the phenomenon after studying the

mentality of economic development officials, “shoot anything that flies;

claim anything that falls.” Herbert Rubin, quoted in Conversations With

Economic Development Practitioners, Economic Development Quarterly,

at 237 (1988).

“ New York State provides an investment tax credit (ITC) for in-

vestments in manufacturing property located in New York, accompanied

23

might not be politically feasible if this information were

public.*°

Additionally, once on the books, tax incentives generally

remain there. They almost never require annual reauthori-

zation, and are rarely subject to-any kind of programmatic

evaluation of their costs and benefits.*° All of these

attributes make targeted tax incentives a far more attractive

policy tool than direct subsidies for both businesses seek-

ing favored treatment and elected officials granting such

treatment.

by an add-on employment incentive credit (EIC) for corporations claiming

an ITC whose employment has increased by at least 1%. A study

published in 1985 by a legislative tax study commission constitutes the

only serious evaluation of these credits undertaken since the ITC was first

enacted in 1969. Some of the results are striking. For example, in 1982,

five corporations claimed 35% ($47.9 million) of the total ITC claimed.

Similarly, just five corporations claimed 45% ($24.2 million) of the total

amount of EJCs claimed. New York State Legislative Commission on the

Modernization and Simplification of Tax Administration and the Tax

Law, The New York Investment and Employment Tax Credits (Staff

Report March 11, 1985), as cited in Richard D. Pomp, Reforming a State

Corporate Income Tax, 51 Alb. L. Rev. 375, 632 (1987).

*° The corporate business community has vehemently opposed meas-

ures proposed in a handful of states to make public certain information —

contained in the state corporate income tax returns of publicly traded

corporations, such as the tax benefits received from targeted tax

incentives. See e.g. Robert Tannenwald, Corporate Tax Disclosure at the

State Level: The Massachusetts Experience, Federal Reserve Bank of

Boston (2003). Robert P. Strauss, State Disclosure of Tax Return

Information: Taxpayer Privacy vs. The Public's Right to Know, 5 State

Tax Notes 24 (1993); Richard D. Pomp, Corporate Tax Policy and the

Right to Know: Enhancing Legislative and Public Access, 6 State Tax

Notes 603 (1994); Robert P. Strauss, The Political Economy of Business

Tax Return Policy, 8 State Tax Notes 873 (1995); Richard D. Pomp, The

Political Economy of Tax Return Privacy - Revisited, 8 State Tax Notes

2389 (1995); Robert Tannenwald, et al, Corporate Tax Disclosure: Good

or Bad for the Commonwealth, 5 State Tax Notes 32 (1993).

“© Sara Hinkley and Fiona Hsu, Minding the Candy Store: State Audits

of Economic Development, Good Jobs First, September 2000.

~~

24

Fourth, the states, unless checked by federal restraints, will

pursue their parochial economic interests without regard to

the consequences for the national economy. From a single

state’s perspective, the use of targeted corporate tax incen-

tives may be perceived as an efficient strategy for pursuing its

own narrow economic interests. First, they provide a

(discriminatory) competitive advantage to in-state corpora-

tions over their out-of-state counterparts. In addition, because

these incentives are granted for in-state activity only, they are

perceived as providing a state with more economic devel-

opment “bang for the buck” than other tax measures, such as

a corporate tax rate reduction, which benefits both in-state

and out-of-state corporations.

From a national perspective, of course, this “efficiency” is

purposeful discrimination that burdens interstate commerce

and hurts the national economy. Nonetheless, the states will

continue to use discriminatory corporate income tax incen-

tives to pursue their parochial economic interests unless and

until they are prohibited from doing so.

Fifth, the abundance of targeted business tax incentives is

to a significant degree simply a reflection of the enormous

political power and influence wielded in state capitols by

large corporations. The misuse of the taxing power on behalf

of powerful private interests, cloaked in the mantle of

economic development, is all too common. Unlike broad-

based, low-rate taxes, higher-rate taxes replete with special

provisions are easily engineered to favor those with power

and influence. Targeted business tax incentives are thus the

vehicle of choice at the state level for directing financial

benefits to the most powerful and influential elements of the

business community.*’ A tax incentive provision that does

*” In his 2001 State of the State message, New York Governor George

Pataki exhorted the legislature: “. . . the [corporate] alternative minimum

tax sends a very clear message to manufacturers. It says: If you invest in

New York, you will be penalized. That is why we've cut that tax in half

25

not generate a single dollar in additional investment nor

create a single new job may nonetheless result in tens of

millions in tax savings for large in-state corporations. The

following example is illustrative:

Assume State A imposes a typical corporate franchise

tax based on apportioned net income at a rate of 10%.

XYZ Corporation (“XYZ”) has its main manufacturing

facility in State A. The facility is valued at $300 million

and employees 500 workers. Routine capital investment

since 1995. This year, let’s finish our work and put the alternative

minimum tax in the trash can where it belongs.” New York’s corporate

alternative minimum tax (AMT), imposed at the modest rate of 2.5% in

2001, was enacted in 1987 to ensure that profitable corporations pay at

least a modest amount of corporate income tax. (N.Y. Tax Law §

210(1)(c) (McKinney’s 2006)). The State’s primary tax on corporations is

imposed at a rate of 7.5%. (N.Y. Tax Law § 210(1) (McKinney’s 2006)).

Under this tax, however, corporations, particularly manufacturers, are able

to reduce the tax they pay by taking advantage of tax credits that reward

certain activities, including investment in plant and production equipment.

(N.Y. Tax Law § 210(12)(a) (McKinney’s 2006)). These credits may not

be used against the AMT. Indeed, that was the intent of the AMT, which

was adopted after a legislative study reported that as a result of the State’s

generous tax credits, some of its largest manufacturers were paying just

$250 in corporate tax each year, the statutory minimum. (New York State

Legislative Commission on the Modernization and Simplification of

Tax Administration and the Tax Law, The New York Investment and

Employment Tax Credits, Staff Report, March 11, 1985). If the AMT

were eliminated, as the Governor proposed, many corporations would be

able to use their carryforward credits (over $1 billion in total) under the

State’s generous fifteen-year carryforward provisions to reduce their tax

to the fixed dollar minimum tax every year into the foreseeable future.

(New York State Department of Taxation and Finance, Office of Tax

Policy Analysis, Analysis of Article 9-A General Business Corporation

Tax Credits For 1999 (2003); N.Y. Tax Law § 210(12)(e)(McKinney’s

2006)). The AMT was not repealed in 2001 because of the State’s

deteriorating finances. However, Governor Pataki has called for its repeal

again in 2006. (New York State Executive Budget, Article VII Rev-

enue Bill, Section H, available at http://publications.budget.state.ny.us/

fy0607artV IIbills/REVENUE.HTM).

26

averaging approximately $20 million a year is required

to keep the facility up and running. XYZ, without tax

incentives, pays $1 million annually in _ corporate

franchise tax to State A.

XYZ and other in-state manufacturers approach State A

seeking a reduction in their tax payments to State A,

asserting that the state’s tax structure is undermining

their competitiveness and endangering the long-term

economic viability of their operations in the State. State

A would like to maintain XYZ and the other in-state

manufacturers as large employers in the State, and

would therefore like to respond positively to their

request for lower taxes rather than risk the consequences

of failing to do so. Not surprisingly, it would like to do

so while minimizing the loss of state tax revenues.

XYZ and other manufacturers with significant plant and

equipment in State A (“in-state manufacturers”) propose

an invec.ment tax credit equal to 10% of the cost of

depreciable property used in manufacturing placed in

service in State A (but not in other states). State A

adopts an investment tax credit that provides: (1) a 10%

credit for qualifying manufacturing investment to the

extent the amount of such investment exceeds the

average investment made in the three prior tax years;

and (2) a three-year carryforward provision for unused

credits. The State touts the measure by asserting it will

increase manufacturing investment and create jobs in

the State.

In response to this legislation, XYZ alters its investment

pattern, but not its overall investment level. While it

continues to average $20 m:"\ion per year, it adopts a

four-year cycle of investment of $10 million in years

one, two and three; and $50 milliew in year four. As a

result, it earns a tax credit of $4 million (($50 million -

$10 million) x 10%) in year four, eliminating its tax

liability for year four and providing a $3 million credit

carryforward. These carryforward credits are ‘sufficient

27

to eliminate XYZ’s tax liability for years five, six and

seven, during which years X YZ invests $10 million each

year. In year eight, XYZ again invests $50 million,

beginning the cycle of credits and carryforward credits

once again. Under these facts, XYZ would eliminate its

corporate tax liability in year four and every year there-

after, even though its investment in State A has not

increased. Nonetheless, both XYZ and state officials

cite the incentive as a key piece of the state’s economic

development strategy, and the State never undertakes a

true programmatic evaluation of its costs and benefits

that might prove otherwise.**

In short, while targeted tax incentives may be unsuccessful

as public policy, they result in significant financial gains for

the incentive-eligible businesses and in obvious political

benefits for the elected officials who, in the name of eco-

nomic development, promote them. In light of this powerful

dynamic, whether targeted tax incentives “work” or not as

public policy is often beside the point.*?

o

** In New York State, of the corporations claiming the ten largest

amounts of investment tax credits for 1982 ($57.5 million among the ten),

six had enough credits to reduce their tax to the minimum $250. Yet

seven of these ten corporations could not claim the employee incentive

credit, which required an increase of a mere 1% or more in New York

employment. Overall, 83% of the corporations claiming an investment

tax credit in 1982 did not increase their New York employment by even

1%. Pomp, supra, note 44, at 636.

*’ New York State has in place an Empire Zone program offering

generous tax incentives that was originally designed to promote economic

development in economically depressed areas. Over time, the program

evolved into a more general economic development program, with tax

benefits often available to businesses that are not located in depressed

areas. The program is run by the Empire State Development Corporation

(ESDC), headed by Charles A. Gargano. Governor Pataki has touted the

Empire Zone program as “the best program in America.” Yet, according

to data provided by the ESDC itself, New York granted $300 million in

tax benefits in 2002 to businesses that had reported the creation of 4,000

28

The public welfare would certainly be better served if the

states abandoned targeted business tax incentives as the key

component of their economic development efforts.°° Tar-

geted business tax incentives are largely ineffective as a

policy tool; their widespread use instead reflects such factors

as political expediency, the political power and influence of

large corporations, and purposeful discrimination in favor of

in-state activity. Because the states have at their disposal a

broad array of public policies, including tax policies, that they

may pursue to promote economic development in ways that

do not run afoul of the Commerce Clause, they would not

suffer any hardship if the use of the limited set of

discriminatory tax incentives at issue in this case were no

longer available to them.

This is the public policy and political context in which the

constitutional challenge to Ohio’s investment tax credit has

been brought. This Court cannot, of course, substitute its

judgment for those made by state legislatures, no matter how

misinformed or self-serving. When state tax legislation

violates the Commerce Clause, however, the Court should not

hesitate to exercise its authority to enforce the Constitution

and invalidate such legislation.

jobs—$75,000 per job—a figure that raised concerns in the legislature

regarding the effectiveness of the program. Rather than substantively

addressing these concerns, however, Chairman Gargano, in testimony

before a legislative committee, simply revised the calculation of tax

benefit per job by dividing the $300 million revenue impact for a single

tax year by the total number of employees within Empire Zones of

businesses receiving tax benefits, and asserting based on this recalculation

that the actual cost per job of the program was $1,170. (Marc Santora,

Zones for Business Tax Breaks Are Debated Along Party Lines, N.Y.

Times, at BS (April 27, 2004). The State has since authorized twelve

additional Empire Zones. (New York Chapter Laws, L. 2005, cc. 61, 63.)

* See e.g. Lynch, supra, note 41.

29

CONCLUSION

For the stated reasons above, it is respectfully urged that

this Court affirm the Sixth Circuit’s decision that Ohio’s

investment tax credit violates the Commerce Clause.

Respectfully submitted,

ROBERT D. PLATTNER RICHARD D. POMP

JEREMY H. SPEICH Counsel of Record ~

MCNAMEE, LOCHNER, TITUS CONNECTICUT LAW SCHOOL

& WILLIAMS, P.C. 65 Elizabeth Street

677 Broadway Hartford, Connecticut 06105

Albany, New York 12207 (860) 570-5251

(518) 447-3200 Attorneys for Amici Curiae

Fiscal Policy Institute,

Connecticut Voices for

Children and Good Jobs First

January 23, 2006

[Supreme Coun, US.

FILED

wD) DEC - 5 2005

No. 04-1724 OFFICE OF THE CLERK

In The

Supreme Court of the Anited States

| @ctober Term, 2005

WILLIAM W. WILKINS, TAX COMMISSIONER

FOR THE STATE OF OHIO, et al.,

Petitioners,

v.

CHARLOTTE CUNO, et al.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals for the Sixth Circuit

BRIEF OF FLORIDA, ALABAMA, ARIZONA, ARKANSAS,

CALIFORNIA, COLORADO, CONNECTICUT, DELAWARE,

GEORGIA, GUAM, HAWAII, IDAHO, ILLINOIS, INDIANA,

IOWA, KENTUCKY, MAINE, MARYLAND, MASSACHUSETTS,

MICHIGAN, MISSOURI, NEBRASKA, NEVADA, NEW YORK,

NORTH DAKOTA, NORTHERN MARIANA ISLANDS,

OKLAHOMA, OREGON, PENNSYLVANIA, PUERTO RICO,

SOUTH CAROLINA, SOUTH DAKOTA, TENNESSEE, TEXAS,

UTAH, VERMONT, WASHINGTON, AND WISCONSIN,

AS AMICI CURIAE IN SUPPORT OF PETITIONERS

CHARLES J. CRIST, JR.

Attorney General of Florida

CHRISTOPHER M. KISE

Solicitor General

Counsel of Record

ERIK M. FIGLIO

Deputy Solicitor General

Office of the Attorney General

PL-01, The Capitol

Tallahassee, FL 32399

(850) 414-3681

Counsel for Amici Curiae

[Additional counsel listed on inside cover]

i eieiedeaneletieiineeeitediinenainbaieteteainmeientinn tnemnaaiaemnieiamendate ieanaiamenmmnmaieiadatal

Troy King

Attorney General of Alabama

State House

11 South Union Street

Montgomery, AL 36130

Terry Goddard

Attorney General of Arizona

1275 West Washington Street

Phoenix, AZ 85007

Mike Beebe

Attorney Géneral of Arkansas

323 Center Street

Little Rock, AR 72201-2610

Bill Lockyer

Attomey General of California

1300 I Street, Suite 1740

Sacramento, CA 95814

John Suthers

Attorney General of Colorado

1525 Sherman Street

Denver, CO 80203

Richard Blumenthal

Attorney General of Connecticut

55 Elm Street

Hartford, CT 06141-0120

M. Jane Brady

Attorney General of Delaware

820 North French Street

Wilmington, DE 19801

Thurbert E. Baker

Attorney General of Georgia

40 Capitol Square, S.W.

Atlanta, GA 30334-1300

Douglas B. Moylan

Attorney Generai of Guam

120 West O’Brien Drive

Hagatna, Guam 96910

Mark J. Bennett

Attorney General of Hawaii

425 Queen Street

Honolulu, HI. 96813

Lawrence Wasden

Attorney General of Idaho

P. O. Box 83720

Boise, ID 83720-1000

Lisa Madigan

Attorney General of Illinois

100 West Randolph Street

Chicago, IL 60601

Steve Carter

Attormmey.General of Indiana

302 W. Washington St., 5" Floor

Indianapolis, IN 46204

Tom Miller

Attorney General of Iowa

Hoover State Office Building

1305 East Walnut

Des Moines, IA 50319

Gregory D. Stumbo

Attorney Genera! of Kentucky

State Capitol, Room 116

Frankfort, KY 40601

Steve Rowe

Attorney General of Maine

State House Station Six

Augusta, ME 04333

J. Joseph Curran Jr. ~

Attorney General of Maryland

200 Saint Paul Place

Baltimore, MD 21202-2202

Thomas Reilly

Attorney General of

Massachusetts

One Ashburton Place

Boston, MA 02108-1698

Michael A. Cox

Attorney General of Michigan

Post Office Box 30212

Lansing, MI 48909-0212

Jeremiah W. (Jay) Nixon

Attorney General of Missouri

Supreme Court Building

207 West High Street

Jefferson City, MO 65101

Jon Bruning

Attorney General of Nebraska

Post Office Box 98920

Lincoln, NE 68509-8920

George J. Chanos

Attorney General of Nevada

100 North Carson Street

Carson City, NV 89701

Eliot Spitzer

Attorney General of New York

The Capitol, Second Floor

Albany, NY 12224

Wayne Stenehjem

Attorney General of North

Dakota

600 East Boulevard Avenue .

Bismarck, ND 58505-0040

Pamela Brown

Attomey General of the Northern

Maniana Islands

Caller Box 10007

Saipan, MP 96950

W.A. Drew Edmondson

Attorney General of Oklahoma

2300 North Lincoln Boulevard

Oklahoma City, OK 73105

Hardy Myers .

Attorney General of Oregon

Office of the Attorney General

1162 Court Street NE

Salem, OR 97301

Tom Corbett

Attorney General of |

Pennsylvania

Strawberry Square

Harrisburg, PA 17120

Roberto J. Sanchez-Ramos

Attorney General of Puerto Rico

Post Office Box 192

San Juan, PR 00902-0192

Henry McMaster

Attorney General of South

Carolina

Post Office Box 11549

Columbia, SC 29211-1549

Lawrence E. Long

Attommey General

State of South Dakota

500 East Capitol Avenue

Pierre, SD 57501-5070

Paul Summers

Attorney General of Tennessee

500 Charlotte Avenue

Nashville, TN 37243

Greg Abbott

Attorney General of Texas

Post Office Box 12548

Austin, TX 78711-2548

Mark L. Shurtleff

Utah Attorney General

Utah State Capitol Complex

East Office Bldg., Suite 320

Salt Lake City, UT 84114-2320

William H. Sorrell

Attorney Genera! of Vermont

109 State Street

Montpelier, VT 05609-1001

Rob McKenna

Attorney General of Washington -

P.O. Box 40100

1125 Washington Street, SE

Olympia, WA 98504-0100

Peggy A. Lautenschlager

Attorney General of Wisconsin

Post Office Box 7857

Madison, WI 53707-7857

l.

QUESTIONS PRESENTED

Do Respondents have standing to challenge Ohio’s

investment tax credit?

Does the dormant Commerce Clause allow a State to

attempt to attract new business investment in the State

by offering credits against the State’s general corporate

franchise or income tax, where the amount of the credit

is based on the amount of a business’s new investment

in the State?

TABLE OF CONTENTS

aT id cioernesipdirencccnonssienntuiamensensensenees iii

INTEREST OF AMICI CURIAE.............ccsc.cceccossecsssseesescesserens l

SUMMARY OF ARGUMENT ...........c.:csecscsessssscsssesescessecnseerers 2

SCS EE NESEY HE SSC ee 4

[. Respondents lack standing .................cc.cccccccsrssscssecenes 4

a. The Ohio Taxpayers failed to allege a

sufficiently particularized injury ....................s0000 4

b. The Michigan Plaintiffs failed to allege a

sufficiently concrete or redressable injury.............. 8

c. Kim’s Auto failed to allege an injury within

the zone of interests protected by the dormant

RS TE 10

It. Ohio’s investment tax credit did not violate the

dormant Commerce Clause .....................:cccc:cccceceeseees 12

a. Tax credits do not violate the dormant

Commerce Clause unless they burden the free

EEO 12

b. Tax credits do not violate the dormant

Commerce Clause if they are equivalent to

pure subsidies in purpose and effect..................... 16

c. Tax incentives are crucial to the States’

ability to compete with foreign nations for

TE SIE NE a RA 18

EE oO 25

TABLE OF AUTHORITIES

FEDERAL CASES

Alabama Power Co. v. Ickes, 302 U.S. 464 (1938)..........0 5.

Allen v. Wright, 468 U.S. 737 (1984) ........c.ccccccsecceseeseeeeeeeeerees 4

American Trucking Ass ‘ns, Inc. v. Scheiner, 483 U.S.

TD scdirttetcentiiieiliaindeciilatpeanitinidanintniiiananatetnnscctiin 13

Arakaki v. Lingle, 423 F.3d 954 (9th Cir. 2005) ...........0cecc00es 6

Armco, Inc. v. Hardesty, 467 U.S. 638 (1984)..............-+. 12, 14

ASARCO, Inc. v. Kadish, 490 U.S. 605 (1989) .....cecc0ssce-s0e-0e-0 6

Association of Data Processing Serv. Orgs., Inc. v.

& g EEe 10

Board of Educ. v. New York State Teachers Retirement

Sys., 60 F.3d 106 (2d Cir. 1995)... cece cceeceeecceteeeeee 7

Boston Stock Exch. v. State Tax Comm'n, 429 U.S.

ee ee bittaceinenicciininiatiatilantnainisistninbane 12, 13, 14, 15

Camps Newfound/Owatonna v. Town of Harrison, 520

a ee cinandinaiiccil ctiaciccscaiticttnariaaiatiariaclaciii 12

C & A Carbone v. Town of Clarkstown, 511 U.S. 383

, CII ccrsccnsstsnmsenesenrempnsennsttanmemnannstinseemmnennanatite 10, 13, 15

Clarke v. Securities Indus. Ass'n, 479 U.S. 388 (1987)......... 10

lil

Colorado Taxpayers Union, Inc. v. Romer, 963 F.2d

Ses pee cniitiritnibiiassininncietinnpitdaiiaapiimisnngiaiabies 7

Coyne ex rel. Ohio v. American Tobacco Co., 183 F.3d '

a eee abinivsstiesinitysinnsieeecnenteianaaiputinganninaiaiiitiiees 7

Cuno v. DaimlerChrysler, Inc., 386 F.3d 738 (6th Cir.

NEE ee Re Ee CAC Oe one 16

Dennis v. Higgins, 498 U.S. 439 (1991) .........cccccceeseeseeeeeeees 10

Doremus. v. Board of Educ., 342 U.S. 429 (1952) ........ccc0ce000 5

Elk Grove Unified Sch. Dist. v. Newdow, 124 S. Ct.

Se TD <sisieiiabciehhecicitiasdtccticbianisicasiiibinsiltiilbitniinniniipil lacus

Fireside Nissan v. Fanning, 30 F.3d 206 (ist Cir.

See eihiichshincintscaeihcldahabasndemtsimiaeiginenintiiliaitlinintipidsitivcapainn 15

_ Flast v. Cohen, 392 U.S. 83 (1968)..........c:cccecssessereeesessenenees 5,8

Frothingham v. Mellon, 262 U.S. 447 (1923) ........cccccceseneeereees 5

Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824) ...............04 12

Granholm v. Heald, 125 S. Ct. 1885 (2005) ............:ccccceeeeeee 13

H.P. Hood & Sons, Inc. v. Du Mond, 336 U.S. 525

Sit cnukshicinthipbniinabiadsinsbubsiescidiiislacibpaaiasiienimsinpeimniaiaisiia 10

Hoohuli v. Ariyoshi, 741 F.2d 1169 (9th Cir. 1984) ................ 7

(1976) ...ceceeeseee. pT oT SORA RS PT Oe 15

iv

Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992).......4, 8, 9

McLeod v. JE. Dilworth Co., 322 U.S. 327 (1944).........000. 13

Nat'l Solid Waste Mgmt. Ass'n. v. Pine Belt Reg’!

Solid Waste Mgmt. Auth., 389 F.3d 491 (Sth

Cir. 2004), cert. denied, 126 S. Ct. 332 (2005).......... 11

New Energy Co. v. Limbach, 486 U.S. 269 (1988).......... 10, 14

Nike, Inc. v. Kasky, 539 U.S. 654 (2003) .......c.cccscsssssssessssssseee 6

Oxford Assocs. v. Waste Sys. eek. 271 F.3d 140 (3d

es ND ierniciitinkdtsihcitinaniccsitasuitecatintaltiniiisisiiltiiatehanidgied 11

Quill Corp. v. North Dakota, 504 U.S. 298 (1992)... 12

Tarsney v. O'Keefe, 225 F.3d 929 (8th Cir. 2000)...............00 7

Taub v. Kentucky, 842 F.2d 912 (6th Cir. 1988) ......c.c...ccc000000 7

Trinova Corp. v. Michigan Dep't of Treasury, 498

Ss Se ainsiiasinipniciinittpunjiiabiinrhihaatiiaalsoasapipan 3, 14, 15

United States v. Richardson, 418 U.S. 166 (1974)...............004. 5

Valley Forge Christian College v. Americans United

for Separation of Church & State, Inc., 454

er a icidbainsissceteiesseiniiictinnioriiniascsingestitiasiciaiipnnieniits 5

Warth v. Seldin, 422 U.S. 490 (1975) .0.......ccccceccseseeeeseneteceneees 5

West Lynn Creamery v. Healy, 512 U.S. 186 (1994) .13, 15, 17

Westinghouse Elec. Corp. v. Tully, 466 U.S. 388

a a a a a 14

Whitmore v. Arkansas, 495 U.S. 149 (1990) .....:s.scsssssssses000 8

Women’s Emergency Network v. Bush, 323 F.3d 937

OT i 7

| LEGISLATIVE MATERIALS

Soe BU, Sara ag SO crcttereriinttenvessocastisnsemmscntennsentins 18

Economic Development and the Dormant Commerce Clause:

the Lessons of Cuno v. Daimler Chrysler and Its Effect

on State Taxation Affecting Interstate Commerce:

Hearings Before the Subcomm. on the Constitution of

the House Comm. on the Judiciary, 109th Cong. (May

a a 18

Manhattan, S.B. 5930, 228th Ann. Leg. Sess. (N.Y.

ER Sl case, CREE Rail Nee 21

OTHER AUTHORITIES

Mark Anderson, Twin Cities Face Stiff Competition in

Luring Biotechs, Finance & Commerce, July 2,

Roger Armbrust, Ontario Pushes for Film Credits,

Es RR, SIU. BF Be Pictcstnicccnteceicsinsimanienimennncties 19

China's High Technology Development, Hearing

Before the U.S. China Econ. & Sec. Review

Comet We CAG. Bl, SRGOD cccecesnscseesecsettvttnnttnentnoese 20, 21

. Peter D. Enrich, Saving.the States from Themselves:

Commerce Clause Constraints on State Tax

Incentives for Business, 110 Harv. L. Rev. 377

ei cdicisdaibchsietateiiintatibimeladiich ‘ipulcanthintnacsociaics 17

Robert_L. Firestone, State Investment Tax Credits Do

Not Violate the Dormant Commerce Clause, 36

St. Tax Notes 189 (2005) .0.......eeccececeeeseeeeeeee 13, 14, 16

Barney Gimbel, Skip Canada, Shoot Here, Fortune, Apr. 4,

Jennifer Grzeskowiak, Waving some cash in

Hollywood's direction, American City &

I, TR, TI soicnsciascesdenepihedstisiiciiasiniisicenbahsnesiocagiin 19

Walter Hellerstein and Dan T. Coenen, Commerce

Clause Restraints on State Business

Development Incentives, 81 Cornell L. Rev.

EE icininsscitlidicibiseaahandinncaniietaidesuattniisiicehidibcinhanlidhibie 16

David Irvin, Selma says hallelujah Hanil E-Hwa,

Montgomery Advertiser, Aug. 13, 2005..................... 23

Charisse Jones, Lower Manhattan Still on the Rebound

After 9/11, U.S.A. Today, Oct. 14, 2005.00.00... 21

Jack Lyne, Portland Raising Subsidies in Global

Skirmish for Siltronic’s 300-mm. Plant, The

Site Selection Online Insider, Nov. 2004................... 20

JoAnne Napier-Chaisson, /nventive Incentives,

http://www.canadafocus.com/2003/sec04.htm.....18, 23

Vii

News Release, Portland Development Comm’n, Portlant

Emerges as One of Five Sites Considered for New

Siltronic Plant, May 5, 2004 .........cccccccceseseseseseseseseeees 20

Report from the Econ. Dev. & Tourism Servs. Dep’t re:

Automotive Manufacturing Initiatives,

SE, Seis SUNN nciicctinsctnhectnssinideinnidectelpemnisisnenseiepeuscosinssnaia 24

Robert J. Rolfe & Richard A. White, Jnvestors'

Assessment of the Importance of Tax Incentives

in Locating Foreign Export-Oriented

Investment: An Exploratory Study, 14 J. Am.

pg Ee vo EEE 18

Robert Westervelt, Inducements Bear Fruit in Eastern Gulf

Region, Chemical Week, Apr. 15, 1997................008. 21

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