News and Insights

United States Supreme Court Grants Writ of Certiorari in Cuno Case

Tax Development Oct 04, 2005

On September 27, 2005, the petition for a writ of certiorari was granted by the United States Supreme Court for the DaimlerChrysler Corp., et al. v. Cuno, Charlotte, et al. enjoined with Wilkins, Tax Commissioner, OH, et al. v. Cuno, Charlotte, et al. (collectively "Cuno"). In addition to the petitions filed, both parties are to brief and argue whether the respondents have standing to challenge Ohio's investment tax credit, Ohio Rev. Code Ann. § 5733.33.

The Cuno case involves the State of Ohio, City of Toledo and local school districts offering an investment tax credit and property tax abatements to encourage DaimlerChrysler to construct its Jeep manufacturing plant in Ohio. Based on the incentives offered, among other matters, the company decided to expand its plant by investing $1.2 billion and creating 5,000 new jobs.

On September 4, 2004, the U.S. Court of Appeals for the Sixth Circuit, (which includes Kentucky, Michigan, Ohio, and Tennessee), ruled that the Ohio Investment Tax Credit violated the Federal Commerce Clause. The court reasoned that the credit gives favorable tax treatment for businesses who want to expand within the state versus businesses who want to expand outside the state. Thus, the credit would place a discriminatory financial burden on out-of-state activities.

The Sixth Circuit also held that the property abatements were allowed because the benefit is directly related to the situs and/or use of the property. The plaintiffs have appealed this portion of the judgment, but the Supreme Court has not taken action on this request.