U.S. Supreme Tax
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U.S. SUPREME TAX

THE GUARDIAN TUESDAY, OCTOBER 4 th 2005

 

U.S. SUPREME COURT TO RULE ON STATE TAX INCENTIVES TO BUSINESS

The United States U.S. Supreme Court agreed to hear two important business cases: one that tests the constitutionality of billions of dollars of state tax incentives to business and another that could expand the number of securities class-action lawsuits that can be brought in state courts.

The tax case involves DaimlerChrysler, the carmaker, and will be closely watched by the U.S. business community because it could affect tax credits that many states give businesses to foster economic development.

The justices, who begin a new session next break given to Daimlerchrysler by the state of Ohio to encourage investment in Toledo Assembly plant. A federal appeals court struck down the credit on the grounds that it was as unconstitutional form of discrimination against interstate commerce.

DaimlerChrysler said in papers filed with the court that the ruling was “of enormous practical and doctrinal importance” and “calls into question the constitutionality of similar tax programmes offered by a substantial majority of the states”

Welcoming the decision to hear the case Robin Conrad of the National Chamber Litigation Centre, the U>S> chamber of Commerce's legal arm said: “These tax credits are important for economic development and creation of jobs”. The appeals court ruled against the credit arguing that it granted preferential tax treatment to companies to expand within the state rather than in other states.

“While we may be sympathetic to efforts by the city of Toledo to attract industry into its economically depressed areas, we conclude that Ohio 's investment tax credit cannot be upheld under the commerce clause of the United States constitution,” the court said.

Several business groups urged the Supreme Court to take the case, saying the appeals court ruling would result in a loss of economic investment to foreign nations. The lawsuit challenging the tax breaks was brought by residents and small businesses in

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