Daimler Chrysler v. Cuno
The plaintiffs sued DaimlerChrysler, challenging the validity of certain state tax credits and local property tax abatements that the City of Toledo, Ohio, granted to DaimlerChrysler as an inducement to expand its business operations in Toledo. In 1998, DaimlerChrysler agreed to build a vehicle-assembly plant in Toledo in exchange for certain tax incentives. In return, the city gave DaimlerChrysler property tax exemptions and investment tax credits worth an estimated $280 million.
The district court granted DaimlerChrysler’s motion to dismiss. The United States Sixth Circuit Court of Appeals reversed in part, finding that Ohio's investment tax credit violated the Commerce Clause because it coerces in-state businesses, which are already subject to Ohio’s franchise tax, to keep their activities in-state to benefit from the tax credit. Thus, the economic effect of the Ohio investment tax credit is to encourage further investment in-state at the expense of development in other states and that the result is to hinder free trade among the states.
Question Presented:
Whether Ohio’s investment tax credit, Ohio Revised Code ยง 5733.33, which seeks to encourage economic development by providing a credit to taxpayers who install new manufacturing machinery and equipment in the State, violates the Commerce Clause of the United States Constitution.
