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WASHINGTON, DC-The US Supreme Court ruled 9 to 0 that a group of Ohio taxpayers and local businesses could not challenge the tax credits and incentives state and city officials had granted to an auto manufacturer for expanding its manufacturing operations. The case, Cuno v. DaimlerChrysler, had been a source of concern to developers, companies and the municipalities that use such incentives to promote investment and development in their localities.
"Plaintiffs have not established their standing to challenge the state franchise tax credit. Because they have no standing to challenge that credit, the lower courts erred by considering their claims on the merits," the decision read. The rules says that the principal claim that the franchise tax credit "depletes state funds to which they contribute through their taxes, and thus diminishes the total funds available for lawful uses and imposes disproportionate burdens on them, is insufficient to establish standing… ."
Cuno, a local Ohio businesswoman, challenged the $280-million worth of tax benefits state and Toledo city officials had given DaimlerChrysler. The plaintiff maintained they were a violation of the US Constitution's Commerce Clause. Initially, a district court found in favor of DaimlerChrysler. However on appeal to the Sixth Circuit Court, that decision was overturned.
If Cuno had been upheld, according to John Byl, a partner at Warner Norcross & Judd LLP, it could have applied to brownfield development credit and economic development zone incentives that many cities offer to revitalize blighted areas. Warner Norcross submitted an amicus brief in this case on behalf of several large clients in Michigan. "It was a very good result for states and developers that use these credits."
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