Giving credit where credit is due: cases on state tax credits, U.S. treaties, Canadian budget, section 861 regulations, and Ontario transaction taxes draw TEI's attention.

• Position: Recent Activities

TEI frequently commends governmental agencies whose efforts advance the goals of reducing the costs and burdens of tax administration and compliance while advancing the cause of good tax policy. TEI is also not timid about offering constructive criticism of policies, proposals, or decisions that frustrate those goals. The Institute's recent advocacy efforts demonstrate these practices. TEI has given credit where credit is due--even while suggesting improvements or seeking clarification--in advocacy efforts ranging from a submission on proposed regulations in Ontario to testimony on U.S. treaty protocols. On the other hand, TEI has also forcefully criticized the results in two state and local tax cases, both dealing, ironically enough, with credits.

Cuno v. DaimlerChrysler

A taxpayer lawsuit filed in an Ohio Court of Common Pleas challenging Ohio investment tax credits and real property tax exemptions has morphed into federal case imperiling the full panoply of state tax incentives and galvanizing the world of state and local taxation. Although the case had been dismissed by a federal district court level, a three-judge panel of the U.S. Court of Appeals for the Sixth Circuit recently decided that Ohio's investment tax credit program unconstitutionally discriminates against interstate commerce. In doing so, the court upended a statutory scheme that had prompted DaimlerChrysler to expand its plant and equipment in Ohio in order to qualify for tax incentives from the state of Ohio and the city of Toledo.

Because the reasoning of Sixth Circuit could vitiate enterprise zone legislation and other state incentive regimes across the Nation, TEI filed a brief as amicus curiae on September 23, 2004, urging the full court of appeals to reconsider the decision. The brief acknowledges the appropriate role of the Constitution's Commerce Clause in protecting out-of-taxpayers from discriminatory tax rules, but explains why state tax incentives such as Ohio's investment tax credit should withstand constitutional scrutiny. More important, the Institute's brief underscores the signal importance of the panel's decision in threatening to upend the settled expectations of taxpayers and states alike. Nearly a dozen amicus briefs from state governments, industry, and associations have been submitted to the appellate court in support of rehearing.

Read the Institute's brief in this issue, beginning at page 410.

General Motors v. California Franchise Tax Board

In...