Corporate and Business Law Client Advisory

March 2006

Tax Incentives

 On Wednesday, March 1, 2006, the United States Supreme Court heard oral arguments in the case of Cuno v. DaimlerChrysler, et al. As you will recall, this case addresses the constitutionality of Ohio's investment tax credit under the Commerce Clause. Frost Brown Todd LLC ("FBT") filed an amicus brief on behalf of several chambers located in Ohio, Kentucky and Tennessee. Attorneys for the State of Ohio, DaimlerChrysler and the Toledo area taxpayer plaintiffs each presented oral arguments to the Court. Jeff Teeters, an FBT attorney who drafted the amicus brief, attended those oral arguments as well, and having experienced this event we thought it worthwhile to provide the following summary: 

 It should certainly be noted that the Justices' questions do not necessarily reflect how they will vote on the case. However, several of the questions provide some insight into the issues and concerns that the Justices have. 

 The vast majority of the attorneys' arguments and the Justices' questions were focused on the issue of whether the taxpayer plaintiffs have standing to assert their constitutional attacks. The taxpayer plaintiffs' attorney conceded to the Court that there are no prior Supreme Court opinions that specifically provide for standing as municipal taxpayers. He is attempting to argue an extension of another Supreme Court decision with which a couple of the Justices voiced disagreement. Chief Justice Roberts, Justice Scalia and Justice Ginsburg all asked very pointed questions that implied they were strongly opposed to Plaintiffs' argument that they are permitted to bring this case.  In addition, Justices Kennedy and Breyer may also be leaning toward ruling that the Plaintiffs do not have standing. If we are correct in those predictions, that would constitute a 5 member majority, which would result in a reversal and remand of the case to the lower courts with instructions to dismiss the case, thereby effectively overruling the current 6th circuit decision.

On the merits, it was more difficult to read into the Justices' questioning; however, Chief Justice Roberts, Justice Scalia, and Justice Ginsburg once again appeared to be strongly in favor of upholding the constitutionality of Ohio's investment tax credit.  Several Justices asked questions focused on identifying how any party is discriminated against by the investment tax credit. Again, while this is just my perception, I believe several Justices appeared to be dissatisfied with the taxpayers' attorney's justifications on that point. Justice Scalia summarized the case as being one for political debate in the state legislatures but not a constitutional debate for the courts. 

 There is no definite time table for when the Court will issue its opinion in this case. We would not expect that opinion any sooner than one or two months.

Jeff Teeters, 513.651.6715,

Additional Documents: