STATE TAX INCENTIVES to locate new businesses remain under a cloud.

A US appeals court in Ohio declined in late January to reconsider its decision that it is unconstitutional for a state to offer a company an investment tax credit in exchange for building a new factory in the state. DaimlerChrysler built a new automobile factory near an existing plant in Toledo, Ohio in 1998 at a cost of $1.2 billion. The state offered anyone investing in new plant and equipment at the time a 13.5% investment
tax credit. The company also received a property tax exemption for 10 years from the two local school
districts. The tax benefits were worth $280 million.

A US appeals court held last September that “locational” incentives like investment tax credits are  unconstitutional because they are an effort by a state to redirect interstate commerce. It let the property tax exemption stand. Ohio quickly asked the court to reconsider its decision. The court declined at the end of January. An appeal is expected to the US Supreme Court.

The decision casts a cloud over tax credits and similar benefits at the state level for wind farms, clean coal technology plants and other projects.