Companies Join in the Fight Against a US Appeal Court Tax Ruling

The Wall Street Journal is reporting that business groups and state governments are joining in an appeal of a ruling that a key part of of a tax break plan that states put forth to induce companies to keep plants, corporate headquarter, etc, in those particular states is unconstitutional.

DaimlerChrysler sought to shut a Toledo plant that once produced the original Willys Jeep back in 1998. In order to keep the plant open Ohio, the state offered the auto maker a $280 million tax break in exchange for a plan to expand the plant. A group headed by Ralph Nader filed a lawsuit against the auto maker and the state challenging these types of tax breaks and lost at the District Court level. The US Court of Appeals for the 6th Circuit reversed, holding that that part of the plan violated the Constitution because it interfered with the free flow of trade among the states.

Affects of the court of appeals decision have been felt recently by the Kmart Holding Co.'s takeover of Sears, Roebuck & Co. Prior to the announcement of the takeover, Michigan had been negotiation with Kmart about replacing the headquarters in Detriot with similar tax-credit deals planned. However, several weeks ago, the retailer announced it wasn't ready to complete the tax-credit deal as a result of the ruling.

DaimlerChrysler is currently appealing to the full court of appeals and if that fails, it plans to appeal to the US Supreme Court.