The Supreme Court 5/15/06 held that state and municipal taxpayers do not have standing to challenge under the dormant Commerce Clause an Ohio law providing an investment tax credit to businesses installing new equipment in the state. In an opinion by Chief Justice Roberts, the Supreme Court reasoned that a state or municipal taxpayer’s interest in state revenues is too remote and uncertain to establish the injury required for standing. The Court also rejected the notion of “ancillary standing” under Article III, and instead held that standing must be determined independently for each claim. Last, the Court concluded that the exception for state taxpayer standing under the Establishment Clause should not be extended to the Commerce Clause. This ruling is important to any business benefiting from investment tax credits or similar economic development legislation throughout the country. The NAM, the Chamber and Council on State Taxation filed an amicus brief 7/20/05 urging the U.S. Supreme Court to review this case. The plaintiffs, financed by Ralph Nader, are using this decision as a test case to challenge state pro-business tax incentives across the country. The NAM’s brief highlighted the importance of the case by pointing out the extent to which companies and local jurisdictions rely on tax incentives. We also argued that the Sixth Circuit’s standard that prohibits state laws that foreclose “tax-neutral decision making” is unworkable and improper. Nearly every business decision and investment involves tax consequences that influence the decision. The NAM also filed a brief in the Sixth Circuit.
On 12/5/05, the NAM and the Council on State Taxation filed a brief on the merits, arguing that the proper standard for determining whether a state tax incentive violated the Commerce Clause is whether it penalizes activities occurring in another state.
Decision Below: 386 F.3d 738 (6th Cir. 2004).