Legal Case Analysis: Chrysler and Investment Tax Credits

Case # 1

1) An investment tax credit is a tax incentive that is offered to businesses by a state. It is a method used to keep business activities within a given state as long as, they are willing to maintain or add new machinery to their facilities. There are a few different ways in which the tax credit can be obtained. An example in the state of Ohio would be, companies come into the state of Ohio and build a new plant or facility to get a tax credit or break on taxes, such as property tax. The other situation that a company would be able to receive the investment tax credit would be to place additional machinery or machines that they update or add onto. It works as long as they can prove that they put more money into the machines they already have or to bring in new machinery all together. As long as the machines are used in the manufacturing process the tax credit can be issued.

In the Daimler Chrysler case the state of Ohio agreed to give the car manufacturer tax exemptions and tax credits worth about $280 million dollars as long as they expanded their operations in Toledo. Before the incentive was offered Daimler Chrysler was going to expand operations to the state of Michigan so they could manufacture jeeps "The credit gives companies a reduction in their state corporate franchise tax in exchange for investing in new machinery and equipment in Ohio." ¹ The tax credits are available to all businesses, it is not subject only to those currently in the state of Ohio, and it is also offered to businesses from other states. Not only dues the state receive revenues, but it also provides many people with steady, unionized jobs. The state of Ohio wants to attract current businesses to stay in state, and they want other companies and corporations who aren't in the state of Ohio to consider it as a viable option.