RALEIGH—A lawsuit filed by a legal association against the state that maintained that offering tax rebate incentives to film companies violates the “public purpose” requirement in the North Carolina Constitution was dismissed Monday in Wake County Superior Court.
Judge Narley Cashwell sided with lawyers representing the state, who argued that the N.C. Institute for Justice’s case was flawed because:
• State taxpayers have no standing to sue over how the state spends money;
• The N.C. Film Office had not awarded any incentives under its new program;
• The lawsuit was moot since the General Assembly repealed the statute that created the incentives in the first place.
The Film Industry Development Account offers up to $200,000 in tax rebates to production companies that spend money while they are in North Carolina. The Institute for Justice’s lawsuit apparently led legislators to rewrite the statute that created the account. They replaced it in this year’s budget with another statute that details the public-purpose reasoning for keeping the development account. The 10-point explanation in the revised statute is in essence a promotional history of the film industry in North Carolina, which justifies the need for film incentives. The law keeps the development account intact with the same requirements and incentive goals.
“They just added a bunch of hortatory language,” said Clark Neily, interim director for the N.C. Institute for Justice. “Otherwise the statute is identical in form.”
The state’s argument that the lawsuit was moot was absurd, because the development account was retained exactly as before, Neily said.
Neily also disputed the state’s argument that taxpayers are not able to sue over appropriations decisions. He said there is case law that “goes back 80 years” to contradict that claim. “There’s a very long line of cases where taxpayers have repeatedly challenged this kind of giveaway,” Neily said. “The courts have never said they don’t have the standing to make that challenge.”
The fact that the development account hasn’t been used yet was also a flimsy argument, Neily said, because the state obviously intends to use it.
Cashwell did not specify if one or all of the state’s objections weighed into his decision. The Institute for Justice would likely appeal the dismissal in a week or two, Neily said.
“I don’t think this is a particularly significant setback,” Neily said.
Chesser is associate editor at Carolina Journal.