Former state Supreme Court Justice Robert Orr said Thursday that the organization he leads filed a lawsuit against state and local governments over the constitutionality of targeted economic incentives offered to Dell Corp.
Orr, who last year left the high court to head the newly formed North Carolina Institute for Constitutional Law, is challenging special legislation that awarded Dell $242 million in tax credits and other economic subsidies. He is also suing the City of Winston-Salem and Forsyth County over $37 million they offered to persuade the company to build its East Coast assembly plant in their jurisdiction.
“We are delighted to have Dell in North Carolina,” Orr said at a press conference. “We just want them to be a good corporate citizen and pay their fair share of taxes.”
The complaint filed Thursday morning in Wake County Superior Court argues that the special incentives for Dell, passed in November by the General Assembly, violate the Commerce Clause of the U.S. Constitution. It also claims that the state and local incentives run afoul of the N.C. Constitution.
“What we’re primarily concerned about is taking tax revenue and handing it out to a few large companies,” Orr said. “I think the constitution was set up to keep that from happening.”
The lawsuit lists seven plaintiffs from across the state, and seeks a declaratory judgment against Dell, the state and local government agencies involved, and the nonprofit economic development agencies that provided the incentives. It asks that any funds paid to Dell or its agents to be refunded or reimbursed to the state and local governments that issued them.
Orr’s organization, NCICL, says that “the ultimate gain derived through the expenditure of public funds must be the public’s, not that of an individual or private entity.”
The complaint argues that corporate income and corporate franchise tax credits given to “major computer manufacturers” by the state violate the Commerce Clause of the U.S. Constitution, because they are offered for business activities in state “but not for identical activities that occur out of state.” It also contends that North Carolina’s tax credits under the Bill Lee Act, and other sales and use tax breaks, which are conditioned on machinery and equipment investment in North Carolina, violate the Commerce Clause.
The lawsuit also says plaintiffs are deprived of their equal protection rights under the U.S. and N.C. Constitutions because of the special tax laws created for Dell. The state constitution also calls for “uniformity of taxation,” in which “no class of property shall be taxed except by uniform rule….”
Orr said he expects vigorous opposition from the state Attorney General’s Office and Dell’s lawyers.
“This can go quickly, or it can go very, very slowly,” he said.
Paul Chesser is associate editor of Carolina Journal. Contact him at [email protected].
Editorial intern Jodi Powell contributed to this report.