Tax News

CCH (cch.taxgroup.com) reports:

A lawsuit has been filed by the North Carolina Institute for Constitutional Law (NCICL) that challenges the enactment of a sales and use tax exemption as well as the award of a grant to Google, an Internet search engine, as violative of several provisions of the state constitution.
The suit challenges: (1) legislation enacted in 2006 that grants a sales and use tax exemption for sales of electricity used at an eligible Internet data center and eligible business property to be located and used at such a data center; and (2) the award of a Job Development Investment Grant (JDIG) with a maximum benefit of $4.8 million to facilitate the construction of a data center to support Google's online operations and create jobs. The suit claims that these actions violate the state constitution in that the tax benefits and other economic incentives or subsidies accrue to Google's private financial benefit. Further the complaint contends that Google is provided these benefits merely for operating its own private business and not in exchange for any public service.
Under the terms of the JDIG agreement approved by the state's Economic Investment Committee, a 12-year grant will be established and for each year that Google meets the required performance targets, the state will provide a grant equal to 75% of the state personal income tax withholding derived from the creation of new jobs. According to the complaint, although the legislation does not specifically reference Google, North Carolina representatives acknowledged after the legislation was enacted that the subsidies at issue were specifically intended for Google with respect to building and operating an Internet data center in Lenoir, which is located in Caldwell County, North Carolina. The plaintiffs in the case are North Carolina taxpayers and residents. The North Carolina Attorney General's Office has not yet filed a response to the complaint.