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N.C. appeals court hears arguments on Google tax breaks

Posted October 26, 2009

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— The legality of tax breaks that lure a company to North Carolina was before the state Court of Appeals Monday.

The three-judge panel heard a challenge by taxpayers who argue that 2006 tax incentives approved by the Legislature to attract Google Inc. (Nasdaq: GOOG) violate the state constitution.

Lawmakers agreed to exempt large Internet data centers from sales and use taxes in return for Google's agreement to build a server farm in Caldwell County. Combined state and local tax breaks for the project could be more than $200 million.

Attorneys for Google and the state argued that the plaintiffs don't have a standing in the tax breaks like a company who competes with Google would.

Attorneys for the plantiffs – Michael Munger, Barbara Howe, and Mark Whitely Cares – however, argued that their clients are taxpayers and for that reason, have standing.

Google's attorney also pointed out that state courts already have upheld the legality of public funds or tax breaks to attract new business twice in the last dozen years.

The hearing came two weeks after Dell (Nasdaq: DELL) announced it is closing its massive assembly plant in Winston-Salem and laying off more than 900 workers.

State and local governments awarded Dell more than $200 million in tax incentives, and the state prevailed in the courts against legal challenges for that incentive package.

Dell has agreed to repay local incentives already received.

Gov. Bev Perdue has vowed that Dell will repay “every red cent” in state incentives.

Apple (Nasdaq: AAPL) also received incentives to build its own data center in Western N.C.

12 Comments

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  • jbwhite2 Oct 26, 2009

    NCWebGuy, Lenovo doesn't need a plant in Winston. Lenovo already has one in Whitsett (just east of Greensboro).

  • postracker Oct 26, 2009

    I forgot the pat on the head.....

  • Gatsby Oct 26, 2009

    There is a problem with these huge tax breaks because its obvious that you cannot trust anyone who has the power to grant it to keep their hands off it.
    Kick-backs & under the table dealing rule as greed is to strong a temptation for the few who handle such business. The only way to protect the taxpayer is never allow them to get control over it.

  • ncwebguy Oct 26, 2009

    Can the rest of us taxpayers sue these taxpayers for wasting the court's time and money for something that has already been settled?

    If another company replaces Dell, the infrastructure built for it will still be utilized and worthwhile. Time will tell if that will happen, and I hope Dell's departure does not "poison the well" for other industry.

    I have no idea why they couldn't retool a relatively new plant to build laptops, netbooks, etc. It would be nice to see Lenovo step in since their US HQ is in RTP, but they seem intent on keeping their manufacturing and assembly in China.

  • goodejrg Oct 26, 2009

    Starshield-- Government rips you off in your face. Businesses rip you off behind your back. However, government must abide by the constitution more than private businesses. CEO's are constantly finding loopholes in the constitution to avoid accountability, especially when it comes to Fair Labor Standards & Hiring practices. If you trust people such as Madoof & the Enron CEO (i forget his name), you are just as lost as I am.

  • whatelseisnew Oct 26, 2009

    Once they are completed, these data centers do not require very many people to run them. They are highly automated facilities.

  • starshield Oct 26, 2009

    I agree rand321, except when the government provides infrastructure for this business, like what happened with Dell.

    @goodejr, So you think you can trust the government more? If you do, you are a lost soul. The government can get you without recourse. Private sectors atleast are held more accountable than any gov. entity.

  • rand321 Oct 26, 2009

    How can giving up something (tax revenue) in the future that you would have NEVER received in the first place is a tax break?

    NC is giving away money that Google would have to pay should it be in NC. However, if they chose another state, NC is in the exact same position as before in respect to the revenue. $0 in sales taxes. At least with generate direct sources of income and jobs, they accelerate the spending through the local economy several times, collecting sales taxes and income taxes from the increased busienss levels.

    Thus, giving away revenue you would have never received in the first place sounds like a great deal for NC!

  • goodejrg Oct 26, 2009

    $200 million in tax breaks, yet I haven't heard of Google being a major employer in NC. Clearly, even if you give large corporations tax breaks, they won't use them to create jobs. The CEO's will pocket the money and use it for their own personal benefits. This is why the private sector cannot be trusted.

  • kcfoxie Oct 26, 2009

    I don't think many other states can compete with the backbone to the internet that NC has. Google sort of needs datacenters here moreso than we need Google here.

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