State News

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

Posted October 26, 2009 4:01 a.m. EDT
Updated October 26, 2009 9:25 p.m. EDT

— 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.