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Suit Filed Over Tax Breaks for Dell Factory in North Carolina

June 24, 2005|From Bloomberg News

A group of taxpayers asked a North Carolina court Thursday to declare that tax incentives worth $279 million granted to Dell Inc. for building a factory in the state are unconstitutional and should be rescinded.

The incentives, approved by the North Carolina Legislature in 2004, discriminate in favor of in-state economic activity in violation of the state constitution's commerce clause, according to a lawsuit filed Thursday in state Superior Court in Raleigh. The plant in Winston-Salem will be Dell's largest when it opens in September.

North Carolina, which outbid Virginia for the $100-million plant, competes with other states for investments by offering companies tax breaks and other incentives. Such grants amount to "corporate welfare" and discriminate against smaller companies that can't get them, according to the North Carolina Institute for Constitutional Law, which is representing the seven plaintiffs.

"What we're seeing in this competition to attract investment is the economic Balkanization of the states," said Robert Orr, director of the institute. "Businesses know they can play one state off another to get the best deal."

The state of North Carolina, Forsyth County, the city of Winston-Salem and state and local officials also are named as defendants.

David Frink, a spokesman for Round Rock, Texas-based Dell, said the company didn't comment on litigation, but the incentives were performance-based, meaning Dell wouldn't realize them unless it created jobs.

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