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Nebraska high court rules against Goodyear in tax case

May 07, 2008
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The Associated Press is reporting that the Nebraska Supreme Court has rejected arguments that replacement parts Goodyear Tire & Rubber Co. bought in 2002 should be exempt from sales taxes because it qualified for corporate tax breaks.

In a ruling issued recently, the high court sided with state tax officials who said Goodyear should not be reimbursed $14,310.10 for the taxes on the parts for equipment it already owned.

The state says Nebraska''s corporate tax breaks are designed to encourage new investment in the state.

Goodyear qualified for tax breaks under the state''s old tax incentive package, known as LB775, because it pledged to invest $3 million and hire 30 new employees at its Lincoln manufacturing plant and its distribution center in Lincoln.

LB775, which began in 1986, authorized sales tax refunds, investment tax credits and personal property tax exemptions for qualifying businesses.

Much of the arguments by lawyers on both sides in the case focused on what the words "will be" in the tax-break law mean.

That key phrase was part of the definition of which property qualified for tax breaks. The law defined property that qualified for tax breaks as "any tangible property of a type subject to depreciation, amortization or other recovery under the Internal Revenue Code of 1986, or the components of such property, that will be located and used at the project."

State officials said the future tense of "will be" in that definition means that new equipment or property that companies invest in should qualify for tax breaks, and replacement parts for existing equipment should not be covered.

Assistant Attorney General Jay Bartel argued that Goodyear''s interpretation of the law contradicted the purpose of the tax incentives, "which was to encourage new investment and new employment in the state."

Goodyear''s lawyers argued that the parts should qualify for tax breaks because state law only requires that parts and equipment be used at a project some time in the future but doesn''t require the equipment to be new.

The high court rejected that argument.

Goodyear did not add 30 employees but still qualified for incentives because it invested $20 million in its operations in the state.

The tax incentives Goodyear was pursuing have been replaced by a new package of tax breaks the Legislature approved in 2005. Those new incentives are called the Nebraska Advantage program.
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