Dell Incentives Repayment Could Have Been Assured By Stam Amendment

Raleigh – Representative Paul Stam (R-Wake) offered an amendment to the 2004 legislation which authorized a massive tax incentives package for Dell, Inc. This amendment would have removed any ambiguity about repayment, with interest, of all incentives paid to the computer manufacturing firm. The amendment failed when legislative leaders claimed that any amendment would drive Dell to Virginia. Dell Inc. announced on October 7, 2009, that it was closing its Forsyth County plant and laying off at least 900 workers after receiving millions of dollars in state and local tax credits and grants as enticements for locating its plant in North Carolina.

In a special session in November 2004, the NC General Assembly passed legislation specifically targeted for Dell, to provide millions of dollars in incentives to the computer manufacturer. Most, but not all of the grants had strings attached which required repayment if the company violated terms of the agreement to create jobs and meeting other criteria.

Rep. Stam’s amendment to Senate Bill 2 “Computer Manufacturing Tax Incentives” is as follows:

“Expiration and Forfeiture – If the taxpayer fails to attain an increased employment level of at least 1, 200, either directly or indirectly or in conjunction with its strategic partners and related entities, within five years after beginning construction of the facility with respect to which a credit is claimed, the taxpayer may not take any further credits under this Article with respect to that facility and forfeits any credits allowed under this Article with respect to that facility.

A taxpayer that forfeits a credit under this Article is liable for all past taxes avoided as a result of the credit plus interest at the rate established under G.S. 105-241.1(i), computed from the date the taxes would have been due if the credit had not been allowed. To secure a forfeited credit under this section, the taxpayer shall grant (1) a deed of trust on the interest in real property of the recipient business and (2) a security interest in the equipment and inventory of the recipient business to the State. The priority of the deed of trust may be subordinated by the State through the Department of Commerce to financing for the acquisition of real property and the construction of improvements, financing for operating capital and the refinancing of these obligations.”

The past taxes and interest are due 30 days after the date the credit is forfeited; a taxpayer that fails to pay the past taxes and interest by the due date is subject to the penalties provided in G.S. 105-236.” (emphasis added)

Recent statements by Dell officials indicate they believe it qualified for previous credits and is not liable for repayment. They maintain that credits cannot be taken away retroactively. Stam’s amendment would have required all credits to be refunded to the state with interest.

“Dell Balks at Tax Credits”, Winston-Salem Journal, Dec. 08, 2009:

http://www2.journalnow.com/content/2009/dec/05/dell-balks-at-tax-credits/news-ncpolitics/