A tax dispute between Arkansas and a Blythesville steel producer could ultimately cost taxpayers millions of dollars in the lost revenue if the company wins, the state's finance director said Friday.
Nycor Corp. argues it should receive a tax credit for equipment and machinery it bought for its factory.
The state would be required to refund $300,000 if it loses at an Oct. 19 trial, but of greater concern to state officials is whether other companies will be able to use that ruling to demand their own refunds.
"It's the precedent we're concerned about," Richard Weiss, director of the Department of Finance and Administration, told the Legislative Council.
Arkansas offers a sales tax credit for equipment and machinery used to expand a business, but not for replacement of existing pieces.
In its lawsuit in Mississippi County Circuit Court, Nucor argues that the items are used directly in manufacturing and that they replace essential machinery. The company says that is enough to qualify for the credit because the upgrade is part of a physical and economic expansion of the mill.
"Past exemption litigation dealing with other manufacturers has involved potential liability for the state of Arkansas in the millions of dollars, and a multitude of similar refund claims and lawsuits are likely to follow if Nucor wins this case," Weiss said in a letter to the panel.
Mark DiGirolamo, controller for the Nucor plant, said the company isn't trying to set a precedent.
"I don't think this is a new ruling" the company is seeking, DiGirolamo said in a phone interview. He noted that "several expansions" are included in the tax appeal.
DiGirolamo said the tax credit for expansion is one of the reasons Nucor located in Arkansas. He said the company's employee head count isn't necessarily an indicator of expansion.
"We have added manpower, but we also had slowdowns economically since 2008 so that blurs it a bit," he said.
The plant has about 1,500 workers.
Weiss said the agency regularly has disputes with companies about taxes and that Nucor's court action "is not a hostile lawsuit."
The matter came up when Weiss asked the council to approve spending $67,220 to pay an expert to testify at the trial. The panel agreed to the request, with the money coming from DF&A's budget.
Nucor has hired an expert who developed a report to support the company's claims. Weiss told legislators that the state's expert would have to get to work quickly because he would have to tour Nucor's plant, write a report and give a deposition before the trial.