The Regional Transportation Authority alleges United Aviation Fuels Corp., a subsidy of United Airlines, has operated a "sham" office in Sycamore since 2001 after reaching an agreement to pay the town more than $300,000 a year – a fraction of what it would have owed in sales taxes in Chicago and Cook County.You'd think Illinois officials would have caught on to the effects of their taxes on transportation equipment and supplies long ago. It is no accident that The Milwaukee Road's Hiawatha locomotives first hit home rails at Sturtevant, giving the Chicago and North Western a division of the freight it would not get had those locomotives been handed from The New York Central in Chicago. The Electroliners also had a longer ride, reaching North Shore Line rails in Wisconsin.
"The only reason that United Fuels has an office in Sycamore is to attempt to create a sham tax situs (location) for fuel sales in a lower taxing jurisdiction," reads a draft of the lawsuit obtained by The Associated Press.
United officials say they have not seen the lawsuit, but that the Sycamore operation is legal.
But Illinois officials would rather go after tax-evasion schemes, as long as the legalities are cheap enough.
The RTA alleges that American Airlines is engaged in a similar "sham" business out of an office it rents in Sycamore's City Hall. But Matyas said American was not included in the lawsuit because the airline remains in bankruptcy, and that suing American would require litigating the case both in federal bankruptcy court in New York and in Cook County Circuit Court, where the RTA plans to file its suit against United. He added that the RTA does plan to pursue legal action against American at some point.Chicago officials seem more interested in scoring political points than in considering the incentives their high taxes provide, even to other jurisdictions in the state.
The lawsuit is potentially embarrassing for Chicago Mayor Rahm Emanuel, who earlier this year called United's decision to move its corporate headquarters to Chicago "great news for all Chicagoans."It's better political theater for Chicago's politicians to push the populist "fair share" stuff, but outlying communities are enticing business away with more favorable tax treatment of business transactions.
When told of the lawsuit, Emanuel spokeswoman Sarah Hamilton said: "The City has been supportive of efforts in Springfield to ensure corporations pay their fair share, but we have not seen this specific lawsuit and therefore cannot comment on it."
According to the RTA, the total sales tax rate in Sycamore is 9.5 percent, compared to 8 percent in Chicago. But the RTA contends the airlines are getting an even better deal: The two companies have entered 25-year agreements that call for Sycamore to "kick back" most of its share of the sales tax on jet fuel — as much as $14 million a year — in exchange for payments of at least $300,000 a year from each airline.