Bus

Chicago RTA accuses airlines of dodging millions in taxes

Posted on January 14, 2013

The Chicago Regional Transportation Authority (RTA) alleged that United Airlines and American Airlines operate offices in Sycamore, Ill. that they use to avoid paying higher taxes from their actual offices in Chicago.
These small, part-time offices are rarely occupied, and in at least one case, don’t appear to even have a computer. However, both multi-billion dollar companies claim they purchase their jet fuel — one of their largest expenses — from those offices.

The RTA alleged that these operations have deprived Chicago and Cook County taxpayers, as well as public transportation agencies, of nearly $300 million over the last seven years, according to a lawsuit filed Monday.

The RTA filed suit against Chicago-based United, while deferring formal action against American, as American is currently involved in bankruptcy proceedings.

“Governments across the country have been forced to do more with less. CTA, Metra and Pace have had to work with constrained budgets and have needed to raise fares and reduce service because the money’s just not there. Now we know why,” said RTA Executive Director Joe Costello. “These airlines happily accept taxpayer-supported services — like the mass transit that many of their customers and employees use — but don’t pay what is due to support those services. That is just wrong.”

CTA, Metra and Pace rely on sales tax revenues to operate mass transit in the six-county region. Public transit has been continually underfunded, and as a result each agency has been forced to raise fares and cut services.

Both airlines purchase and use millions of gallons of jet fuel in Chicago. Despite this, since 2001, United has claimed to "accept" jet fuel at its office in a Sycamore strip mall, while American has been "accepting" jet fuel at its small, windowless office inside Sycamore’s town hall since 2004, according to the RTA.  

The companies have entered into 25-year agreements with Sycamore, guaranteeing the city as much as a half-million dollars every year that the airlines are allowed to claim that they "accept" jet fuel there, the RTA alleged. Most states collect sales tax based on where products are received while Illinois is one of only a few states that collect sales tax based on where a company claims a purchase was “accepted.”  

If the airlines complied with Illinois law, and paid the appropriate sales tax, they would be taxed at a rate of 9.5%. Instead, the airlines claim to "accept" the fuel in Sycamore, where the sales tax rate is only 8%. According to the RTA, Sycamore then kicks back a large part of its share of the sales tax to the airlines, amounting to as much as $14 million a year.   
The lawsuit, filed in the Circuit Court of Cook County, came about 18 months after the RTA filed similar lawsuits against far south suburban municipalities Kankakee and Channahon, which have similar tax-avoidance deals with retailers and other airlines.

“RTA is charged with ensuring the financial stability of mass transit in the region and with ensuring that CTA, Metra and Pace receive all revenue that they are entitled to,” Costello said. “We are calling on United, American and any other businesses engaged in these practices to do the right thing and cancel these agreements.”

A copy of the complaint and a video can be found here.

View comments or post a comment on this story. (0 Comments)

More News

Chinese company unveils 'Transit Elevated Bus'

The bus is supported by two legs that run along rails laid along the roadside. The legs allow the buses frame to glide high above the gridlock at speeds of up to approximately 37 miles per hour.

Last Chance for Innovative Solutions Award submissions

Have you recently partnered with a solutions provider within the last year to implement a new innovation at your operation that has helped you save money, run more efficiently, streamline operations, improved customer satisfaction or increased ridership? Tell us what you did and how it has positively impacted your business.

NY MTA introduces the first of more than 2,000 state-of-the-art buses

After more than three decades of bearing more than a passing resemblance to refrigerators on wheels, the appearance of North America’s largest transit bus fleet is undergoing a stunning transformation

NY MTA rolls out first of 75 state-of-the-art New Flyer buses

In March, Gov. Cuomo announced the addition of 2,042 buses, equipped with Wi-Fi and USB charging ports, to the MTA fleet over the next five years, replacing 40% of the current fleet.

Dallas' DART takes top spot at APTA's International Bus Roadeo

The Grand Champion Award recognizes the system with the highest combined bus operator and maintenance team score.

See More News

Post a Comment

Post Comment

Comments (0)

More From The World's Largest Fleet Publisher

Automotive Fleet

The Car and truck fleet and leasing management magazine

Business Fleet

managing 10-50 company vehicles

Fleet Financials

Executive vehicle management

Government Fleet

managing public sector vehicles & equipment

TruckingInfo.com

THE COMMERCIAL TRUCK INDUSTRY’S MOST IN-DEPTH INFORMATION SOURCE

Work Truck Magazine

The number 1 resource for vocational truck fleets

Schoolbus Fleet

Serving school transportation professionals in the U.S. and Canada

LCT Magazine

Global Resource For Limousine and Bus Transportation

Please sign in or register to .    Close