Regional Transportation Authority - Chicago

IL: RTA Accuses City of Violating Law to Protect Tax Scofflaws

The Regional Transportation Authority (RTA) filed suit today against the city of Kankakee, accusing its officials of ignoring a state law requiring cities to disclose contracts they have with companies seeking to avoid paying their fair share of taxes.

The lawsuit, filed in Cook County Circuit Court, is part of an ongoing effort by the RTA to hold companies accountable for years of tax dodges that have cost city and county governments, as well as public transit agencies, hundreds of millions of dollars.

Dozens of companies based in Chicago and its suburbs have entered into agreements with small towns like Kankakee, allowing the company to funnel purchases through that small town, taking advantage of a lower tax rate. The companies conduct no business there, which the RTA alleges violates state law. Those agreements mean Chicago area taxpayers are forced to pay more in taxes and public transit fees.

The RTA has filed repeated requests under the state’s Freedom Of Information Act, asking the city of Kankakee to provide records of any agreements it has with companies engaging in these schemes, the city has refused to provide this information as required by FOIA.

“The General Assembly passed a law to shed light on these sham tax agreements that take place across Illinois,” said RTA Executive Director Joe Costello. “The RTA has been forced to file this lawsuit because the city of Kankakee is evading our requests — and state law — to provide this public information.”

In January, the RTA filed a lawsuit alleging American Airlines and United Airlines entered into tax-dodge agreements with the village of Sycamore, in order to purchase millions of gallons in jet fuel at a lower sales tax rate than those airlines would pay if they purchased the fuel in Chicago, where they actually operate their business.

The RTA is engaged in an existing lawsuit with several tax consultants who have entered into tax-haven agreements with Kankakee on behalf of numerous Chicago area based companies. The FOIA requests filed by the RTA seek to identify companies that have direct agreements with the city for similar benefits. Cities with such agreements generally receive a percentage of the company’s savings, in exchange for partnering in the scheme.

CTA, Metra and Pace rely on sales tax revenues to fund about half of their annual operating budgets. Due to a shortage in those operating funds, each agency has been forced to raise fares and cut services — as recently as this year. The RTA is the agency responsible for ensuring each of those agencies receives all of the tax funds it is owed and that those agencies present budgets that address regional transportation needs.

“These companies are hurting the cities they call home and their own employees by refusing to pay their fair share of taxes,” Costello added. “It is bad enough that Kankakee is allowing this to happen, but they are now blatantly violating the law in an effort to protect these tax dodging companies.”

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