The lawsuit's central issue is the constitutionality of 2001 legislation creating the property tax exemptions that benefited Midwest Airlines and Air Wisconsin, both based in the state.
A Dane County judge struck down the exemptions in 2003 after Minnesota-based Northwest Airlines sued. The judge ruled Northwest should not be subject to those taxes because the other two airlines are not.
''What we're looking for is a level playing field,'' Northwest spokesman Kurt Ebenhoch said.
The Fourth District Court of Appeals noted a decision in the case could impact other tax incentives lawmakers create for firms doing business in Wisconsin. That could ''affect Wisconsin's ability to compete with other states in attracting business and industry,'' the judges wrote.
Supreme Court spokeswoman Amanda Todd said she expects the justices to decide whether they want to take the case sometime in the next month or so. The court can accept the case directly or order the appeals court to hear it first.
Lawmakers did not specifically name Midwest or Air Wisconsin in the 2001 legislation, which created a property tax exemption for airlines that operate ''hub facilities'' in Wisconsin. But those airlines were the only ones that met the standard.
The property tax breaks amounted to about $2.5 million annually for the two airlines.
Northwest contended it should not have to pay about $1.6 million in property taxes a year for its Wisconsin operations because of the exemptions for Oak Creek-based Midwest Airlines and Appleton-based Air Wisconsin.
Dane County Circuit Judge John C. Albert agreed, ruling the tax exemption violated the Commerce Clause of the U.S. Constitution.
That clause gives Congress the power to regulate commerce among states. But it also limits the power of the states to ''discriminate against interstate commerce.''
Representatives of Midwest Airlines and Air Wisconsin did not immediately return calls from The Associated Press.
The appeals court noted the outcome is likely to significantly impact the state's economic health, including Wisconsin's ability to attract airline services, including hub facilities. The court said those facilities create airline jobs and improve the business climate by providing frequent and direct flights to other destinations.
Midwest officials have said if the tax exemption is not reinstated, the company will reconsider its growth plans in Wisconsin.
