The Chicago area's Regional Transit Authority is suing United Airlines, charging the carrier is dodging millions in taxes owed to Chicago taxing jurisdictions.
The RTA said in a press release United, along with American Airlines, has set up a sham office in an outlying town in Illinois where it "accepts" the millions in jet fuel it purchases. Illinois law allows companies to pay sales tax in municipalities where it "accepts" the goods, not where they're ultimately delivered.
The RTA contends in a lawsuit filed in Cook County Circuit Court Monday the tiny offices that aren't regularly staffed and amount to nothing more than a mailing address in Sycamore, Ill., means the 9.5 percent the airlines should be paying in Cook County is instead paid at the lower Sycamore rate of 8 percent. In reality, a tax deal with Sycamore sees United paying an annual $500,000 payment-in-lieu-of-taxes -- a kickback of sorts, the RTA charges in its suit -- in exchange for saving paying the higher Cook County taxes.
"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," RTA Executive Director Joe Costello said. "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."
RTA officials said the airlines have dodged paying about $300 million in taxes over the last seven years.
United, a unit of United Continental Holdings Inc. of Chicago, told Crain's Chicago Business Review the accusations are "without merit."
"The operation of our fuel subsidiary in Sycamore has been examined by tax authorities in the past and has been determined to comply with all applicable laws," United said in a statement. "Accordingly, we will vigorously defend ourselves against any such claims."
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