RTA claims airlines dodging fuel taxes in Sycamore

January 14, 2013 3:27:57 PM PST
Two major airlines are accused of avoiding higher taxes to the City of Chicago and Cook County by running what the Regional Transit Authority calls a ''sham.''

The agency says actions by both United Airlines and American Airlines are costing much needed funding.

Through a lawsuit filed Monday, the RTA is hoping to stop the airlines from operating what the RTA claims are sham offices in DeKalb County to buy jet fuel.

The RTA says it has lost out on millions of dollars in sales tax revenue. The airlines say what they are doing is legal.

The airlines are two of the largest in the world, yet, when it comes to buying jet fuel, United and American turn to Sycamore, Illinois. The rural town 55 miles west of Chicago is the home to two small offices that both airlines use as the location to buy hundreds of millions of dollars' worth of fuel.

"This is not where anyone is negotiating multimillion dollar agreements or buying a million dollars a day worth of jet fuel; this is just a sham," said RTA Chief of Staff Jordan Matyas.

The RTA is accusing United and American of operating sham offices in Sycamore to avoid paying millions of dollars' worth of sales tax in Chicago and Cook County. The RTA relies on sales tax to fund Metra, CTA and Pace. The RTA says, since 2005, the airlines practice has cost the RTA $96 million.

"When you're re looking at CTA raising fares today, when you're looking at the fares that were raised on Metra just last year, that's all money that could have reduced that increase or gone to other operational needs."

The RTA is suing United and will add American to the lawsuit once the airline emerges from bankruptcy.

While its corporate headquarters are in the Willis Tower, United's jet fuel operation is in a small Sycamore building shared by a law office and a chiropractor. One woman is the only employee working in the office.

American shares space in the Sycamore City Hall, also a one-woman operation. "The law says you need to pay sales tax where there was acceptance," said Matyas. "So you have to look, where was it negotiated? Where was it paid for? Where was it used? Nothing happened in Sycamore."

Through written statements, United, American and the City of Sycamore all say what they are doing is legal under state law.

Under an agreement since 2001, United pays the City of Sycamore more than $300,000 a year. The RTA says that is a fraction of what the airline would have owed in Cook County and Chicago sales tax.

United and the City of Sycamore say their agreement has been reviewed by tax authorities.