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posted: 1/17/2013 9:54 AM

Editorial: RTA's tax questions merit broader study

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The Daily Herald Editorial Board

Can billions of dollars worth of jet fuel for planes at O'Hare International Airport in Chicago really be bought and sold out of an office at the Sycamore Village Hall? Or, for another airline, out of a Sycamore storefront operated by a part-time employee with little or no equipment?

The airlines -- American and United, in this case -- insist it can and that the practices they employ, apparently saving tens of millions of dollars in Cook County taxes in the process, are entirely above board. Maybe they are. But they, and other situations like them, sure seem to cry out for more investigation.

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Nor does the issue apply solely to the airlines. They're in the news this week because the Regional Transportation Authority announced a lawsuit against United, claiming its Sycamore storefront is a "sham" that exists solely for the purpose of dodging a transportation tax the cash-strapped RTA and its member agencies need to operate. But the RTA and other local taxing agencies have complained for years -- in other lawsuits in some cases -- that major corporations headquartered in the Chicago area are quietly opening small offices in downstate communities and routing work through them merely to avoid paying taxes where their work is actually done.

We're happy to let the courts rule on the legality or legitimacy of the United office, and we emphasize that no business should be faulted for locating its operations where the financial circumstances, in conjunction with all the other factors that go into selecting an office location, are most favorable. But at the same time, we can't escape some other important observations.

For one, that businesses benefiting from the services available in a certain location have a responsibility to share in paying for those benefits.

For another, that no system should permit businesses, or individuals for that matter, to pretend they operate in one inexpensive place providing them no services so they can avoid paying their share of support to the more expensive and more desirable place where they actually conduct their operations.

For yet another, that no town providing nothing more than office space should benefit from hosting a business office that exists only to keep the business from paying taxes to the town that does provide its services.

Whether any of this is actually happening in the United or American situations remains to be determined, and it's not entirely clear yet how pervasive the practice may be. But the questions aren't frivolous. The RTA estimates the United and American offices in Sycamore alone have cost local taxing bodies just under $300 million since 2005.

American told The Associated Press its Sycamore Village Hall office "is permitted under Illinois law," and United likewise told AP that tax authorities have examined its Sycamore office and declare that it complies "with all applicable laws." That may be. But laws also may need updating. Those who make them should be looking carefully into the legitimate questions the RTA complaints raise.

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