Village of Channahon Continues Stonewalling Requests to Disclose Names of Companies Receiving Secret Tax Breaks
December 21, 2011
The Village of Channahon filed new documents in Cook County Circuit Court last Friday, in which it refused to provide the Regional Transportation Authority (RTA) with answers to questions about the nature of its tax avoidance schemes that have cost local governments across Illinois millions per year in lost revenues. Attorneys for the village also asked that in the event Channahon is ordered to answer the RTA’s questions, including which businesses are benefiting from the schemes, that the information be put under a protective order so that the RTA cannot share it with the public.
“We continue to believe that the reason they don’t want this information shared with Illinois taxpayers is that it will demonstrate the truth of the allegations we have made about Channahon’s role in a widespread scheme to shortchange taxpayers in the six-county RTA region,” said RTA Executive Director Joe Costello. “The village needs to stop playing legal games and instead provide a full accounting of who is benefitting from the expenditure of public tax dollars. We believe in financial transparency at the RTA, and that should be the policy of any governmental unit.”
The RTA recently adopted balanced 2012 budgets for the Chicago Transit Authority, Metra and Pace, but all three agencies face significant financial challenges in the coming year, including union contract negotiations and rising fuel costs.
The sales tax rebate agreements at issue were entered into by Channahon and tax consulting firms representing retailers who do business in jurisdictions where sales taxes are higher than the statewide 6.25% sales tax. The agreements allow retailers to claim that their sales occur at sham offices in Channahon, which does not impose its own sales tax. In exchange, Channahon takes only a small cut of its 1% share of the statewide sales tax, and rebates the rest to the consulting firm. The consulting firm, in turn, takes a cut and then rebates an unknown, but likely significant, amount of the sales tax to participating retailers. The result is that the retailers pocket most of the money themselves and avoid paying sales taxes to local governments that are providing services, including transportation services, to the retailers’ customers and employees. Channahon benefits by reaping a tax windfall without having to provide any additional services.
“We want to make sure that the public has access to this information in the future. That’s why we have been working with State Representative Carol Senate (D-Vernon Hills) on House Bill 3859, which would require municipalities and counties to publicly disclose all of the details of their tax rebate agreements—including the names of the retailers involved and the terms of each deal,” said Costello.
The RTA region includes Cook, DuPage, McHenry, Lake, Will and Kane counties and is served by the Chicago Transit Authority (CTA), Pace and Metra.