The Illinois Supreme Court has taken down a special tax break for a western Illinois aviation service, declaring state lawmakers lacked the constitutional authority to extend to the business a property tax exemption held by a public airport authority, costing the local school district and other local governments a tidy sum in unpaid property taxes.

On June 16, the state’s high court, by a 6-1 decision, sided with a state appeals court, which had found the law violated the Illinois constitution’s prohibition on special legislation.

Justice Lloyd Karmeier authored the majority opinion. He was joined in that decision by Chief Justice Rita B. Garman, and justices Robert Thomas, Thomas Kilbride, Charles Freeman and Anne M. Burke.

Justice Mary Jane Theis dissented.

The case centered on an Illinois state law, which had been scheduled to take effect in 2013, that was crafted at the request of the Metropolitan Airport Authority of Rock Island County in Moline, to enable the Quad Cities airport to extend tax incentives to Elliott Aviation, a so-called fixed base operator doing business at the airport.

Under the law, Elliott Aviation, because it operated on land owned by the tax-exempt airport authority, would be allowed to share in the MAA’s tax exemption. The law did not extend similar tax exemptions to other fixed base operators located on other public airports in Illinois, however, because the MAA had indicated it needed the tax incentives to persuade Elliott to expand its operations at the Moline airport, rather than across the Mississippi River in Iowa, where such FBOs, leasing space from public airport organizations, are not taxed.

The MAA and other Quad Cities organizations in support of the law projected Elliott’s expansion at the Moline airport would generate hundreds of jobs and millions of dollars in new revenue for the local economy.

The law passed by overwhelming majorities in the Illinois General Assembly, and was signed by former Gov. Pat Quinn.

However, the law was challenged in court by Moline School District 40, which projected the tax exemption would cost it $150,000 in lost property taxes. The school district said the law flew in the face of the state constitution’s prohibition of so-called “special legislation,” which benefits only a select few, such as a certain community or business.

In response, the MAA and Elliott argued the law should stand because it lands squarely on the exception in the constitution allowing such special laws for such groups which may be uniquely situated, compared to the rest of the state. They said the airport’s location immediately across the border from a state with tax laws much more advantageous to fixed base operators make this a unique case worthy of the law.

A circuit judge shot down the school’s arguments. But the school district found friendlier skies at the Illinois Third District Appellate Court in Ottawa, which unanimously struck down the law.

Elliott Aviation appealed to the state high court.

However, a majority of justices there said they, too, believed the law should not be cleared for launch.

The majority said they did not believe Elliott should be considered unique enough to warrant such special treatment under the law.

“Illinois has many municipal airport authorities and numerous FBOs, including FBOs like Elliott Aviation that operate near other states with a more favorable tax environment,” the justices wrote. “They, too, would stand to benefit from tax incentives. Indeed, the same could be said of every other Illinois business throughout the state.”

The justices said they recognized the economic benefits to Rock Island County were “undeniable.”

But they said that alone is not enough to overcome the constitutional issues with the law.

“In sum, based upon what is before us, we do not see and cannot reasonably conceive of anything that would justify distinguishing FBOs operating at the Quad City airport from any number of other FBOs at other Illinois airports or, indeed, from other Illinois businesses which operate on our borders or compete with companies in more tax-friendly jurisdictions, for purposes of property tax liability,” the justices wrote. “To the contrary, the law presents a paradigm of an arbitrary legislative classification not founded on any substantial difference of situation or condition.”

In her dissent, Theis said the justices erred in simply accepting the school district’s “unsupported allegation … that there are other FBOs in Illinois, some of which conduct business at our borders,” ignoring the school district’s “complete lack of any evidence” concerning the other 19 FBOs operating in the state.

“Apparently, the majority accepts the School District’s argument … that even a statute creating a tax exemption for all FBOs across the state would be special legislation because all Illinois businesses are similarly situated,” Theis wrote. “An ‘every other Illinois business throughout the state’ yardstick provides the wrong measure in special legislation cases. The legislature need not choose between a statute that governs all businesses or no statute at all.”

And she said the court should have deferred more to state lawmakers in determining whether this law – which could be used to generate economic development in the state, as opposed to Iowa – represented an action in the best interests of the state.

“Due to its superior investigative and fact-finding facilities, the General Assembly is far better suited than this court to balance the benefits of a tax incentive for a group of businesses in one county against detriments there and elsewhere,” Theis wrote.




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