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.