CHICAGO — A Chicago-area transportation agency on Wednesday alleged that some of the nation’s largest and best known companies including AT&T, Sears Holdings Corp., Verizon and Target are running “sham” offices as part of a scheme with two small northern Illinois communities to avoid paying millions of dollars in taxes in Chicago and Cook County.
The Regional Transportation Authority released the names of companies or their subsidiaries that it contends have dozens of small offices in Kankakee and Channahon — some upstairs from a cash for gold business and a hair braiding shop — where it says little if any work is done and often nobody so much as answers a knock on the door. And in many cases, according to the RTA, there are no signs on the street or office directories in the buildings that identify these companies as tenants.
“Whatever work they are doing is just enough to create a sham office in order for these sales transactions to be cited to these cities,” said Jordan Matyas, the RTA’s chief of staff. “In some places you have 20 companies procuring millions of dollars in goods from these offices where there is minimal staff doing minimal work.”
The release of the names Wednesday is the latest chapter in a legal battle between the RTA and small communities over tax incentive programs that the agency characterizes as a scam and the communities defend as sound and legal strategies that provide funds they desperately need to provide city services.
The communities say their tax incentive programs are a perfectly legal way to take advantage of the fact that their sales tax rates are lower than those in and around Chicago.
“They have higher taxes and they’re blaming us,” said Kankakee’s assistant city attorney, L. Patrick Power.
Some companies the RTA names, including AT&T, Sears Holdings Corp., and Verizon said they have done nothing wrong and are following Illinois tax laws.