Illinois lawmakers face a political test of wills this week when they are expected to be asked to vote for an otherwise popular bill that Gov. J.B. Pritzker has vowed to veto.
Should it be enacted, private jet maintenance companies in Illinois would be forgiven sales tax tabs from the last five years and would have an exemption extended to 2024. It passed nearly unanimously in the House in October, but faces an uncertain fate in the Senate now that Pritzker has pledged to veto it.
“This bill would forgive $50 million of taxes that are owed by people who are in this private jet industry,” he said last week. “I just don’t think it’s right, given the state of our finances in the state of Illinois.”
He was responding to a question regarding a WCIA Channel 3 report that labeled the companies as “luxury jet manufacturers” getting a tax break. Other than Chicago-based Boeing, Illinois is not home to any private jet manufacturers. The legislation would affect aviation facilities whose mechanics perform routine maintenance on smaller jets to meet government standards.
It’s somewhat rare for a governor to promise action regarding pending legislation that could still be changed or amended.
House Bill 3902 is scheduled to be heard Wednesday morning in the Senate Finance Committee.
The issue arose when companies learned that an exemption was allowed to sunset along with many others in 2014. Industry representatives estimate the amount of owed tax revenue to be nearly $50 million and would require the companies to pay about $8 million annually over the next four years.
Many companies said they were unaware that the exemption had been allowed to expire. They didn't charge their clients and facing tax bills that supporters say could put the local aviation companies at a disadvantage to other states that offer the same exemption.
Even Illinois’ own agencies were, as of March of this year, under the impression that the tax exemption was still in place. The Legislative Research Unit’s 2019 Tax Handbook said companies that offer “(m)aterials and components incorporated into or upon an aircraft as part of its modification, completion, repair, or maintenance” are completely exempt from Illinois’ occupational sales tax.
“These guys are coming here and choosing what state they go to, whether that be Illinois, Michigan, or California,” said Rob French with the Illinois Aviation Trades Association. “It doesn’t matter to them. They are looking at what is a bottom line on what is regular maintenance for their planes.”
French said periodic maintenance for these jets can cost hundreds of thousands of dollars.
Companies that were diligent enough to catch the issue and remit sales tax to the state wouldn’t be refunded under the bill.