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Local News

Channahon settles RTA point-of-sales lawsuit

CHANNAHON – The Channahon Village Board unanimously approved Monday a settlement with the Chicago Regional Transportation Authority for a lawsuit filed in 2011.

The lawsuit involved a sales tax matter stemming from retailers that had set up small satellite offices in Channahon, allowing the purchase of materials at a lower sales tax rate. Point-of-sale rules allowed for the sales tax to be applied where the purchase was accepted, not where it was delivered to a customer.

The village, along with the Illinois State Supreme Court, said the point-of-sale practice was legal at the time; laws have since been changed.

Channahon and other municipalities – such as Kankakee – were sued by the RTA (the umbrella organization that oversees the Chicago Transit Authority, Metra and Pace), Cook County and the city of Chicago for lost sales taxes.

The sales tax rates were lower in Grundy County – 6.25 percent compared to 9.5 percent in Cook County – in part because they do not include the sales taxes that support the RTA.

The agreement signed Monday, according to attorney Jim Murphy, with Mahoney, Silverman and Cross Law Firm, is with regard to particular retailers, including the broker Inspired Development LLC, which Murphy said brought several retailers to Channahon. Those retailers began point-of-sales programs with the village that allowed businesses in Chicago and other municipalities to route sales through Channahon.

Using what some say was a tax loophole, the lawsuits said Channahon re-routed sales tax dollars back to the companies.

In the settlement approved Monday, Murphy said Channahon would pay the RTA $377,500 from a special fund made of revenue collected from the sales taxes of the point-of-sales businesses. Channahon came out “very good” in the settlement, he said.

“[Channahon] has agreed to release funds that would otherwise go to Inspired and thereon after to the retailers,” Murphy said.

The village’s fund still has a balance of more than $6 million, Murphy said, which would have gone to Inspired Development, Minority Development Co. and a direct retailer.

“The reason we’re holding that,” he explained, “is because we did not get proper indemnification [from Inspired and Minority], so we are holding them until all of the litigation is resolved.”

Three years ago, the Cook County Circuit Court dismissed many of the counts in the RTA case, as well as similar cases filed by the city of Chicago and Cook County.

Murphy said the agreement signed Monday cleared another significant hurdle.

“It’s a very large chunk of the litigation,” he said, “but it’s not all of the litigation.”

There’s a portion of the litigation that remains with the RTA, according to Murphy, as well as with Cook County and some municipalities and with a case brought by the city of Chicago, which was dismissed and is currently on appeal.

“It’s taken a long time,” he said, “but the law has changed. I think Channahon has always followed the law with the regulation, and it’s really just that there was a disagreement with the policy.”

“I am pleased that we have made great strides toward resolution of this old chapter,” Channahon Village President Missey Moorman Schumacher said after Monday’s meeting, “and I appreciate all the hard work everyone has put forward, and I look forward to moving into the future.”

Also Monday, it was announced there will be at 11 a.m. Oct. 13 a ceremony and unveiling of an honorary village street sign for Kenneth J. Frayne Memorial Way at Channahon Fire Station No. 1, 24929 S. Center St. Oct. 13 is the 15th anniversary of Channahon volunteer fireman Frayne’s death in the line of duty.

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