* I’ve been telling subscribers about this bill for over a week now. It’s quite something…

Some big Chicago-area retailers have found a way to avoid paying high local sales taxes on their wholesale purchases. They’ve essentially set up their own “tax havens” in downstate counties that have no local sales taxes. The havens mostly are just one-person offices with a fax machine.

The retailers contract to purchase mass quantities of fuel or construction equipment or lumber or whatever, and then those contracts are faxed to their little downstate offices, stamped as received and then faxed back to headquarters and — voilà — no local sales taxes are owed.

In January, the Illinois Department of Revenue lost a court case filed by Hartney Fuel Oil Co., Putnam County and the town of Mark, Ill. (population 500).

Hartney is based in Cook County but had a “sales office” in no-tax Mark. The Department of Revenue claimed that Hartney owed sales taxes in Cook County, but a Putnam County judge disagreed.

Nobody really noticed. But then some folks got the bright idea of introducing a bill at the Statehouse to codify the downstate court case to make certain that all Chicago-area companies had the same option.

Bad move.

Introducing that legislation shone a light on the tax-avoidance scheme, and now all heck is breaking loose.

Proponents say this tax haven thing has been standard practice for 50 years and they’re just hoping to codify the judge’s ruling after the Department of Revenue changed its practices. They also claim that if their bill fails, companies will move their headquarters out of the Chicago area to avoid high sales tax rates.

A lobbyist who worked for the bill claimed that after five state audits ruled against his clients, four moved out of Cook, with one going to Indiana.

The bill passed the Senate earlier this month, partly because opponents reacted too late to kill it.

The legislation has received scant media coverage so far, but it is considered a major threat by the Regional Transportation Authority, Cook County, the city of Chicago and several suburban taxing bodies, which worry that the legislation would lead to a vast out-migration of tax revenues.

Some suburban counties thought they could get some of those tax havens, until they realized their inclusion in the RTA’s regional sales tax zone meant they had no chance. So they no longer are supporting the bill.

The Chicagoland Chamber of Commerce’s support was crucial to the bill’s Senate passage, but the chamber reportedly received serious heat from Mayor Richard Daley and Mayor-elect Rahm Emanuel. So, it is backing away as well.

And the main lobbying firm which pushed the legislation through the Senate has withdrawn from the fight. The firm also represents the DuPage County Board, the chairman of which is now opposing the bill after initially backing it. That position change meant the lobbying firm had a conflict, so it’s out.

Meanwhile, House Speaker Michael Madigan’s spokesman said last week that while opinion is divided in the House over the bill’s future, with some downstaters pushing hard for its passage, Madigan has put the legislation “under very serious review” because the “alarm bells have been sounded.”

That may look like a hedge to you, but Madigan’s people usually don’t tip their hand so clearly. The wheels have come off this bill.

The RTA’s chief lobbyist is Madigan’s son-in-law, which doesn’t help the bill’s chances in the House, of course, but the strong opposition from pretty much the entire Chicago region’s governmental units is hugely important.

Also, the state senator who represents Madigan’s district, Steve Landek, forcefully opposed the tax bill in committee, claiming that much of the construction of the Chicago Fire’s soccer stadium in his district avoided local sales taxes by using those downstate tax havens.

And now, the Senate bill’s opponents are gearing up to introduce legislation of their own in the House that would officially kill off these tax havens. The measure likely will be tacked onto a broader bill dealing with taxation. Doing it that way would make it far tougher to vote against the provision.

The bottom line here is that the backers of the original Senate legislation might have set the stage for exactly the opposite of what they intended.

Instead of just letting the judicial branch handle the issue completely under everybody’s radar, they decided to move the fight into the General Assembly. But then everybody discovered what was going on.

Oops.

* Meanwhile, in other business-related news, ComEd’s big push got Phil Kadner wondering whether the company’s bill sponsor, Rep. Kevin McCarthy, is getting anything out of this spring session…

So I asked the ComEd president whether McCarthy had been promised a job in exchange for his support.

She smiled and said ComEd was pleased to have McCarthy sponsoring the bill because he’s smart, understands the issue and is an experienced legislator.

I asked McCarthy if he would promise not to ever accept a job from ComEd or act as a paid consultant for the company or become a lobbyist for the industry.

McCarthy said he has been promised nothing for his work on the bill and has spent years passing tough legislation in Springfield, earning the respect of House Speaker Michael Madigan (D-Chicago), who is confident in McCarthy’s ability to get the job done.

CUB’s Kolata said he has no reason to suspect McCarthy has been promised anything.

Reading between the lines isn’t too difficult there. We’ll have to see what happens, but if McCarthy is looking to get out, this would be a good time to do so, and with a major bill to push himself on to bigger and better things.

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