MOLINE — The success or failure of Illinois House Bill 3902 has Elliott Aviation sitting on pins and needles.
If the bill is passed next week but vetoed by Illinois Gov. J.B. Pritzker, it could have serious consequences for the company's Moline operation.
According to company officials, if the law is vetoed by Pritzker, as he has said he will and the veto is not overridden, it could greatly affect the company which employs 273 people, about two-thirds of all the workers at the Quad City International Airport.
According to its website, Elliott Aviation has been providing aircraft sales, aviation services and innovative solutions since 1936. Its work includes aircraft sales and acquisitions, avionics, maintenance, parts, paint and interiors, accessories, aircraft management, charter services and three locations in the Midwest — Moline, Des Moines and Minneapolis.
The new law allows for an exemption to retroactively continue for the state not to tax aircraft parts.
Otherwise, there will be a 6.25% tax on all parts for mechanically inspecting/servicing and maintaining aircraft, avionics modifications, refurbishment of interiors, aircraft painting, landing gear and component overhauls, as well as on some technical products, company president Greg Sahr said.
“Our Moline location is our only facility that offers all of these services and is by far the largest of our three facilities,” he said.
It was thought that a 2009 law that went into affect in 2010 already provided the exemption, but about three months ago it was discovered that the law was covered by a 1994 sunset provision that should have taken effect Jan. 1, 2015. The tax could be collected dating back to 2015.
The reason the law is important is that 35 other states do not tax aircraft parts. Airlines and private jets would be able to take their aircraft to other states for repair, skipping Elliott Aviation and the Quad City International Airport because of the 6.25 percent sales tax.
Illinois Rep. Tony McCombie, R-Savanna, doesn't share the company's concern. She believes the state House and Senate will override the Governor’s veto. House Bill 3902 already passed by 113-0 with one legislator voting present. The Senate votes on the bill Wednesday.
While admitting you don’t really know for sure, until a veto vote is taken, McCombie noted the large margin it passed in the House. “If the votes stay the same, with him vetoing it, sometimes that changes the Dems’ side but I think we will be alright,” she said.
To override the veto, a 3/5s majority is needed in both the Illinois House and Senate. “I can’t imagine why it wouldn’t (be overridden),” McCombie said.
McCombie believes Pritzker’s stance is probably “an image thing."
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“I think his comment was ‘I am not giving owners of jets tax breaks,’ or something like that,” she said. “I think it plays into what he is thinking about higher taxes for the one percent.”
Still, she believes if Pritzker vetoes the law, the veto won’t stand.
“I think once they understand it was an unintended consequence,” the veto will be overridden, she said Thursday. “For them (the 13 Illinois companies affected) to go back and have to pay, it was an oversight.
“It was not supposed to be that way, is my understanding. Now we are just trying to correct it.”
McCombie’s comments are appreciated by Sahr.
“We are encouraged by the support we are getting in the Illinois legislature and will be working hard to garner support for the passage of the bill all the way through the process,” he said.
If the bill was vetoed there would be plenty of consequences for Elliott and the Quad-Cities.
Among them are possible significant reduction in workforce at Elliott, which has added close to 100 good paying jobs and invested $9 million in facilities and equipment since 2010, when the exemption was put into place. In addition, according to the Quad Cities Chamber of Commerce, the total economic impact Elliott has to the Quad-City area is approximately $100 million annually.
It also impacts the number of take-offs and landings at the airport which is very important to the airport, the company wrote in a letter to its employees. Elliott has already halted building a new $1.4 million hangar.
“Clearly this tax exemption worked as designed,” the company wrote “It allowed our business to grow and add good-paying jobs, which ultimately had a significant positive impact on the economies of our local communities in Illinois over the past 10 years.”
"It is very important to the airport and the community," Quad City International Airport director Ben Leischner said. And a vast majority of its business is from out of state, he said, and has a strong economic impact.
The business is in a very competitive global business with narrow profit margins, he added. "To be competitive, that (no tax on parts) is the norm," Leischner said. "If we don't have it, we won't have that level of business here."