AgdaPkt 2006-05-22 - Laserfiche WebLink

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ATTACHMENT I 7A Page 6 UPDATES AND PERSPECTIVES ON THE FEDERAL EXCISE TAX (AND ON ASSOCIATED "REFUND" CLAIMS RELATED to CELL PHONES) Federal Excise Tax Lawsuits. As a result of losing several federal lawsuits, the IRS and Treasury Department may issue a ruling in the near future (within days) that limits how the federal excise tax (FET) is applied to wired and wireless "long distance" services. Since most UUT ordinances reference the federal excise tax law, you may encounter refund claims from long distance customers in your city. Several California UUT cities have already experienced some refund claims citing the FET lawsuits. Please note that there are valid legal defenses against such claims that should be litigated. In addressing such claims, please note the following recommendations from the UUT. TTF: 1. Refund Claims. Please advise us of any such refund claim, including the details surrounding the claim. DO NOT ALLOW OR PAY THE REFUND CLAIM. 2. Statute of Limitations. Please take a look at the refund section of your UUT ordinance. If it does not have a specific reference to a one-year statute of limitations, then please consider amending your ordinance to provide for one, as your current statute of limitations on refund claims is likely three years. Changing the applicable statute of limitations is not affected by Proposition 218. U.S. May Stop, Refund Excise Tax On Phone Service By ROBERT GUY MATTHEWS and AMOL SHARMA Apri/14, 2006; Page A2 Wall Street Journal WASHINGTON -- The Treasury Department, following a series of hostile court rulings on the way it assesses the federal excise tax on phone service, is working on a plan to stop collecting the levy and refund billions of dollars to consumers and businesses, according to people familiar with the matter. Government officials are holding closely guarded discussions on how to best handle the repayment process as well as mitigate the impact of about $60 billion in potential refunds and lost federal revenues over the next five years. The surcharqe would likely disappear from lonq-distance and wireless bills. but local-call levies could remain. The Treasury, Internal Revenue Service and Justice Department wouldn't confirm the direction of the discussions. "Treasury, IRS and Justice Department are working together and considering the matter and you could expect some sort of decision to come in the future," said Treasury spokesman Sean Kevilighan. Treasury, Justice and the IRS wouldn't confirm that they are discussing refunds. Courts have ruled seven times in recent years that the government is misapplying the 3% tax and ordered refunds to companies that have sued over the charges. The courts have generally accepted the argument that the tax is outdated and should no longer apply on long-distance calls, given how technologies and calling plans have changed. 3