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ATTACHMENT I 7A Page 7 More suits are pending, and rather than continue with costly litigation, the Treasury has decided to concede defeat, say government officials. Elimination of the excise tax would be a major victory for the telecommunications industry, which has fought for years in court and on Capitol Hill to do away with the surcharge. The .law -- originally enacted to help pay the costs of the Spanish-American War -- taxes telecom services based on both the duration of a call and the distance it travels. But the changing nature of technology now lets phone companies offer flat rate per minute or monthly plans. The government, however, has continued to assess the tax under the old services, sparking widespread protest. When the tax was enacted in 1898, telephone service was something of a luxury and the levy affected relatively few Americans. As telecommunications expanded to become a fixture of modern life, the tax has become a steady revenue stream that administrations of both political parties have been loath to surrender. In 2000, Congress repealed the tax, at an estimated five-year cost of $24 billion. Former President Clinton vetoed the measure over budget concerns. A multibillion-dollar giveback would hit the federal budget hard at a time when the deficit is hovering around $423 billion, according to government estimates for 2005. The telephone excise tax brought in about $6 billion in 2004 and is estimated to collect about $45 billion through 2010. According to the Congressional Budget Office, if the law is rescinded, the IRS would be required to refund payments going back for about three years. Treasury Secretary John Snow indicated in a House Ways and Means Committee hearing in February that he would likely have to concede total defeat if the IRS continued to lose appeals cases. "Should the judgment come down in alignment with the prior three Federal Circuit Courts, I think the handwriting is on the wall," he said. Other Sites of Interest RE FET http://phone.ioerror. us/2005/12/court -rules-federal-excise-tax-on-cell-phones-illeqal http://www.techlawjournal.com/topstories/2006/200604 2 7. a sp http://monev,cnn,com/2006/04/19/pf/telephone excise http://www,findarticles.eom/p/artieles/mi mOPJR/is 2005 Dee 19/ai n15953851 http://www. wi rele s sweek. com/article/CA62 99499. html?spa cedesc = F eatu res 4 .< ~ .'. _..._..... ...... _'_'_~"'__""_'_""~"'_"'" __^...~~~~_.._..__H_..__."_ ..,AA.._...___....__... '.,._____..~....'__"_._.'M._.'_"~__.~ _.._~ ...__.~