Source: http://www.techlawjournal.com/alert/2006/05/26.asp
Timestamp: 2019-04-20 10:37:08+00:00

Document:
TLJ Daily E-Mail Alert No. 1,379, May 26, 2006.
May 26, 2006, Alert No. 1,379.
5/25. The Department of the Treasury, of which the Internal Revenue Service (IRS) is a component, announced in a release that "it is conceding the legal dispute over the federal excise tax on long-distance telephone service."
Five federal circuits, and numerous trial courts, previously held that the IRS could not collect excise taxes on certain telecommunications services.
The DOT added that "The Department of Justice will no longer pursue litigation and the Internal Revenue Service (IRS) will issue refunds of tax on long-distance service for the past three years. Taxpayers will be able to apply for refunds on their 2006 tax forms, to be filed in 2007."
The DOT offered no explanation for why it for so long persisted in collecting a tax that, under the plain meaning of the statute, it could not collect. Nor did it explain its long running defiance of the the authority of the federal courts.
Statute. This issue involves 26 U.S.C. § 4251, which imposes a 3 percent excise tax on some, but not all, communications services. This tax is sometimes referred to by its opponents as the "Spanish American War tax", since it was originally imposed to help fund that war.
In addition, John Snow (at left), the Secretary of the Treasury, stated in the DOT release that "In addition to ending the litigation, I would like to call on Congress to terminate the remainder of this antique tax by repealing the excise tax on local service as well." He added that this "marks the beginning of the end of an outdated, antiquated tax that has survived a century beyond its original purpose, and by now should have been ancient history."
The IRS had applied a tortured interpretation to the applicable statutory language. 26 U.S.C. § 4252 contains the relevant definitions.
§ 4251(b) provides that the term ''communications services'' means "(A) local telephone service; (B) toll telephone service; and (C) teletypewriter exchange service". This issue involves "toll telephone service".
That is, to be taxable, a "toll telephone service" must include a "toll charge which varies in amount with the distance and elapsed transmission time". The key word here is "and". The carriers and taxpayers have long asserted that the word "and" means "and". The IRS long asserted that "and" means "or".
The IRS long collected billions of dollars in taxes where the charge did not vary with distance, in violation of the plain meaning of the statute.
Court of Appeals Opinions. The federal appeals courts uniformly instructed the IRS that the word "and" means "and", and that its tax collections are illegal.
The U.S. Court of Appeals (11thCir) issued its opinion [22 pages in PDF] in ABIG v. IRS on May 10, 2005. See, story titled "IRS Loses Appeal Over 3% Excise Tax on Communications" in TLJ Daily E-Mail Alert No. 1,133, May 11, 2005. This case is American Bankers Ins. Group v. United States, U.S. Court of Appeals for the 11th Circuit, App. Ct. No. 04-10720, an appeal from the U.S. District Court for the Southern District of Florida, D.C. No. 03-21822 CV-PCH. The Court of Appeals opinion is also reported at 408 F.3d 1328. The District Court opinion is also reported at 308 F. Supp. 2d 1360.
The U.S. Court of Appeals (6thCir) issued its opinion [20 pages in PDF] in Office Max v. US on November 2, 2005. See, story titled "IRS Loses Another Appeal Regarding 3% Excise Tax" in TLJ Daily E-Mail Alert No. 1,246, November 3, 2005. This case is Office Max, Inc. v. U.S.A., U.S. Court of Appeals for the 6th Circuit, App. Ct. No. 04-4009, an appeal from the U.S. District Court for the Northern District of Ohio, at Cleveland, D.C. No. 03-00961, Judge Patricia Gaughan presiding. The Court of Appeals opinion is reported at 428 F.3d 583.
The U.S. Court of Appeals (DCCir) issued its opinion [11 pages in PDF] in Amtrak v. US on December 9, 2005. The National Railroad Passenger Corporation is better known as Amtrak. This case is National Railroad Passenger Corp. v. United States, U.S. Court of Appeals for the District of Columbia Circuit, App. Ct. No. 03cv00431, an appeal from the U.S. District Court for the District of Columbia. This case is reported at 431 F.3d 374.
The U.S. Court of Appeals (2ndCir) issued its opinion [PDF] in Fortis v. USA , on April 27, 2006. See also, story titled "2nd Circuit Rules Against IRS on Excise Tax on Phone Service" in TLJ Daily E-Mail Alert No. 1,361, May 1, 2006. This case is Fortis, Inc. v. United States of America, U.S. Court of Appeals for the 2nd Circuit, App. Ct. No. 05-2518-cv, an appeal from the U.S. District Court for the Southern District of New York, D.C. No. 03 Civ. 5137, Judge John Koeltl presiding. The Court of Appeals issued a per curiam opinion of Straub, Sack and Trager.
on May 9, 2006. See, story titled "IRS Loses Another Frivolous Appeal Regarding Telephone Excise Tax" in TLJ Daily E-Mail Alert No. 1,367, May 10, 2006.
5/25. The House Judiciary Committee (HJC) amended and approved HR 5417, the "Internet Freedom and Nondiscrimination Act of 2006".
The HJC approved a manager's amendment offered by Rep. Sensenbrenner on a voice vote. There were no other amendments. The HJC then approved the bill, as amended, on a roll call vote of 20-13-1. See, roll call at left.
The House will not meet. It will next meet on Monday, June 5, 2006.
The Senate will meet at 8:45 AM. It will resume consideration of the nomination of Brett Kavanaugh to be a Judge of the U.S. Court of Appeals for the District of Columbia.
Deadline to submit comments to the Federal Communications Commission (FCC) regarding the April 27, 2006, recommendations of the World Radiocommunication Conference Advisory Committee (WRC-07 Advisory Committee). See, FCC notice [145 pages in PDF], with the recommendations attached. This proceeding is IB Docket No. 04-286.
The House will not meet on Monday, May 29, through Friday, June 2. See, Majority Whip's calendar.
8:30 AM - 5:30 PM. Day one of a two day workshop on public participation in nanotechnology hosted by the National Nanotechnology Coordination Office (NNCO). See, notice in the Federal Register, May 3, 2006, Vol. 71, No. 85, at Page 26117. Location: Westin Arlington Gateway Hotel, 801 North Glebe Road, Arlington, VA.
9:30 AM. The House Judiciary Committee (HJC) will hold a hearing titled "Reckless Justice: Did the Saturday Night Raid of Congress Trample the Constitution?". See, notice. The hearing will be webcast by the HJC. Location: Room 2141, Rayburn Building.
Interactive Data Revolution: Improved Disclosure for Investors, Less Expensive Reporting for Companies". Lunch will be served at 12:00 NOON. Peter Wallison (AEI) will introduce the program at 12:45 PM. Chris Cox, Chairman of the Securities and Exchange Commission (SEC), will give the keynote address at 12:45 PM. At 1:45 PM there will be a panel titled "XBRL, the New Computer Language: How It Creates Interactive Data". The speakers will be Richard Daly (Automatic Data Processing, Inc.), Mark Schnitzer (Morgan Stanley), Louis Thompson (National Investor Relations Institute), Mike Willis (Pricewaterhouse Coopers), and James Glassman (AEI). At 3:30 PM there will be a panel titled "Enhanced Business Reporting: Why It Is Necessary and How It Works with XBRL". The speakers will be Alan Anderson (Franklin Templeton Investments, Inc.), Robert Eccles (Advisory Capital Partners), John Philip (Infosys Technologies Limited), Mike Willis (PWC), and Peter Wallison (AEI). See, notice and registration page. Location: AEI, 1150, 17th Street, NW.
Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding licensing and use of frequencies in the 904-909.75 and 919.75-928 MHz portions of the 902-928 MHz band that are used for the provision of multilateration Location and Monitoring Service (M-LMS band). This NPRM is FCC 06-24 in WT Docket No. 06-49. See, text [24 pages in PDF] of NPRM; notice in the Federal Register, March 29, 2006, Vol. 71, No. 60, at Pages 15658-15666; and story titled "FCC Releases NPRM on M-LMS Systems" in TLJ Daily E-Mail Alert No. 1,325, March 8, 2006.
Deadline to submit comments to the U.S. Patent and Trademark Office (USPTO) in response to its notice of proposed rulemaking (NPRM) regarding changes to the rules of practice relating to ex parte and inter partes reexamination. See, notice in the Federal Register, March 30, 2006, Vol. 71, No. 61, at Pages 16072-16086.
5/26. On May 25, the Senate approved a motion to invoke cloture on the nomination of Brett Kavanaugh to be a Judge of the U.S. Court of Appeals for the District of Columbia by a vote of 67-30. See, Roll Call No. 158. On May 26, the Senate confirmed Kavanaugh by a vote of 57-36. See, Roll Call No. 159. See also, statement by President Bush.
5/26. The Senate confirmed Gen. Michael Hayden (at right) to be Director of the Central Intelligence Agency (CIA) by a vote of 78-15. See, Roll Call No. 160. See also, statement by President Bush.
5/25. The House Judiciary Committee (HJC) announced that it will hold a hearing on Tuesday, May 30, 2006 titled "Reckless Justice: Did the Saturday Night Raid of Congress Trample the Constitution?". See, notice. Attorney General Alberto Gonzales stated in a release that this was a "search of Congressman Jefferson's office" in an "ongoing public corruption investigation". Rep. William Jefferson's (D-LA) troubles could impact technology related trade legislation. He is a member of the House Ways and Means Committee (HWMC), and its Subcommittee on Trade. Back in 2001 he was one of the Democrats who worked for HWMC and House approval of HR 3005 (107th Congress), the "Bipartisan Trade Promotion Authority Act of 2001", and related bills, which gave the President trade promotion authority (TPA). Republicans held a majority of the seats in the House, and the Republican leadership backed the bill. The Democratic leadership opposed the bill. Some Republican members voted against the bill. Hence, the bill could only have been enacted with the support of Democrats. Rep. Jefferson worked to win Democrats' votes. The key vote on TPA, on December 6, 2001, was 215-214. See, stories in TLJ Daily E-Mail Alert No. 323 , December 7, 2001. TPA expires next year. Support for TPA and free trade agreements has diminished since 2001. It would further diminish with the departure of Rep. Jefferson.

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