Home » AT&T »Consumer News »Public Policy & Gov't »Rural Broadband » Currently Reading:

AT&T Loses Tax Refund Case: Wanted USF Income Treated As “Contributions to Capital”

Phillip Dampier October 4, 2011 AT&T, Consumer News, Public Policy & Gov't, Rural Broadband No Comments

AT&T has lost a case it appealed all the way to the U.S. Supreme Court to win favorable tax treatment for income it received from the Universal Service Fund program, designed to help underwrite the costs of providing rural telephone service.

AT&T was seeking a $500 million income tax refund on its 1998 and 1999 federal taxes from money the government provided AT&T.

Federal tax law requires phone companies to treat the USF revenue as income, subject to regular taxation.  AT&T argued the money was actually a “contribution to capital,” which would have substantially reduced the company’s tax burden.  Contribution to capital, as a concept, has been the subject of several corporate lawsuits over the years.  The genesis of court challenges comes from a 1925 case — Edwards v. Cuba Railroad Co., that held government subsidies provided to induce the construction of facilities and provision of service were not taxable income within the meaning of the Sixteenth Amendment.

AT&T believed that USF funding subsidized the delivery of phone service, so it cannot be considered taxable income.

The U.S. Supreme Court disagreed.  The justices elected to leave intact a lower court ruling that threw AT&T’s arguments aside.

Considering the long history of court losses for other corporate entities who have argued similar cases all the way back to the 1950s, the decision should not come as a surprise to the phone company, and AT&T’s reaction was muted.

“We are disappointed with the Supreme Court’s decision,” the company said in a statement. “However, AT&T does not expect any impact to our financial statements.”

The case is AT&T v. United States, 10-1204.

Search This Site:

Contributions:

Recent Comments:

  • Josh: Wow, great article! I'm feeling nostalgic, and kind of weirded out by VHS going away, and the realization we're (once again) likely to lose a giganti...
  • Jeno: My family and I had Verizon for years, and it was just fine, no problem. It seems almost as SOON as Frontier came into the picture, our internet was ...
  • Sharon: I too have gotten taken by Verizon, and they are continually trying to add more costs to my plan; daily. This number did call today, showing as a Ver...
  • Josh: I need PBS and The CW...I can't believe those aren't on here! I'd want BBC America too. I'd really want a much longer DVR too...28 days isn't good...
  • Len: I have a 25MB/s CenturyLink connection (internet only) that costs $83 / month. I have a "discount" that brings it down to $53. These guys at Century...
  • Josh: Having to pay to get your bill is just an hilarious low :-D And I'm sorry about those people :-( Somehow I doubt they're not needed......
  • Len: 100 MB/s....... For ONLY 300 Euros a month! OK, sarcasm here, but you see what I'm getting at. MB/s is only part of it. It makes no difference...
  • Mike D.: There are giant delicious pies being feasted upon and Comcast isn't able to gorge themselves. That will end soon, and unless customers drop them like ...
  • Josh: Glad you mentioned that. Yeah, I'm nowhere near Chicago and am affected....
  • BobInIllinois: Just a note to explain what Comcast means by the "Chicago Region". It is a Comcast regional market designation for more territory than just the Chica...
  • Josh: This is just an excuse to raise bills by at least $50/month (or more, if you go over without realizing you have to *CALL* to add this $50/month fee). ...
  • 7879878: And why isnt the FCC getting Involved? The fact there is NO OPT OUT and a $35+ option to get back what you had before should be a huge red flag to an...

Your Account: