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:

  • Elbert Davis: This is absolutely breathtaking in regards to the arrogance of the bill. Byron and the lobbyists/monopolies left absolutely nothing to chance. Kudos...
  • Roger: I wasn't aware of Esquire being spawned from Style, but I do remember that it was positioned as the replacement for G4, which catered to those interes...
  • Paul Houle: My take is that a "wireless recession" will soon be at hand. There are a number of stories talked about on this site that, I think, are connected w...
  • Keanyn Gray: frontier every month for the last 8 month for incorrect bills amounts, each time they tell me they will correct credit my bills to the agreed amount ...
  • JayS: Channels, before they were removed from Tv and used to start the cellular telephone networks, went up to 83. Due to technology limitations, UHF (...
  • Josh: As near as I can tell we've had broadcast TV spectrum stolen from us TWICE. (Once during the NTSC to ATSC transition, but apparently once before that...
  • Phillip Dampier: The retention staff in Syracuse actually stopped handling those types of calls in early 2016 and referred everyone to the national customer retention ...
  • T Nelson: I am a Twc customer in the Rochester, NY area. In November my special promotion program ran out. In the past I had dealt with a retention specialist...
  • Milan Gohil: Thank you for publicizing my ordeal, Phillip! I hope this report opens the eyes of consumers and Spectrum executives!...
  • LG: They should be taken into Federal receivership. They only care about cell phones, so we need to take that away from them. Make it a requirement to m...
  • Joe V: Six months ago I moved from San Francisco to southeastern Massachusetts 30 miles south from Boston. It is pathetic that on one side of my town they ...
  • Matt K: Does that 23% on fiber count only true FTTH or are they also counting crap like AT&T's Uverse?...

Your Account: