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:

  • David Bystrack: What about all the problems in Ct ??? They still can't get my bill fixed and billed me $476.00 for there mistake.They just took the money from my cred...
  • Disagree with McCarthy: I was an employee of a real Telco corporation and my state was sold to Frontier. There is no training for employees. We have to teach ourselves and ...
  • Smith6612: Compared to Time Warner Cable, some people may actually be saving $10 here if they use the Rental Gateway. In my market, TWC would charge $10 for the ...
  • phychic99: Surely you jest on the Secure Connection Fee :) If not I just spit out my coffee......
  • Lee: I have Frontier and my lines going back to the dslam are all underground. I doubt they would go back to hanging new lines on the electric poles, and t...
  • Somewhat Perplexed: "Frontier CEO Blames Employees" I didn't see anything supporting that, anywhere in the article. Implying that's the case because bonuses were cut i...
  • Elbert Davis: Armstrong Cable pulls a similar scam,calling their router rental fee "Zoomshare." At least Charter allows you to use your own modem. Armstrong only ...
  • Newer Employee: Frontier is a joke but I'm getting $20 an hour to sit on Reddit while turning off people's internet. The training is almost non-existent and we aren'...
  • Upset employee: Wow it hurts to see that you blame the employees for the downfall we are the ones sitting there and having to explain and fix the customers service. D...
  • Josh: I'm on "Performance Plus" in Illinois...25Mb/s. Will be interesting to see if it goes up......
  • He's kidding right?: ... This company has the absolute worst systems for putting through sales and correcting billing that you could imagine.... the technicians are woeful...
  • John: As a bit of an aside Charter is charging a new "Secure Connection Fee" of one dollar, this is explained in footnotes of bill as Charters charge for s...

Your Account: