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Wednesday, March 26, 2008
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Federal Court Dismisses Multi-billion Dollar Telephone Excise Tax Cases

WASHINGTON — Judge Ricardo M. Urbina of the U.S. District Court for the District of Columbia has dismissed three cases against the Internal Revenue Service (IRS) where the plaintiffs asked for, among other things, billions of dollars in additional telephone excise tax refunds to telephone users nationwide, the Justice Department announced today. In the three separate class-action lawsuits that had been consolidated for pretrial purposes, 14 individuals and two companies had raised numerous challenges to the IRS‘s procedure for refunds of long-distance telephone excise taxes. The court considered and rejected a variety of plaintiffs‘ arguments in granting the United States‘ motion to dismiss all the plaintiffs‘ claims. For example, the United States argued that several class action plaintiffs could not seek refunds because they failed first to file a claim with the IRS, a threshold legal requirement for any refund suit. The court agreed, stating: “no refund claim, no refund suit.” The court also rejected another class-action plaintiff‘s claim since that plaintiff had failed to wait the mandatory six months required by statute to hear back from the IRS after filing a claim with the IRS before filing a refund suit in district court. The court noted the importance of this six month waiting period because the IRS was entitled to assess whether the claim was meritorious in order to “avoid needless litigation.” The court also summarily dismissed the plaintiffs‘ argument that the IRS‘s collection of the long-distance telephone excise tax was an illegal exaction. “The court‘s dismissal of three different class actions lawsuits alleging billions of dollars in refunds sends the unequivocal message that Congress‘ and the IRS‘ requirements to obtain a telephone excise tax refund must be met in every case,” said Nathan J. Hochman, Assistant Attorney General for the Justice Department‘s Tax Division. “Taxpayers who try to dodge and subvert those reasonable requirements will come up empty.” Information about the telephone excise tax refund, including how taxpayers can request a refund of this tax, is available on the IRS‘s website.