IRS: Show me the money

(New York) Despite this week's congressional action to provide stop-gap funding for Federal Aviation Administration operations, serious problems still exist for the agency – and the airline industry – a WND probe has revealed.

Thursday, Congress authorized release of funds to put more than 70,000 people back to work who were either employed by or worked on projects for the FAA. Problem solved, yes? No.

Late Friday, a surprise Internal Revenue Service interpretation of the Congressional action raised eyebrows in the nation's capital. At issue – federal ticket taxes collected without legal authorization by U.S. air carriers that the airlines were trying to keep with the blessing of the IRS. The unauthorized tax collections could easily exceed $400 million, said FAA administrator Randy Babbitt.

So, who does the money in the cookie jar belong too – the IRS, the airlines, the flying public?

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The reason the airlines' collection of the 7.5 percent federal tax was not legal is that the levy expired on July 23 when congressional funding of the FAA lapsed. Yet the airlines continued to collect the tax under the guise of an unpublished "fare" increase, treating it as "an unexpected windfall."

Secretary of Transportation Ray LaHood decried the airlines' move, but did little other than criticize the carriers and tell reporters the situation was under "legal review."

Monday, sensing potential legal problems, Delta and US Airways announced they were "voluntarily refunding" taxes collected on tickets purchased before the FAA federal funding lapsed but whose travel took place after the lapse. They left unclear the status of funds collected and paid for during the period the FAA went unfunded, July 23 to Aug. 4.

Other major carriers such as United/Continental, American, Southwest and Jet Blue offered nothing to their passengers.

"The money (at hand) was a tax collection issue, so we don't get involved," explained Bill Mosley, spokesman for Lahood. "It is a matter the Treasury Department needs to address."

Sandra Solstrum a spokeswoman at the Treasury Department, refused any on-the-record response other than to say since the issue involved the "collection of taxes" it is "an IRS matter." When asked how or when air passengers might get their money back Solstum's only response was, "Go to their (IRS) website. Look there."

Late Thursday, Sens. Max Baucus (D-MT) and Orin Hatch (R-UT) urged the IRS not to take any action against the airlines over the collection issue. The senators were reported to be seeking to "convince" the IRS to concentrate its "limited resources" and to "go forward," ostensibly allowing the air carriers to keep their windfall because collection would be "too expensive."

Friday morning, the status of that cookie jar containing more than $400 million in cash collected from the traveling public remained in limbo ... until the IRS weighed in that afternoon. A terse unattributed statement on the agency's website announced the IRS wanted its money.

Congress' stop-gap funding of the FAA, the IRS determined, "was retroactive" to July 23, the date of the original lapse, and as such, neither the airlines or the passengers who paid the tax are entitled to the money. The position taken by the IRS was totally unanticipated, say numerous published reports.

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Before the surprise IRS move, both Delta and US Airways put conditions on their "refund offer." Neither airline would release any money until the Department of Transportation "advised" them on how and to whom such funds should be sent.

Now they know. The IRS expects all U.S. air carriers to cough over the $400 million in question. And soon.

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