Airline ticket refund crashes and burns

Posted 09/08/2011

The good news was that the US House and Senate, after some parliamentary measures, managed to pass another short-term extension of the FAA budget but the bad news is that the IRS will not offer tax refunds.

The IRS said during shutdown that some passengers may have been eligible for refunds during the two weeks or so when the federal government was not authorized to collect taxes on airline tickets.

Many or perhaps most airlines continued to collect the tax.

The bill bringing back the tax passed in a nearly empty Senate chamber through a procedure called unanimous consent. Since most senators have left for summer recess, a bill can be passed with just a few senators present. The bill previously passed in the House of Representatives.

Passage of the bill extends funding for the FAA until Sept. 16.

It means that an estimated 4,000 FAA employees and an estimated 70,000 construction workers can return to work on stalled airport projects across the country. But the bill’s critical element was allowing the FAA to again collect airline ticket taxes.

Estimates were the refunds could have been as much as $60 on a $300 round-trip, according to the AP. But the bill signed by President Barack Obama restarting the FAA technically makes the taxes retroactive to July 23, the first day of the shutdown.

No taxpayers, therefore, will be owed refunds, IRS spokeswoman Julianne Breitbeil said in a phone interview with the AP. The IRS, however, won't try to collect back taxes from either passengers or airlines, she said.

Airlines stopped collecting the taxes during the shutdown. Most airlines raised fares so passengers paid the same amount. Estimates are that the airlines kept most of the US$400 million that would have gone to the government.

At least one exception: Alaska Airlines/Horizon Air. The airline estimated average savings of up to $50 per round-trip fare.

Competitors were influenced by Alaska Air to keep fares lower on some routes.

The IRS posted details of its ruling on its website at http://www.irs.gov.

By David Wilkening

Originally published 9 Aug 2011 at: http://rss.feedsportal.com/c/398/f/5923/s/173bd7b7/l/0L0Stravelmole0N0Cstories0C11488670Bphp0Dmpnlog0F1/story01.htm