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Ticket tax refunds grounded

By Kay Bell · Bankrate.com
Friday, August 5, 2011
Posted: 2 pm ET

If you were counting on an airline ticket tax refund, you're out of luck.

When Congress was unable to agree last month on a bill to continue funding the Federal Aviation Administration, not only did around 74,000 people lose their jobs, but taxes tacked onto airline tickets also lapsed.

Thanks to that legislative oversight, it looked like the 12.5 million airline passengers who bought their tickets -- taxes included -- before the FAA ran out of money on July 23 but who actually flew on or after than date might be eligible for a refund of that ticket tax money.

Today's extension of FAA operations, however, killed any ticket tax refund possibility.

The Senate, utilizing special legislative procedures during its official recess, agreed to a short-term extension of the FAA authorization bill that the House had previously passed. President Barack Obama promptly signed the measure into law.

And the new law's July 23 effective date means that the ticket taxes never officially lapsed.

That, in turn, means that the ticket taxes were always valid and no one is entitled to a refund.

The Internal Revenue Service promptly announced the news on its website:

"Today's Congressional action extending the Federal Aviation Administration authorization reinstates retroactively the airline ticket taxes for passengers who traveled during the lapse of the FAA's authorization. As a result of the bill Congress passed today, passengers who purchased tickets prior to July 23 and traveled between July 23 and the date of enactment of today's legislation are not entitled to a refund of the airline ticket excise tax."

There is, however, some good tax news for airline passengers who bought tickets between July 23 and today.

Even though the new law says the ticket taxes were still in effect, the IRS is not going to try to collect them. That same IRS announcement notes, "Additionally, the IRS intends to provide relief for passengers and airlines with respect to ticket taxes that were not paid or collected because of the lapse."

And notice the mention of the airlines? The carriers are off the hook, too.

Even though many of the airlines didn't reduce passenger fares when they weren't authorized to collect the ticket taxes and simply pocketed the difference, the airlines aren't going to have to give it back, to either the passengers or Uncle Sam.

To paraphrase that age-old observation, life and taxes definitely aren't fair.

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