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IRS won't offer airfare tax refunds after all

The end result: Most airlines got a cash boost during the brief tax holiday, and travelers were left out of the savings.

By MSN Money Partner Aug 9, 2011 10:41AM

This post comes from Matt Brownell at partner site MainStreet.


When Congress finally acted to end the shutdown of the Federal Aviation Administration, one group definitely lost out: fliers who thought they were getting their airline excise tax refunded.


The FAA briefly shut down late last month when Congress failed to agree to extend the agency's operating authority, and one side effect was that it could no longer collect the 7.5% airline ticket excise tax from travelers who bought their tickets after July 23, the date the shutdown began.


While most airlines used this as an opportunity to temporarily raise ticket prices and thereby pad their profit margins, one group of consumers seemed poised to fall through the cracks and avoid the financial hit altogether: those who bought tickets before the shutdown for travel during the shutdown.

The Internal Revenue Service said at the time that those buying tickets on or before July 22 for travel during the shutdown "may be entitled to a refund of the tax," presumably on the grounds that passengers shouldn't have to pay a tax to an agency that wasn't even operating while they were flying. Delta even took the step of saying it would issue the refund directly rather than making customers go through the IRS.


But the IRS ruled over the weekend that no refunds would be coming to these passengers.


"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," the agency bluntly announced late Friday. Post continues after video.

That reversal is due to the fact that the renewal of the FAA's operating authority -- including tax collection -- was made retroactive to July 23.


"The IRS initially said when this all started that customers who flew during this period should be owed a tax refund, so we made the decision that it would be easiest for our customer to process the refunds ourselves," Delta spokesman Trebor Banstetter explains. "What changed is that when Congress passed the extension bill, it was retroactive to July 23."


The end result is that few consumers actually wound up benefiting from Congress' brief inability to keep the FAA up and running, though airlines certainly did. Those who bought tickets during the shutdown generally got hit by equivalent fare increases from most of the large American carriers (though a few, including Virgin America and Spirit, kept fares the same and effectively gave their customers a true tax holiday). And if you traveled while the FAA was shuttered, don't expect to get a refund check in the mail from Delta or anyone else.


More on MainStreet and MSN Money:

Aug 9, 2011 2:55PM

No one should get one cent from the government, they got nothing; but, why does the airlines get to keep any of that money? Why are they defrauding the government and the passengers by collecting a tax that is non-existent? That is a crime, plain and simple.



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