Originally published on Passive Activities and Other Oxymorons on January 10, 2011.
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TECH v. U.S., Cite as 106 AFTR 2d 2010-7382, 12/17/2010
Sometimes when you think back on your youth, you can shift your viewpoint and realize that many of the people you remember as being old were in reality rather young. Your camp counsellors or high school teachers for example. Not my Nana Reilly. As far as I’m concerned she was always old. How old was she ? The only immigrant among my grandparents, the others being American born children of famine refugees, she recalled that when she came to this country as a young woman, not a kid, soldiers were going off to war. Against Spain.
What she probably didn’t realize was that the expenditures for that war were being paid, in part, by a new tax. The new tax which would continue for the rest of her very long life and beyond would not have troubled her much. You see she made sure that her children and grandchildren that didn’t actually live with her were within walking distance or a very short drive so that they would all show up every Sunday. So an excise tax on long distance phone calls was probably of no account to her.
The language of the tax indicated that it would be charged on calls that were priced based on time and distance. The cost of long distances calls substantially declined and companies began offering a variety of flat rate plans. The tax was levied on these charges also. Companies began suing for refunds. The IRS kept losing the suits, but kept on fighting them. Finally, they threw in the towel. For a period of time doing the refund claims was a bit of a cottage industry. I made some efforts to get my firm interested, but the problem was you needed really big long distance bills to make it worthwhile. In the interest of simplification the IRS indicated that it would give you a refundable credit of either $30 or $60 depending on your family size on your 2006 return. You were entitled to the credit even if you were not otherwise required to file a return. There were efforts made to publicize this to people. My own efforts were limited to calling the executive director of Jeremiah’s Inn to make sure the guys were filing returns to get their $30.
Something interesting happened :
The Tax Inspector General estimated that the population of non-filers eligible for the refund was between 10 million and 30 million people. As early as August 2006, the IRS estimated that approximately 21.9 million to 22 million of these people would fill out a form 1040EZ-T to obtain the refund. Given the $30 to $60 range of safe harbor amounts, which approximately 99% of taxpayers who sought the refund elected to take, these numbers show that the IRS expected to refund between $657 million and $1.3 billion of the projected 21.9 million non-filers filed the form 1040EZ-T. This estimate proved to be wide of the mark. As of the filing of the class certification motion, only about $26 million had been refunded to the approximately 700,000 tax payers that filed a form 1040EZ-T. Thus, the IRS has actually refunded only 2 to 4 percent of the money it originally expected to return to non-filers.
Given the deficit and all, it is hard to imagine anybody being really upset about this. Apparently though, it is bothering Brian Tech.
Plaintiff essentially alleges that because the IRS failed to provide him and his potential fellow class members with reasonable notice of the availability of the excise tax refund that complies with due process, the number of non-tax return filers who actually claimed a refund was extremely low.
It might seem odd to have a fairly substantial Boston law firm AND a DC law firm representing somebody who got screwed out of $30 because he wasn’t paying attention, but of course the “class” they are talking about is not Mr. Tech’s high school graduating class (assuming for the sake of argument that he graduated from high school). It’s more like the coalition of the clueless. Based on the estimates there are 20,000,000 people who didn’t get the $30. The billion or so that they left lying on the table leaves room for some pretty hefty attorneys fees.
Plaintiff asserts a single claim for a violation of due process and seeks equitable relief that will require,inter alia , the Government to provide him and similarly situated Non-Filers with reasonable notice of their entitlement to a refund of the unlawfully collected excise tax, and of the existence of the special tax form needed to promptly obtain the refunds. In effect then, what Plaintiff now seeks is certification of a massive class action suit against the United States that involves a potential class numbering in the tens of millions, seeking recompense approaching a billion dollars.
The United States’s position that Tech lacks standing to pursue this action rests on its allegation that “Tech has known about, and had the ability to use, the procedure for claiming any telephone excise tax overpayment since before filing suit.” . The United States supports this allegation with the following testimony given by Tech at his deposition:
Q: How did it come about that you contacted any law firm with respect to this lawsuit?
A: A family member found some information on it, and I needed a lawyer …
Q: So am I right that some family member informed you something about the Telephone-the availability of the Telephone Excise Tax?
A: Um-hum.
Q: So tell me what your told you with respect to the Telephone Excise Tax.
A; She said a lot of people are getting taxed unjustly, and you might fall in the category of it because you’re subsidized. Everything you have is given to you by either one government or the next, and these people can help you.
The Court did not go along with the government on this and refused to knock Tech out as a plaintiff.
The case is stalled for the moment, though, because nobody can come up with a method for defining “the class”.
The United States argues that neither it, nor any other entity, has records capable of determining membership in the proposed class. While it appears facially possible for the class to be identified through the telephone carriers’ records, inasmuch as the carriers remitted the tax to the I.R.S., this method, when examined carefully, is a practical impossibility. As the United States points out, there are several thousand long-distance telephone carriers operating nationwide, and during the time period at issue, there were countless mergers, acquisitions and dissolutions of carriers. If not entirely impossible, retrieving all of the necessary records from this vast amount of entities, many of which are now obsolete or have been absorbed into different umbrella companies, is an incredibly herculean task. In our view, this type of inquiry is of such a “daunting” nature that it makes the class definition insufficient.
Tech’s side argues, um-hum, that the list of people who got economic stimulus payments would be good enough. Apparently though there is no way to tell whether they had telephones or not, much less flat rate long distance plans.