IRS: No tax refunds for fliers, after all
 

By Nick Ut, AP-UPDATED (Friday, Aug. 5, at 3:30 p.m. ET):

The Internal Revenue Service said Friday that no fliers who flew during the past two weeks — when the Federal Aviation Administration was partially shut down — are eligible for ticket tax refunds.

The decision may come as a surprise to millions of airline passengers who were expecting a refund — up to 15% of the ticket price — after the FAA's partial shutdown on July 23.

MORE: *IRS says airlines must start charging ticket taxes by Aug. 8 (Bloomberg News)

Airlines and the IRS previously said fliers who bought tickets prior to July 23 and traveled after that date during the partial shutdown might receive a refund for federal taxes paid on each ticket.

Airlines stopped collecting the taxes on July 23 because Congress was unable to reach an agreement to re-authorize the FAA.

The Senate approved legislation Friday that ended the FAA's two-week partial shutdown and re-authorized FAA operations through Sept. 16. The partial shutdown, which caused a furlough of nearly 4,000 FAA employees and halted more than 200 aviation development projects, resulted from an FAA funding standoff between the House and the Senate.

IRS spokesman Frank Keith says the re-authorization of the FAA's operations through Sept. 16 means that fliers who bought tickets before July 23 and traveled during the partial FAA shutdown are not due a refund and those who bought tickets during the shutdown do not have to pay the federal ticket taxes.

Airlines must resume charging U.S. ticket taxes by 12:01 a.m., Aug. 8, says Keith.

The Air Transport Association of America, which represents U.S. airlines, says the refund issue was solely an IRS matter.

"The Internal Revenue Service is the ultimate arbiter on tax matters, and we defer to its decision regarding the collection of federal ticket taxes," says Steve Lott, a spokesman for the group.

Kate Hanni, executive director of passengers-rights group FlyersRights.org., says she's "flabbergasted" by the IRS' decision, and that "the flying public has been deceived about the ticket tax refunds."

She says fliers who bought a ticket before July 23 and traveled during the FAA's partial shutdown paid federal taxes and received no benefit from them.

"At what point does the flying public matter to our government?" she asks.

Before Friday's IRS decision, companies that bought tickets for many employees who traveled during the partial FAA shutdown may have been expecting large refunds.

Shane Downey of the Global Business Travel Association, which represents about 5,000 corporate travel departments and travel suppliers, says "the important thing" is that no passengers will be retroactively taxed.

"This outcome is the best you can hope for from a bad situation," he says.