Federal Excise Tax

Responding to the IRS’s Aggressive Approach to Excise Taxes

The Excise Tax Group of the Internal Revenue Service (IRS) continues to be aggressive in pursuing the collection of federal excise taxes imposed on a wide variety of goods, services, and activities, such as fuels, chemicals, telecommunication services, air and ship transportation, and certain manufactured items. Some federal excise taxes can be industry specific, while others have broader applicability. For instance, a federal excise tax may be imposed on the premiums paid for each policy of insurance, indemnity bond, annuity contract, or policy of reinsurance issued by any foreign insurer or reinsurer.

The IRS’s published guidance and institutional positions in the excise tax area often appear to be result-oriented, finding taxpayers liable without offering much in the way of analysis. The recent controversy over the application of the federal communications excise tax to long-distance services provides an example of the government’s penchant for overreaching in this area. Despite a clearly worded statutory provision that rendered most modern long-distance services nontaxable, it took losses in five United States Courts of Appeals, the United States Court of Federal Claims, and numerous United States District Courts before the government conceded the issue and agreed to follow the plain language of the law.

Unlike the federal income tax, federal excise taxes are “recession-proof.” Even taxpayers who may be in a net operating loss position for federal income tax purposes will be liable for applicable federal excise taxes. Thus, excise taxes provide the government with a more dependable source of revenue in a down economy.

Given the number of different excise tax provisions in the Internal Revenue Code, the specificity with which they are written, and the tenaciousness with which the IRS Excise Tax Group pursues their assessment, taxpayers need counsel who have in-depth knowledge of the idiosyncrasies of federal excise tax practice and procedure and have a proven record of success before IRS and the federal courts with respect to excise tax issues.

In-Depth Experience with Excise Tax Issues

Miller & Chevalier’s Federal Excise Tax practice includes lawyers who have in-depth substantive knowledge of the excise tax regimes included in the Internal Revenue Code. Our lawyers also have significant experience with the specific compliance procedures that are unique to the collection, reporting, and payment of excise taxes. The practice includes former IRS lawyers who know the internal policies and personalities within the IRS Excise Tax Group.

Most important, our lawyers have significant experience not only in representing clients before the IRS, but also in the federal courts, which is essential given the IRS’s position with respect to excise tax collection. Because most excise taxes are assessed taxes, and therefore must be pursued in a refund forum, knowledge of the particularized procedures that apply to divisible taxes and actual experience before the United States Court of Federal Claims and the United States Districts Courts is essential for any successful excise tax practice. Miller & Chevalier’s Federal Excise Tax practice includes litigators with a proven record of success in these forums generally, and in excise tax cases in particular.

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  • Obtained significant refunds of the Section 4251 federal communications excise tax in court cases that ultimately led to the IRS conceding that amounts paid for most long-distance telephone services were not subject to the tax. Nat’l R.R. Passenger Corp. v. United States, 431 F.3d 374 (D.C. Cir. 2005); America Online, Inc. v. United States, 64 Fed. Cl. 571 (2005).
  • Obtained a refund of federally imposed passenger-based user fees for several major U.S. air carriers. American Airlines, Inc. v. United States, 551 F.3d 1294 (Fed. Cir. 2008); Continental Airlines, Inc. v. United States, 77 Fed. Cl. 482 (2007).
  • Represented a major utility in an appeal to the Federal Circuit from an adverse trial court decision imposing liability for the Section 4481 excise tax on highway motor vehicles. Florida Power & Light Co. v. United States, 375 F.3d 1119 (Fed. Cir. 2004).
Government Experience
  • Commissioner, Internal Revenue Service
  • Assistant Commissioner (Technical), Internal Revenue Service
  • Tax Legislative Counsel, U.S. Department of the Treasury
  • Deputy Tax Legislative Counsel, U.S. Department of the Treasury
  • Tax Assistant, Office of the Solicitor General, U.S. Department of Justice
  • Majority Tax Counsel, Committee on Ways & Means, U.S. House of Representatives
  • Assistant Chief of Staff, Joint Committee on Taxation, U.S. Congress
Corporate Experience
Rankings and Recognition
  • Chambers USA: Tax Team of the Year, 2016
  • Chambers USA: Tax: Controversy (National), 2007 - 2016
  • Chambers USA: Tax (District of Columbia), 2003 - 2016
  • Legal 500: Tax: Non-Contentious (US), 2013 - 2016
  • Legal 500: Tax: International Tax (US), 2013 - 2016
  • Legal 500: Tax: Contentious (US), 2007 - 2016
  • U.S. News -- Best Lawyers® "Best Law Firms": Tax Law (National), 2010 - 2016
  • U.S. News -- Best Lawyers® "Best Law Firms": Tax Law (District of Columbia), 2010 - 2016
  • International Tax Review "Americas Tax Awards": Americas Tax Policy Firm of the Year, 2012 - 2013, 2015 - 2016 
  • International Tax Review "Americas Tax Awards": Washington, DC Tax Firm of the Year, 2013
  • International Tax Review "Americas Tax Awards": Washington, DC Transfer Pricing Firm of the Year, 2012
  • International Tax Review: World Tax (Washington, DC), 2012, 2014 - 2017
  • International Tax Review: World Transfer Pricing (National), 2014 - 2017