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1 Joseph Henchman & Matthew Reddington, Case Presents Opportunity to Ensure Uniform Application of Tax Code and Prevent Harm to Taxpayers 1 (2008)

handle is hein.taxfoundation/ffbcgxz0001 and id is 1 raw text is: FOUNDATION Case Presents Opportunity to Ensure Uniform Application of Tax Code and Prevent Harm to Taxpayers Fiscal Fact No. 126 by Joseph Henchman and Matthew Reddington April 28, 2008 Introduction In May, the U.S. Supreme Court will decide whether to hear the case of Centerior Energy Corp. v. Mikulski, an appeal from a lower court decision opening the door to fragmented state-by-state interpretations of the U.S. tax code.j The Tax Foundation filed a friend of the court brief urging the Court to take the case, which raises the question of whether taxes paid to the government can be recovered from a business instead of from the IRS. I. A Dilemma Faced by Many Taxpayers Like many taxpayers, Centerior Energy Corp. was confronted with applying complex tax laws to its individual situation. The tax law in question, 26 U.S.C. § 7422, was left ambiguous by Congress, which had expected the IRS to issue further regulations. Since the IRS never did, Centerior and other taxpayers had to choose between two conflicting, but equally plausible, interpretations. The plaintiffs in this case (the Mikulskis) allege that Centerior chose wrongly, and as a result, caused them to overpay their income taxes. The lower court agreed, suggesting that correct interpretations of ambiguous tax laws could vary state-by-state. The dilemma faced by Centerior is one faced routinely by taxpayers. A recent Tax Foundation report examined several examples of items in the tax code that have confused taxpayers, such as the sales tax deduction, the alternative minimum tax, the telephone excise tax refund, Hurricane Katrina exemptions, and education credits.21

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