AT&T Rejected by U.S. High Court on $500 Million Tax Refund

The U.S. Supreme Court turned away a bid by AT&T Inc. (T) for a $500 million tax refund in a fight stemming from government subsidies to the company for serving remote areas.

The justices today left intact a federal appeals court ruling that rejected the Dallas-based company’s bid for a refund on its 1998 and 1999 federal taxes.

AT&T received $1.5 billion during those years under the state and federal “universal service” programs. The company sought to treat the money as “contributions to capital,” a classification that would have spread the tax burden over several years.

The Internal Revenue Service disagreed, saying the company had to treat the funds as income for the 1998 and 1999 tax years.

“We are disappointed with the Supreme Court’s decision,” the company said in a statement. “However, AT&T does not expect any impact to our financial statements.”

The company fell 36 cents, or 1.3 percent, to $28.16 today in trading on the New York Stock Exchange.

The case is AT&T v. United States, 10-1204.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.

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