At&t, Inc. v. United States

DENNIS, Circuit Judge:

The issue in this federal income tax case is whether the plaintiff-taxpayer, AT&T Inc., an interstate telecommunications company, must pay income taxes on the funds it received from federal and state governmental entities for providing “universal service” — viz., affordable telephone service mainly for lower-income consumers and those in high-cost rural, remote or isolated areas — or else is entitled to treat those funds as nonshareholder contributions to capital under the Internal Revenue Code, see 26 U.S.C. § 118(a). The district court held that the taxpayer was not…