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1998 Fools: IRS to Purchase AOL


From: 	Associated Press <info@ap.org>

IRS to Purchase AOL

WASHINGTON, DC (AP) -- In a move that some Wall Street analysts are calling
"staggering," the United States' Internal Revenue Service announced in a
joint press conference today that they will be purchasing America Online,
Inc., (NYSE: AOL), headquartered in Dulles, Virginia, for an undisclosed
amount.

AOL Chairman and CEO Steve Case, and President and COO Robert W. Pittman,
joined Commissioner of Internal Revenue, Charles O. Rossotti, in
Washington, DC, to announce this merger.

Rossotti explained that, "[due] to their high volume of American users, AOL
is the perfect agency for The Department of the Treasury to venture into
collecting information and revenue electronically."

The IRS has announced that as soon as the SEC approves the purchase, they
will be changing the current rate structure on AOL.  AOL had announced a
rate change from their standard $19.95 per month to $21.95, which was to be
implemented as of April 1, 1998.  However, the IRS has stated they will
instead be lowering the monthly rate to a base $4.95 per month.  On top of
the base rate, they will be instituting what is being termed a "usage"
rate.  

As an example, a single user would take 28% of the number of minutes they
are online and multiply by ten cents per percentage point.  Thus, a user on
line for 60 minutes would incur a usage cost of an additional $1.68.  Now,
a married couple would take 37 1/2% of the number of minutes they are
online and multiply by ten cents per percentage point, hence, 60 minutes
would incur a usage cost of $2.25.  However, should this married couple
have a child under the age of 18, they can deduct 2 1/2% of each 5 minute
interval that any dependent is online.  Additional usage cost modifiers
will be included as Congress deems it necessary.

Case and Rossotti jointly stated that the IRS believes, "this pricing
structure will persuade many Americans to migrate back to using AOL for
their Internet access and for payment of their income taxes."  AOL will
also be removing many of their advertising banners due to the political
ramifications that may be brought into question by Congress as,
"favoritism," or, "wrongful contributions."

According to Rossotti, the main reason for the proposed merger is
financial.  The IRS intends to use revenue generated by the base plus usage
rates to subsidize the rising costs associated with the processing of the
federal income taxes.  

The IRS will also sell off the foreign units of AOL consisting of Canada,
the United Kingdom (also serving Sweden), France, Germany (also serving
Austria and Switzerland), and Japan.  They expect that these "branches"
will spawn Europe Online, Asia Online, and Canada Online, and bring to the
IRS an estimated $1.3 billion.

Another method of attempting to reduce the processing costs, Rossotti
continued, is that in cooperation with the Department of Social Security,
the IRS-AOL merger will allow AOL users to file their income taxes under
their screen names rather than their social security numbers directly
through AOL.  As an incentive for this "screen name - income tax" plan to
work, known as IRS Initiative 257, the IRS will be granting a 5% tax
reduction on all monies due for any AOL user filing under their screen
name.  Any refunds due back to AOL users will be processed first, with no
reduction.

The IRS has stated that they will set up a toll-free number to handle
questions and calls concerning the merger and any pricing structure
changes, or you may visit their website at http://www.irs.ustreas.gov, and
soon to be linked by http://www.aol.com/corp.  

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