Violation of what law?

They can do whatever they want, there is nothing that says they have to issue refunds. Currently, while I don't agree with them, they are choosing not to issue any refunds and instead send people to the IRS to receive their refunds.

It may be a bad customer service decision (though every airline but one has made), but it's certainly within their rights to do so.

If there is blame to be had, it should be with the IRS and the government for being so wishy washy about this, if they were to come right out and require the airlines to do this, they would do it, but as of yet they have not. It's not like this is the first time they have had to issue tax refunds, if the IRS wants to change the processing of those they could have just changed the regulations and require the airlines to handle it. Instead they are hiding under a rock without saying anything.

It was wrong for them to raise their fees when the taxes went away, but the public really doesn't care. The airlines have said so far hardly anybody is asking for a tax refund, so again I think the general public just doesn't care enough about it yet to make it an issue.