Justia Tax Law Opinion Summaries

Rockwater, Inc., doing business as Peerless Manufacturing Company, sold three peanut-drying trailers and was audited by the IRS, which determined that Rockwater owed excise taxes on these sales. Rockwater paid the taxes, statutory interest, and penalties, then filed a claim for a refund with the IRS. Subsequently, Rockwater filed a lawsuit against the United States for a full refund and attorney’s fees. The United States District Court for the Middle District of Georgia granted summary judgment in favor of Rockwater for the refund of excise taxes, statutory interest, and penalties but denied the request for attorney’s fees. The United States appealed the decision regarding the taxes and statutory interest but not the penalties.The United States Court of Appeals for the Eleventh Circuit reviewed the case. The court concluded that the district court erred in determining that Rockwater’s peanut-drying trailers were “off-highway transportation vehicles” exempt from the excise tax. The court found that the trailers were not specially designed for the primary function of transporting peanuts off-highway and that their capability to transport a load over public highways was not substantially limited or impaired. The trailers had standard highway equipment, could travel at road speed limits, and did not require special permits for highway use.The Eleventh Circuit reversed the district court’s grant of summary judgment to Rockwater regarding the excise taxes and statutory interest and remanded with instructions to enter final judgment for the United States for taxes and statutory interest. The court affirmed the district court’s ruling that Rockwater was not required to pay penalties, as the government did not appeal this part of the decision. View "Rockwater, Inc. v. United States" on Justia Law

Dakota Drug, Inc., a wholesale drug distributor, was subject to the Wholesale Drug Distributor Tax in Minnesota. The dispute arose over whether rebate amounts paid to Dakota Drug’s customers under rebate agreements should be included in the company’s “gross revenues” for tax purposes. Dakota Drug argued that these rebate amounts should not be included because they were contractually obligated to return the rebates to customers, either through account credits or checks.The Minnesota Tax Court reviewed the case and granted summary judgment in favor of Dakota Drug. The court determined that the rebate amounts did not constitute “gross revenues” as defined by Minn. Stat. § 295.50, subd. 3, which describes gross revenues as “total amounts received in money or otherwise.” The court concluded that Dakota Drug did not “receive” the rebate amounts because they were obligated to pay these amounts to customers once the rebates were earned.The Minnesota Supreme Court reviewed the case and affirmed the Tax Court’s decision. The Supreme Court held that under Minn. Stat. § 295.52, subd. 3, “gross revenues” do not include rebate amounts paid to a wholesale drug distributor’s customer pursuant to a rebate agreement. The court reasoned that Dakota Drug did not come into possession of the rebate amounts as they were contractually obligated to return these amounts to the customers. Therefore, the rebate amounts were not part of the “total amounts received in money or otherwise” and should not be included in Dakota Drug’s gross revenues for tax purposes. View "Dakota Drug, Inc. vs. Commissioner of Revenue" on Justia Law

Appellant A. Thomas Jones challenged the City of Atlanta's imposition of charges through two ordinances, arguing that these charges, levied on the Department of Watershed Management (DWM) customers, are unlawful taxes. The ordinances in question impose a franchise fee on DWM's gross revenue and a payment in lieu of taxes (PILOT) on DWM's real property, with the collected sums deposited into the City's General Fund. Jones contended that these charges exceed the costs they purportedly cover and are instead used to generate general revenue, violating various constitutional and statutory provisions.The trial court initially dismissed Jones's suit on procedural grounds, but the Court of Appeals reversed this decision in part. Upon remand, the City moved for judgment on the pleadings, and Jones filed motions for partial summary judgment. The trial court granted the City's motion and denied Jones's motions, leading to this appeal. Jones argued that the trial court erred in its application of the standard of review and in its conclusions regarding the nature of the charges.The Supreme Court of Georgia reviewed the case and found that the trial court erred in granting the City's motion for judgment on the pleadings. The Supreme Court held that the trial court failed to treat Jones's allegations as true, particularly his claims that he paid the disputed charges, that the revenue generated from these charges grossly exceeded the associated costs, and that these costs were covered by other transfers from DWM to the City's General Fund. Consequently, the Supreme Court vacated the trial court's judgment on the pleadings and remanded the case for further proceedings.However, the Supreme Court affirmed the trial court's denial of Jones's motions for partial summary judgment. The Court concluded that Jones failed to demonstrate the absence of genuine disputes of material fact regarding whether the charges were taxes or fees and whether the revenue generated exceeded the associated costs. The case was remanded for reconsideration of Jones's claims under the proper standard of review. View "Jones v. City of Atlanta" on Justia Law

Memorial Hermann Accountable Care Organization (MHACO), a nonprofit corporation formed under Texas law in 2012, participated in the Medicare Shared Savings Program (MSSP) as an accountable care organization (ACO). ACOs are groups of healthcare providers that manage and coordinate care for Medicare beneficiaries, potentially sharing in cost savings achieved for the Medicare program. MHACO's patient population includes those covered by MSSP, Medicare Advantage Plans, and employer-sponsored health plans, but it does not provide services for uninsured individuals. The proportion of MHACO’s revenue from MSSP activities varies annually.The Internal Revenue Service (IRS) issued a proposed adverse determination letter, concluding that MHACO did not qualify for a tax exemption under I.R.C. § 501(c)(4). The IRS Independent Office of Appeals upheld this determination, stating that MHACO was not organized and operated for promoting social welfare and providing community benefit. MHACO petitioned the United States Tax Court for a declaratory judgment, which upheld the IRS’s determination, finding that MHACO’s non-MSSP activities primarily benefited its commercial payor and healthcare provider participants rather than the public. MHACO’s motions to vacate or revise the judgment were denied, leading to this appeal.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court affirmed the tax court’s judgment, holding that MHACO did not qualify for a § 501(c)(4) tax exemption. The court applied the "substantial nonexempt purpose" test, consistent with the Supreme Court's interpretation in Better Business Bureau of Washington, D.C. v. United States, and found that MHACO’s commercial activities constituted a substantial nonexempt purpose. The court concluded that MHACO’s operations did not exclusively promote social welfare, as required by § 501(c)(4). View "Memorial Hermann Accountable Care Organization v. CIR" on Justia Law

The case involves William Phillip Jackson, who owes unpaid federal taxes to the United States. Following a jury trial and post-trial proceedings, the United States District Court for the Western District of Missouri entered a judgment against Jackson for $2,396,800.47 and ordered the foreclosure and sale of four properties owned by Jackson and his wife. Jackson filed multiple motions to amend or vacate the sale, which were denied, and his appeals to the Eighth Circuit Court of Appeals were unsuccessful. Jackson then filed for Chapter 13 bankruptcy relief, but the United States proceeded with evictions and seized personal property before being notified of the bankruptcy filing.The United States Bankruptcy Court for the Western District of Missouri heard Jackson's motion for contempt and turnover of property and the United States' motion to lift the automatic stay nunc pro tunc. The bankruptcy court denied Jackson's motion and granted the United States' motion, annulling the automatic stay retroactively to the date of Jackson's bankruptcy filing. Jackson appealed this decision but did not seek a stay of the order pending appeal. While the appeal was pending, the United States sold the properties at auction, and the district court confirmed the sales and approved the disbursement of proceeds.The United States Bankruptcy Appellate Panel for the Eighth Circuit reviewed the case and determined that the appeal was constitutionally moot. The court held that since the properties had been sold and Jackson did not obtain a stay pending appeal, there was no effective relief that could be granted. Consequently, the appeal of the bankruptcy court's order annulling the stay and denying Jackson's motion for contempt and turnover was dismissed for lack of jurisdiction. View "Jackson v. United States" on Justia Law

Jim Walsh, a member of the Washington State House of Representatives, along with other appellants, submitted six initiatives to the legislature. Three of these initiatives were enacted, while the remaining three—repealing the Washington Climate Commitment Act, repealing the state’s capital gains tax, and making participation in the state’s long-term care insurance program optional—were set to appear on the November 2024 ballot. The appellants sought to prevent public investment impact disclosures from appearing on the ballot, arguing that these disclosures were not warranted.The Thurston County Superior Court denied the appellants' request for writs of mandamus and prohibition, dismissing their complaint. The court found that the capital gains tax was not impliedly repealed by another initiative and that the other two initiatives did indeed modify a "tax or fee," thus requiring public investment impact disclosures. The appellants then appealed directly to the Supreme Court of the State of Washington.The Supreme Court of the State of Washington affirmed the lower court's decision. The court held that the writs of prohibition and mandamus were not appropriate in this case. The attorney general and the secretary of state were acting within their jurisdiction and statutory obligations. The court also noted that the appellants had not demonstrated the absence of a plain, speedy, and adequate remedy in the ordinary course of legal proceedings. Therefore, the trial court's denial of relief and dismissal of the case were upheld. View "Walsh v. Hobbs" on Justia Law

A group of 16 related LLCs, which generate all their income from investments in distressed debt instruments, sought a refund for business and occupation (B&O) taxes paid, claiming their income was deductible as "investment income" under RCW 82.04.4281. The statute allows deductions for "amounts derived from investments," but does not define "investments." The LLCs argued that their income qualified for this deduction.The Washington State Department of Revenue audited the LLCs and denied their refund claim. The LLCs challenged this decision in superior court. The superior court granted summary judgment for the Department, ruling that the legislature did not change the definition of "investments" when it amended the statute in 2002. The court relied on the precedent set in O’Leary v. Department of Revenue, which defined "investments" as "incidental investments of surplus funds." The LLCs' motion for reconsideration was denied.The LLCs appealed, and the Court of Appeals affirmed the superior court's decision. The appellate court found that the legislature did not intend to abrogate the O’Leary definition when it amended the statute. The LLCs then petitioned for review by the Washington Supreme Court.The Washington Supreme Court held that the legislature did not abrogate the O’Leary definition of "investments" when it amended RCW 82.04.4281. The court found no clear legislative intent to change the definition, noting that the amendments were primarily aimed at addressing issues raised by the Simpson decision and the ambiguous phrase "other financial businesses." Consequently, the court affirmed that "investments" continues to mean "incidental investment of surplus funds," and the LLCs could not deduct income earned from their primary business activities. The trial court and the Court of Appeals' decisions were affirmed. View "Antio, LLC v. Dep't of Revenue" on Justia Law

The case involves debtors Jason and Leah Wylie, who faced financial difficulties in 2018 due to Mr. Wylie's health issues. As they prepared to file for bankruptcy, they delayed filing their 2018 and 2019 tax returns. Their accountant prepared the 2018 returns, showing significant overpayments, which the Wylies elected to apply to their 2019 tax liabilities instead of receiving refunds. This decision was repeated for their 2019 returns, which were filed shortly after they submitted their Chapter 7 bankruptcy petition.The United States Bankruptcy Court for the Eastern District of Michigan found that the Wylies transferred their anticipated 2019 tax refunds with the intent to hinder the trustee and denied them a discharge under 11 U.S.C. § 727(a)(2)(B). However, the court dismissed other counts alleging similar intent for their 2018 tax overpayments and false statements in their bankruptcy filings. The Wylies appealed the decision on Count II to the United States District Court for the Eastern District of Michigan, which reversed the bankruptcy court’s decision, holding that the finding of intent was clearly erroneous.The United States Court of Appeals for the Sixth Circuit reviewed the case and agreed with the district court. The appellate court found that the bankruptcy court’s intent findings were inconsistent and unsupported by the evidence. Specifically, the bankruptcy court had found that the Wylies’ intent in both the 2018 and 2019 tax elections was to ensure their taxes were paid, not to hinder the trustee. The appellate court emphasized that § 727(a)(2) requires specific intent to hinder the trustee, which was not demonstrated in this case. Consequently, the Sixth Circuit affirmed the district court’s decision and remanded the case to the bankruptcy court to enter a discharge for the Wylies. View "Miller v. Wylie" on Justia Law

The case involves two grand jury subpoenas issued to an accounting firm and an investment company in connection with an alleged illegal tax-shelter scheme. The investment company claimed that the documents sought were protected by attorney-client privilege. The government moved to compel the production of these documents, arguing that the crime-fraud exception applied, which would negate the privilege claims.The United States District Court for the Northern District of Georgia denied the investment company’s motion to intervene and ordered the accounting firm to comply with the subpoena. The court also ruled that the crime-fraud exception applied, compelling the investment company, the accounting firm, and other third parties to produce the requested documents. The investment company appealed these orders.The United States Court of Appeals for the Eleventh Circuit reviewed whether it had jurisdiction to hear the appeals. The court noted that typically, orders related to grand jury subpoenas are not appealable unless the party stands in contempt. The investment company had not stood in contempt before appealing, which generally precludes appellate review. The court also considered the Perlman exception, which allows immediate appeal if the subpoenaed party is unlikely to risk contempt to protect another’s privilege. However, the court found that this exception did not apply because the investment company could have raised its privilege arguments on appeal by standing in contempt.The Eleventh Circuit dismissed the appeals for lack of jurisdiction, emphasizing that the investment company’s failure to stand in contempt foreclosed its ability to seek immediate appellate review. The court held that the investment company must comply with the district court’s orders or stand in contempt to preserve its right to appeal. View "In Re: Grand Jury Investigation" on Justia Law

The plaintiff, a company that constructs and operates fuel cells, sought municipal property tax exemptions for its fuel cell modules and related equipment installed on the Pfizer campus. The property primarily provided electricity and converted waste heat into thermal energy. The plaintiff applied for tax exemptions under Connecticut General Statutes § 12-81 (57), which exempts class I renewable energy sources from taxation. The defendant, the town of Groton, denied the applications, classifying the property as a cogeneration system under § 12-81 (63), which allows but does not require municipalities to exempt such systems from taxation.The Superior Court granted partial summary judgment to the plaintiff, ruling that the property was exempt from taxation for the years 2017 through 2019 under § 12-81 (57). The court found that the property, which included fuel cells with a heat recovery steam generator (HRSG), fell within the definition of a class I renewable energy source. For the 2016 tax year, the court held a trial and determined that the property was not completely manufactured by October 1, 2016, and thus was exempt under § 12-81 (50) as "goods in the process of manufacture." The court also ruled that the plaintiff was not required to file a personal property declaration for the exempt property, and the penalties imposed by the defendant for failing to file such a declaration were improper.The Connecticut Supreme Court upheld the trial court's rulings. It agreed that the property was exempt from taxation under § 12-81 (57) for the years 2017 through 2019, as the statute specifically exempts class I renewable energy sources, including fuel cells. The court also affirmed that the property was exempt for the 2016 tax year under § 12-81 (50) as it was still in the process of manufacture. Finally, the court held that the plaintiff was not required to file a personal property declaration for the exempt property, and the penalties for failing to do so were not permitted. View "FuelCell Energy, Inc. v. Groton" on Justia Law