Justia Tax Law Opinion Summaries

The case involves five public utilities operating in California, including Pacific Bell Telephone Company and AT&T Mobility LLC, which challenged the property tax rates imposed by Merced County for the fiscal years 2017-2018 and 2018-2019. The utilities argued that the tax rates applied to their properties exceeded the permissible rates under Section 19 of Article XIII of the California Constitution, which they interpreted as requiring utility property to be taxed at the same rate as non-utility property.In the Superior Court of Merced County, the utilities sought partial refunds of the property taxes paid, claiming that the tax rates levied on them were higher than the average tax rates in the county. The County demurred, relying on the precedent set by the Sixth District in County of Santa Clara v. Superior Court, which held that Section 19 does not mandate the same tax rate for utility property as for locally assessed property. The utilities conceded that Santa Clara was binding but sought to challenge its holding on appeal. The Superior Court dismissed the case, and the utilities filed a timely notice of appeal.The California Court of Appeal, Fifth Appellate District, reviewed the case de novo and affirmed the lower court's judgment. The court held that Section 19 of Article XIII of the California Constitution does not require utility property to be taxed at the same rate as non-utility property. Instead, the court interpreted the relevant language as an enabling clause, allowing utility property to be subject to taxation, rather than a limiting clause mandating equal tax rates. The court found that the historical context, language, and structure of Section 19 supported this interpretation, and thus, Merced County's application of the tax rates did not violate the constitutional provision. View "Pacific Bell Telephone Co. v. County of Merced" on Justia Law

A private, for-profit corporation, The GEO Group, Inc., which operates correctional facilities under contracts with federal and state government entities, was assessed a deficiency in sales and use taxes by the Texas Comptroller. GEO Group challenged the deficiency, arguing that the purchases made for operating the facilities were tax-exempt as they were made on behalf of government clients. The Comptroller denied the claim, and GEO Group paid the additional taxes and sued for a refund in district court.The trial court conducted a bench trial and ruled against GEO Group, finding that it failed to prove by clear and convincing evidence that it was an "agent" or "instrumentality" of the government, thus not qualifying for the tax exemption. The court of appeals affirmed the trial court's judgment, holding that GEO Group's relationship with its government clients was too attenuated to warrant a tax exemption and that the trial court did not err in applying a heightened standard of proof.The Supreme Court of Texas reviewed the case and concluded that the correct standard of proof for GEO Group to prove its entitlement to a tax exemption is by a preponderance of the evidence, not clear and convincing evidence. However, the court agreed with the lower courts that GEO Group is not an "agent" or "instrumentality" of the federal or state government under the relevant statutes and rules. Therefore, GEO Group is not entitled to a tax refund. The Supreme Court of Texas affirmed the judgment of the court of appeals. View "The GEO Group, Inc. v. Hegar" on Justia Law

In late 2008, the IRS assessed Arthur and Gigi Stover a significant tax bill, which they could not pay. The Government waited until 2020 to initiate a collection suit, nearly twelve years later. Generally, the Government has ten years to sue for unpaid taxes, but this period can be extended if the taxpayer requests an installment agreement. The IRS records indicated that the Stovers requested such an agreement on December 12, 2008. However, Arthur Stover testified that they did not contact the IRS about a payment plan until 2009 through their CPA.The United States District Court for the Western District of North Carolina granted summary judgment to the Government, finding no genuine issue of material fact regarding the date of the installment agreement request. The court held that the request tolled the statute of limitations, making the Government's collection action timely.The United States Court of Appeals for the Fourth Circuit reviewed the case and found that there was a genuine dispute of material fact regarding the date of the installment agreement request. Arthur Stover's deposition testimony suggested that the request could not have been made until 2009, contradicting the IRS records. The court concluded that summary judgment was improper because the conflicting evidence created a genuine issue of fact that should be resolved by a factfinder.The Fourth Circuit vacated the district court's grant of summary judgment and remanded the case for further proceedings. The main holding was that summary judgment is not appropriate when there is a genuine dispute of material fact regarding the date that dictates the timeliness of the Government's suit. View "United States v. Stover" on Justia Law

Angeline and Frank Brozovich appealed a tax order issued by the Commissioner of Revenue, which assessed them $10,864.58 in unpaid individual income tax, penalties, and interest for tax years 2019 and 2020. The assessment was based on the finding that the Brozoviches improperly deducted over $105,000 in losses related to their residential real estate in Bainbridge Island, Washington. The primary issue was whether Angeline qualified as a “real estate professional” under Internal Revenue Code § 469(c)(7)(B) for those tax years.The Minnesota Tax Court held a trial and determined that Angeline did not qualify as a real estate professional because she failed to submit credible evidence that she met the minimum requirement of 750 hours or more on qualifying services in support of renting the Bainbridge Island Property during the years at issue. The tax court also found that other deductions claimed by the Brozoviches, including those related to renting the property to their son, credit card interest payments, and a lawncare payment, were improperly claimed.The Minnesota Supreme Court reviewed the case and affirmed the tax court’s decision. The court held that the tax court had jurisdiction to decide cases arising under Minnesota tax law that incorporate federal tax law. It also held that the tax court did not err in determining that Angeline was not a real estate professional and that some of the claimed deductions were unsupported by the evidence offered. The court found no clear error in the tax court’s factual findings and concluded that the tax court’s decision was supported by the evidence as a whole. View "Brozovich v. Commissioner of Revenue" on Justia Law

Hollydale Land LLC (Hollydale) owned a golf course in Hennepin County, Minnesota, which was taxed under the Minnesota Open Space Property Tax Law. This law allows for reduced tax assessments on properties used for recreational purposes, with deferred taxes calculated based on the difference between the market value and the reduced value. When Hollydale sold the golf course, Hennepin County assessed seven years of deferred taxes totaling $2,622,720.41. Hollydale paid the amount but contested the calculation, arguing that the County failed to cap the market value at the bona fide sale price.Hollydale filed a petition in district court, later transferred to the tax court, challenging the County's assessment. Hennepin County moved to dismiss the petition, arguing it was untimely because Hollydale should have challenged the valuations annually. The tax court denied the motion, holding that the petition was timely as it was filed within 60 days of the notice of deferred taxes, thus the tax court had jurisdiction.Hennepin County sought certiorari review of the tax court's order. The Minnesota Supreme Court reviewed whether the tax court's order denying the motion to dismiss was a "final order" under Minn. Stat. § 271.10, subd. 1, which would allow for immediate appeal. The court reaffirmed its decision in Beuning Family LP v. County of Stearns, which held that such orders are not final and thus not immediately appealable. The court also declined to exercise discretionary review under Minn. R. Civ. App. P. 105.1, finding no compelling reason for immediate appeal and determining that judicial economy would be better served by allowing the tax court to resolve the merits of the case.The Minnesota Supreme Court dismissed the writ of certiorari, concluding that the tax court's order was not a final order and that the interests of justice did not warrant discretionary review. View "County of Hennepin v. Hollydale Land LLC" on Justia Law

The taxpayer, 480 McClellan LLC, leased property from the Massachusetts Port Authority (Massport) to construct and operate a cargo facility. The property, located in East Boston, was previously taxable before Massport acquired it in 1990. In 2017, the City of Boston began taxing the property, and the taxpayer sought abatements for the tax years 2017 through 2020, which were denied by the city's board of assessors.The taxpayer appealed to the Appellate Tax Board, arguing that section 53 of the 1993 supplemental appropriations bill exempted it from taxation because the property was used for "air transportation purposes." The board invited the parties to address whether section 53 had amended section 17 of the Massport enabling act, which governs the taxation of Massport lessees. The board concluded that section 53 was not enacted because the Senate did not finalize its reconsideration of the Governor's veto before the end of the 1993 legislative session. The board also determined that the property was leased for "business purposes" under section 17, making the taxpayer subject to taxation.The Supreme Judicial Court of Massachusetts reviewed the case and affirmed the board's decision. The court held that the Senate's initial vote to override the Governor's veto of section 53 was not final due to a timely motion to reconsider, which was not resolved before the legislative session ended. Therefore, section 53 did not amend section 17. The court also upheld the board's interpretation that "business purposes" under section 17 includes commercial, for-profit activities, and found that the taxpayer leased the property for such purposes. Consequently, the taxpayer was subject to taxation under section 17. View "480 McClellan LLC v. Board of Assessors of Boston" on Justia Law

Plaintiffs Ahmad Skouti and Faten M. Kour purchased a citrus orchard using proceeds from a jury award for the destruction of their grapevines. Under Internal Revenue Code section 1033, taxpayers can avoid recognizing gain from involuntary conversions if they purchase similar property. The Franchise Tax Board (Board) determined that the citrus orchard was not similar to the grapevines and denied the plaintiffs the benefit of section 1033. After exhausting administrative remedies, the plaintiffs filed a complaint in the trial court seeking a tax refund.The Superior Court of Sacramento County reviewed the case. Both parties filed motions for summary judgment. The trial court granted the Board’s motion and denied the plaintiffs’ motion, concluding that the citrus orchard, which included both land and mature trees, was not sufficiently similar to the grapevines to qualify for nonrecognition of gain under section 1033. The plaintiffs appealed this decision.The California Court of Appeal, Third Appellate District, reviewed the case. The court affirmed the trial court’s decision, agreeing with the Board that the properties were not similar under section 1033. The court held that the plaintiffs’ investment in grapevines, which are agricultural fixtures, was not equivalent to an investment in land with citrus trees. The court emphasized that the risks and management associated with grapevines were different from those associated with land containing citrus trees. Therefore, the plaintiffs did not achieve a sufficient continuity of investment to justify nonrecognition of the gain. The judgment of the trial court was affirmed, and the plaintiffs’ appeal was denied. View "Skouti v. Franchise Tax Board" on Justia Law

The City of East Lansing entered into an agreement with the Lansing Board of Water and Light (LBWL) in 2016, which included a franchise fee to be charged to LBWL consumers residing within the City. The fee was collected by LBWL and remitted to the City. Plaintiff James Heos, representing a class of LBWL consumers, filed a complaint against the City, alleging that the franchise fee was an illegal tax under the Michigan Constitution's Headlee Amendment and other state laws.The trial court granted summary disposition in favor of the plaintiff on most counts, ruling that the franchise fee was an illegal tax. The Michigan Court of Appeals reversed this decision, directing the trial court to grant summary disposition in favor of the City, concluding that the plaintiff was not a taxpayer and thus his claim was time-barred.The Michigan Supreme Court reviewed the case and held that the franchise fee was indeed a tax because it was used for general revenue-raising purposes, was not proportionate to any costs incurred by the City, and was not voluntary. The Court further held that the plaintiff was a taxpayer because the legal incidence of the fee fell on the LBWL consumers, not LBWL itself. The Court reversed the Court of Appeals' decision and remanded the case to the trial court for further proceedings, allowing the plaintiff to pursue his Headlee Amendment claim. View "Heos v. City Of East Lansing" on Justia Law

San Diego Gas & Electric Company (SDG&E) owns an interstate electric transmission line running from Arizona to California. The Arizona Department of Revenue (ADOR) is responsible for valuing SDG&E's property in Arizona for tax purposes. In 2020, SDG&E reported a net "original plant in service" valuation of $48,817,396 and a net "related accumulated provision for depreciation" amount of $51,446,397, resulting in a negative valuation of $2,629,001. ADOR disagreed with this calculation and determined a different accumulated depreciation amount, resulting in a positive valuation.The Arizona Tax Court granted summary judgment in favor of SDG&E, finding that their valuation correctly followed the statutory requirements. ADOR appealed, and the Arizona Court of Appeals reversed the Tax Court's decision, holding that the statute did not permit a negative valuation for a plant in service and that accumulated depreciation could not reduce the full cash value to a negative number. The Court of Appeals remanded the case for further proceedings.The Arizona Supreme Court reviewed the case and held that the calculation prescribed by the statute for determining a reduced plant in service cost does not preclude a negative valuation. The Court found that the statutory language did not limit the reduction of the original plant in service cost by accumulated depreciation to a non-negative number. Additionally, the Court clarified that a negative valuation for one component, when summed with other component valuations, reduces the overall full cash value but does not "offset" the valuation of other components. The Supreme Court vacated the relevant portions of the Court of Appeals' opinion and affirmed the Tax Court's grant of summary judgment in favor of SDG&E. View "San Diego Gas & Electric Co. v. Arizona Department of Revenue" on Justia Law

An individual, referred to as "Client," became the target of a criminal investigation into alleged tax evasion. The grand jury issued a subpoena to Client, who invoked his Fifth Amendment privilege against self-incrimination and refused to produce documents. Subsequently, the grand jury subpoenaed the law firm that had represented Client in tax matters, requesting documents related to that representation and instructing the firm to provide a privilege log if any documents were withheld. The law firm declined to produce certain documents or provide a privilege log, citing attorney-client privilege, the work-product doctrine, and Client’s Fifth Amendment rights.The United States District Court for the Central District of California ordered the law firm to provide the Government with a privilege log, rejecting the firm's assertion of Client’s Fifth Amendment rights. The district court temporarily stayed enforcement of its order, and Client filed an interlocutory appeal.The United States Court of Appeals for the Ninth Circuit reviewed the case. The court held that an attorney cannot be compelled to provide the Government with a privilege log of documents protected under Fisher v. United States, 425 U.S. 391 (1976). The court explained that providing a privilege log would reveal the existence, authenticity, and Client’s custody of the documents, thus undermining Client’s Fifth Amendment act-of-production privilege. The court determined that to assess whether the documents are indeed protected under Fisher, the district court should conduct an in camera review.The Ninth Circuit reversed the district court’s order and remanded the case for further proceedings, instructing the district court to conduct an in camera review to determine the applicability of the Fisher privilege. View "In re Grand Jury Subpoena, Dated July 21, 2023" on Justia Law