Justia Tax Law Opinion Summaries

Plaintiffs, who owned real property in Southfield, Michigan, became delinquent on their property taxes between 2012 and 2014. Oakland County foreclosed on their properties under the General Property Tax Act (GPTA). The plaintiffs had the opportunity to redeem their properties by paying the delinquent taxes, but they failed to do so. Consequently, the properties were foreclosed, and the city of Southfield exercised its right of first refusal to purchase the properties for the minimum bid, which included the unpaid taxes and associated fees. The properties were then conveyed to the Southfield Neighborhood Revitalization Initiative (SNRI).The plaintiffs filed a class action lawsuit in the Oakland Circuit Court, alleging violations of their constitutional rights, including the Takings Clauses of the Michigan and United States Constitutions. The trial court granted summary disposition in favor of the defendants, citing lack of jurisdiction, lack of standing, and res judicata. The Michigan Court of Appeals affirmed the trial court's decision. However, the Michigan Supreme Court vacated the Court of Appeals' decision and remanded the case for reconsideration in light of its decision in Rafaeli, LLC v Oakland Co, which held that retaining surplus proceeds from tax-foreclosure sales violated the Takings Clause of the Michigan Constitution.On remand, the trial court again granted summary disposition to the defendants, but the Court of Appeals reversed in part, holding that Rafaeli applied retroactively and that the plaintiffs had valid takings claims. The Michigan Supreme Court reviewed the case and held that a taking occurs when a governmental unit retains property without offering it for public sale and the value of the property exceeds the amount owed in taxes and fees. The Court also held that MCL 211.78m, as amended, applies prospectively, while MCL 211.78t applies retroactively but does not govern this case. The case was remanded to the trial court for further proceedings. View "Jackson v. Southfield Neighborhood Revitalization Initiative" on Justia Law

Dr. Bernard T. Swift and his wife, Kathy L. Swift, took tax deductions for insurance premium payments made by Swift’s medical practice to captive insurance companies. The IRS issued notices of deficiency, disallowing the deductions and imposing penalties. The tax court upheld the IRS’s determination, finding that the payments were not genuinely for insurance.The Swifts challenged the IRS’s determination in the tax court, which sustained both the deficiencies and penalties. The tax court found that the arrangement with the captive insurance companies did not constitute insurance because it did not achieve risk distribution and did not resemble commonly accepted notions of insurance. The Swifts then appealed the tax court’s decision.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court affirmed the tax court’s decision, agreeing that the arrangement did not achieve risk distribution, which is essential for insurance. The court found that the number of risks insured by the captives was insufficient and that the reinsurance pools did not constitute bona fide insurance arrangements. The court also upheld the penalties, rejecting the Swifts’ arguments that the IRS failed to obtain timely supervisory approval and that they had reasonable cause or substantial authority for their tax treatment. The court concluded that the Swifts could not reasonably rely on advice from a promoter of the transaction and that the IRS letter rulings cited by the Swifts were materially distinguishable. View "Swift v. CIR" on Justia Law

Peter McGowan, a dentist, and his solely owned dental practice, Peter E. McGowan DDS, Inc., engaged in a complex life insurance arrangement involving two subtrusts. The dental practice contributed $50,000 annually to these subtrusts, one of which owned a life insurance policy covering McGowan. The policy's death benefit would go to McGowan's wife, while the cash value could potentially be donated to a charity, the Toledo Zoo, if premiums were not paid. McGowan reported only a portion of these contributions as taxable income, and the dental practice deducted the full amount of the premiums.The IRS audited McGowan and the dental practice, concluding that McGowan should have included the full value of the policy's economic benefits in his gross income and that the dental practice could not deduct the premiums. The IRS assessed over $100,000 in unpaid taxes, penalties, and interest for the tax years 2014 and 2015. McGowan and the dental practice paid these amounts and then sued for a refund in the United States District Court for the Northern District of Ohio. The district court granted summary judgment to the government, upholding the IRS's assessments.The United States Court of Appeals for the Sixth Circuit reviewed the case and affirmed the district court's decision. The court held that the split-dollar regulation applied to McGowan's arrangement, requiring him to include the full value of the policy's economic benefits in his gross income and prohibiting the dental practice from deducting the premiums. The court also found that the regulation was consistent with the Internal Revenue Code. Additionally, the court noted that McGowan's income from the arrangement should be treated as a shareholder distribution rather than services-based compensation, entitling him to a refund due to the lower tax rate on dividends. View "McGowan v. United States" on Justia Law

Several local taxing districts within Kootenai County, Idaho, including East Side Highway District, Post Falls Highway District, Worley Highway District, the City of Coeur d’Alene, and the City of Post Falls, filed claims against Kootenai County and its Treasurer, Steven Matheson. The dispute arose when Matheson decided that the County would retain all late charges and interest from delinquent property taxes to cover collection costs, rather than distributing a proportionate share to the taxing districts. The taxing districts argued that they were entitled to their share of these funds.The District Court of the First Judicial District of Idaho ruled in favor of the taxing districts, granting their motions for summary judgment and judgment on the pleadings. The court determined that Idaho Code sections 63-1015 and 63-1007(1) required the County to distribute the late charges and interest proportionately to the taxing districts. The court also awarded attorney fees to the taxing districts under Idaho Code section 12-117(4).The Supreme Court of the State of Idaho reviewed the case and affirmed the district court's judgment. The Supreme Court held that the statutory language was unambiguous and required the County to apportion late charges and interest among the taxing districts in the same manner as property taxes. The Court also upheld the award of attorney fees to the taxing districts, noting that Idaho Code section 12-117(4) mandates such an award in cases involving adverse governmental entities. The Supreme Court awarded attorney fees and costs on appeal to the taxing districts. View "East Side Hwy Dist v. Kootenai County" on Justia Law

The case involves Pacific Bell Telephone Company and other utilities suing the County of Napa and the state Board of Equalization for a refund of property taxes and declaratory relief. The utilities argue that from 2018 to 2023, the tax rates used to compute the debt-service component of their property taxes were higher than those applied to other properties, violating the California Constitution's requirement that public utility property be taxed in the same manner as other property.In the lower court, the trial court sustained the respondents' demurrer to the utilities' complaint without leave to amend, based on the precedent set by the Sixth District Court of Appeal in County of Santa Clara v. Superior Court, which held that the California Constitution does not mandate that public utility property be taxed at the same rate as other property. The trial court entered judgment in favor of the respondents.The California Court of Appeal, First Appellate District, reviewed the case. The court affirmed the lower court's decision, agreeing with the reasoning in Santa Clara and another case, Pacific Bell Telephone Co. v. County of Merced. The court concluded that the constitutional provision does not require the same or comparable debt-service tax rates for public utility and nonutility property. The court also rejected the utilities' claim that the tax rates violated the principle of taxation uniformity embodied in the California Constitution. The judgment in favor of the respondents was affirmed. View "Pacific Bell Telephone Co. v. County of Napa" on Justia Law

The case involves a dispute over the interpretation and application of Idaho Code section 63-602G, which governs the homestead property tax exemption. In 2020, the Idaho Legislature amended the statute to remove the April 15 application deadline and added that the exemption "shall be effective upon the date of the application." The Idaho State Tax Commission issued guidance stating that the exemption should not be prorated based on the application date, which was supported by an Attorney General Opinion. However, Latah and Lincoln Counties disagreed and prorated the exemption based on the application date.The Counties petitioned for judicial review in their respective district courts, which were consolidated. The district court ruled in favor of the Counties, determining that the Tax Commission exceeded its authority and that the statute was ambiguous, allowing for proration based on legislative intent. The Tax Commission appealed the decision.The Supreme Court of Idaho reviewed the case and held that the plain language of Idaho Code section 63-602G requires the retroactive application of the homestead exemption to January 1 of the tax year during which the application was submitted, regardless of the application submission date. The Court found that the statute was unambiguous and that the exemption applies to the entire tax year, not prorated based on the application date.The Court also determined that the Tax Commission did not exceed its statutory authority when it issued the May 2022 Order directing the Counties to apply the full homestead exemption. The Court concluded that the Tax Commission's order was within its constitutional and statutory powers to ensure uniformity and compliance with property tax laws.The Supreme Court of Idaho reversed the district court's order, vacated the judgment, and remanded the case for entry of an order affirming the Tax Commission’s May 2022 Order. View "Latah County v. Idaho State Tax Commission" on Justia Law

Patrick Kennedy and Roy J. Meidinger, Sr. filed whistleblower claims with the IRS, alleging significant tax violations by various entities. Kennedy's claims involved three corporations, while Meidinger's claim was based on a theory that healthcare provider discounts to insurance companies constituted untaxed debt relief. Both claims were initially reviewed by the IRS Whistleblower Office (WBO) and forwarded to IRS operating divisions for further action.The IRS operating divisions did not take substantive action on Meidinger's claim or on two of Kennedy's claims. Meidinger's claim was deemed speculative, and Kennedy's first two claims were either outside the operating division's jurisdiction or involved a defunct entity. Kennedy's third claim led to an audit of the targeted taxpayer, but the IRS found no tax violations and collected no proceeds.The United States Tax Court dismissed Meidinger's case for lack of jurisdiction, as the IRS had not proceeded with any administrative or judicial action based on his information. The Tax Court also dismissed Kennedy's first two claims for the same reason but reviewed his third claim on the merits, ultimately denying it because the IRS collected no proceeds.The United States Court of Appeals for the District of Columbia Circuit reviewed the consolidated appeals. The court held that the Tax Court lacked jurisdiction over Meidinger's claim and Kennedy's first two claims, as the IRS had not taken any substantive action against the taxpayers based on their information. However, the court affirmed the Tax Court's decision on Kennedy's third claim, agreeing that no proceeds were collected, and thus, no award was warranted. The court dismissed Meidinger's appeal and Kennedy's first two claims for lack of jurisdiction and affirmed the denial of Kennedy's third claim on the merits. View "Kennedy v. Cmsnr. IRS" on Justia Law

Verizon New England Inc. (Verizon) sought review of a District Court judgment favoring Neena S. Savage, the Tax Administrator for Rhode Island. The case revolved around the interpretation of "accumulated depreciation" under G.L. 1956 § 44-13-13, which governs the taxation of tangible personal property (TPP) for telecommunications companies in Rhode Island. Verizon, a New York corporation providing telecommunications services in Rhode Island, had declared the value of its TPP based on financial accounting depreciation until 2009. After reevaluating its approach, Verizon submitted amended valuations and requested tax refunds, which were denied.Verizon requested an administrative hearing, arguing that "accumulated depreciation" should include all forms of depreciation, including physical deterioration, functional obsolescence, and economic obsolescence. The hearing officer recommended affirming the refund denials, and the tax administrator adopted this recommendation. Verizon then appealed to the District Court, claiming the tax was excessive due to the incorrect calculation of accumulated depreciation.The District Court granted summary judgment in favor of the defendant, reasoning that the plain and ordinary meaning of "accumulated depreciation" did not include external factors like obsolescence. The court noted that the tax administrator had consistently applied financial accounting-based depreciation for forty years without legislative intervention.The Rhode Island Supreme Court reviewed the case and agreed with the District Court's interpretation. The court held that "accumulated depreciation" in § 44-13-13 refers to financial accounting depreciation, reflecting the value on Verizon's balance sheet. The court affirmed the judgment of the District Court, concluding that the plain and ordinary meaning of depreciation did not encompass market contingencies such as economic and functional obsolescence. View "Verizon New England Inc. v. Savage" on Justia Law

Appellants Benedict J. Frederick, III, Matthew W. Wyskiel, III, and Stacie Teal-Locust challenged the Baltimore City Board of Elections' decision to reject a proposed charter amendment petition sponsored by Renew Baltimore. The proposed amendment sought to cap Baltimore City's real property tax rate, decreasing it incrementally over seven years. The current tax rate is $2.248 per $100 of assessed value, and the amendment aimed to reduce it to $1.20 per $100 by fiscal year 2032.The Election Director for the City Board approved the petition format but did not assess its legality. Renew Baltimore submitted the petition with 23,542 signatures, exceeding the required 10,000. However, the Election Director later deemed the amendment deficient, citing a conflict with section 6-302(a) of the Tax-Property Article, which grants the Mayor and City Council the authority to set property tax rates. The Circuit Court for Baltimore City upheld this decision, ruling that the amendment was not proper charter material and violated section 6-302(a).The Supreme Court of Maryland reviewed the case and affirmed the Circuit Court's decision. The Court held that the proposed charter amendment was impermissible because it violated section 6-302(a) of the Tax-Property Article by allowing citizens to establish the tax rate, which is a power vested in the Mayor and City Council. Additionally, the Court noted that section 49 of Article II of the Baltimore City Charter prohibits voters from initiating legislation related to property taxation. Therefore, the proposed amendment could not be presented on the November 2024 general election ballot. View "Frederick v. Balt. City Bd. of Elections" on Justia Law

The case involves a dispute over a renewable energy technologies income tax credit (RETITC) claimed by Blake and Blanca Goodman for solar energy systems installed on their home in 2012. The Goodmans claimed $17,250 in RETITC on their Hawai‘i income tax return using Form N-342. Despite having no excess tax credit (their tax credit did not exceed their tax liability), they were required to make an irrevocable election on how to treat the tax credit as either refundable or nonrefundable.The Department of Taxation audited the Goodmans' return and issued a Final Assessment reducing their claimed RETITC by 30%, resulting in an additional tax assessment of $5,416.50. The Goodmans appealed to the Board of Taxation Review, which ruled in their favor, allowing them to amend their elections. The Department then appealed to the Tax Appeal Court, which granted summary judgment for the Department, ruling that the Goodmans' election was irrevocable and that they owed additional taxes.The Intermediate Court of Appeals (ICA) vacated the Tax Appeal Court's decision, holding that the court exceeded its jurisdiction by increasing the Goodmans' tax liability beyond the Department's assessment. However, the ICA affirmed the Department's Final Assessment, finding that Form N-342 and its instructions were consistent with the statute.The Supreme Court of Hawai‘i reviewed the case and held that Form N-342 and its instructions were inconsistent with HRS § 235-12.5(f)-(h). The court found that the statute's provisions for refundable or nonrefundable elections only apply when a taxpayer's tax credit exceeds their tax liability. Since the Goodmans did not have excess tax credit, they should not have been required to make such elections. The court vacated the ICA's judgment and reversed the Tax Appeal Court's final judgment, ruling that the Goodmans are entitled to the $17,250 RETITC they claimed. View "Suganuma v. Goodman" on Justia Law