Justia Tax Law Opinion Summaries

Several individuals, including Richard and Jocelyn Markowitz, John and Elizabeth van Merkensteijn, and pension funds they controlled, were found by a jury to have defrauded the Danish tax authority (Skat) by submitting false claims for tax refunds. The defendants conceded before trial that they were never entitled to the refunds under the U.S.-Denmark tax treaty, admitting that they had not owned Danish shares or received dividends subject to Danish withholding tax. However, they argued that they had been misled by a London-based trading partner into believing otherwise and were unaware that the refund claims submitted on their behalf were fraudulent.The United States District Court for the Southern District of New York presided over the case after it was consolidated as part of multidistrict litigation. The defendants unsuccessfully moved to dismiss Skat’s claims, contending that the common law revenue rule barred the suit. The district court held that because the defendants never owned the relevant Danish stocks or paid taxes, Skat’s claims were for commercial fraud rather than enforcement of Danish tax law. After trial, the jury found each defendant liable, and the district court entered judgments totaling over $476 million based on Skat’s gross payments and prejudgment interest.On appeal, the United States Court of Appeals for the Second Circuit reviewed the case. The court held that Skat’s lawsuit was not barred by the revenue rule because it did not seek to enforce foreign tax laws, but rather sought recovery for fraud. The court also found no abuse of discretion in the district court’s exclusion of certain evidence and upheld the sufficiency of evidence supporting judgments against Jocelyn Markowitz and Elizabeth van Merkensteijn under an agency theory. The Second Circuit affirmed the district court’s judgment. View "Skatteforvaltningen v. Markowitz" on Justia Law

A U.S. citizen residing in Canada sold real estate located in Canada in 2015 and paid Canadian taxes on the resulting income. He was also required to pay the U.S. “net investment income tax” (NIIT) on the same income. To avoid double taxation, he claimed a foreign tax credit against his NIIT liability, relying on Article XXIV of the U.S.-Canada income tax treaty, which is designed to protect taxpayers from being taxed by both countries on the same income. The IRS rejected his claim for the foreign tax credit against the NIIT.The taxpayer brought a refund action in the United States Court of Federal Claims, arguing that under the treaty, he was entitled to offset his NIIT liability with the credit for Canadian taxes paid. The Court of Federal Claims granted summary judgment in his favor, holding that the treaty created a foreign tax credit that could be applied against the NIIT, thereby allowing the taxpayer to recoup the NIIT he had paid.On appeal, the United States Court of Appeals for the Federal Circuit reviewed the text of both the Internal Revenue Code and the treaty. The court held that while the treaty’s Credit Clauses broadly apply to U.S. income taxes, the treaty expressly subjects the availability of a foreign tax credit to the limitations of U.S. law. The Code only permits foreign tax credits to offset taxes imposed by Chapter 1, and the NIIT is imposed by Chapter 2A. Thus, there is no statutory authority or independent treaty provision permitting a foreign tax credit to offset the NIIT. The court rejected arguments that the treaty overrides this limitation or that its general principle of avoiding double taxation mandates a credit against the NIIT. The Federal Circuit reversed the judgment of the Court of Federal Claims, holding that the taxpayer was not entitled to apply a foreign tax credit against the NIIT under either the Code or the treaty. View "ESTATE OF BRUYEA v. US" on Justia Law

Two U.S. citizens lived in France during the 2015 tax year and sold shares of a French company, earning a profit. They paid income taxes to both France and the United States, including a net investment income tax (NIIT) of $3,851 to the IRS. In 2020, they filed a lawsuit in the United States Court of Federal Claims seeking a refund of the NIIT, arguing that the U.S.–France tax treaty entitled them to offset that tax with credits for French income taxes paid.The United States Court of Federal Claims granted summary judgment for the plaintiffs. The court rejected their first argument based on Article 24(2)(a) of the treaty, finding it did not permit a credit against the NIIT, but accepted their second argument based on Article 24(2)(b), concluding that provision provided a credit against the NIIT without regard to certain limitations in U.S. tax law. The government appealed the judgment to the United States Court of Appeals for the Federal Circuit.The United States Court of Appeals for the Federal Circuit reviewed the treaty and statutes de novo. It held that both Article 24(2)(a) and Article 24(2)(b) of the Convention are subject to U.S. tax law limitations, specifically those in the Internal Revenue Code that prohibit offsetting the NIIT with foreign tax credits. The court reversed the judgment of the Court of Federal Claims, holding that the treaty does not provide a foreign tax credit to offset the NIIT, and the plaintiffs are not entitled to a refund on that basis. Each party was ordered to bear its own costs. View "CHRISTENSEN v. US " on Justia Law

A group of associations representing infusion centers, cancer patients, and pharmaceutical manufacturers challenged the constitutionality of a program created by the Inflation Reduction Act of 2022, which directs the Secretary of Health and Human Services (HHS), through the Centers for Medicare and Medicaid Services (CMS), to negotiate prices for high-expenditure prescription drugs under Medicare Parts B and D. The program allows HHS to select drugs based on certain criteria, negotiate a “maximum fair price” with manufacturers, and impose an excise tax on manufacturers who refuse to negotiate. The tax is calculated as a high percentage of sales reimbursed by Medicare. Manufacturers may avoid the program by withdrawing from Medicare and Medicaid participation. The statutory scheme also limits administrative and judicial review of key program decisions and allows HHS to implement early cycles of the program through guidance rather than notice-and-comment rulemaking.The United States District Court for the Western District of Texas initially dismissed the case for lack of subject-matter jurisdiction and improper venue. On appeal, the United States Court of Appeals for the Fifth Circuit reversed and remanded, finding that at least one plaintiff had standing and venue was proper. On remand, the district court granted summary judgment for the government, holding that the program did not violate the nondelegation doctrine, that the Anti-Injunction Act barred the plaintiffs’ Eighth Amendment claim, and that the plaintiffs lacked a protected property interest to support their due process claim.Upon further appeal, the United States Court of Appeals for the Fifth Circuit affirmed the district court’s judgment. The court held that the statute provided an “intelligible principle” sufficient to withstand a nondelegation challenge, that the Anti-Injunction Act did not bar the Eighth Amendment claim but the excise tax did not constitute a punitive fine, and that neither manufacturers, providers, nor patients possessed a protected property or liberty interest implicated by the program. The government’s summary judgment was affirmed in full. View "Natl Infusion Center v. Kennedy" on Justia Law

A parent corporation headquartered in Massachusetts, together with its affiliated companies, forms a "water’s edge combined group" for New Hampshire business profits tax purposes. One group member realized a substantial capital gain in 2017 from selling a business division, while the parent company incurred a significant capital loss in 2020 from selling a subsidiary. The group attempted to use the parent’s 2020 capital loss as a carryback to offset the 2017 capital gain of another member, thereby reducing its overall tax liability in New Hampshire.The New Hampshire Department of Revenue Administration (DRA) audited the group’s returns and denied the requested refund, reasoning that state law only permits a capital loss carryback to offset the same entity’s prior gains, not the gains of a different group member. After the DRA’s Hearings Bureau upheld this assessment, the group appealed to the Merrimack County Superior Court. The Superior Court, after a bench trial, ruled in favor of the taxpayer group, concluding that the relevant statutes allowed a combined group to offset one member’s capital loss against another’s gain. The court also found that certain administrative rules conflicted with the statute.On appeal, the Supreme Court of New Hampshire reversed the Superior Court’s decision. The Supreme Court held that under RSA chapter 77-A, each member of a water’s edge combined group must calculate its net income, including capital losses and gains, separately, in accordance with the Internal Revenue Code, before the group’s net incomes are combined. Thus, a capital loss incurred by one group member cannot be used to offset a capital gain realized by another member. The court also found no constitutional violation and ruled that the administrative rules were consistent with the statute. The case was reversed and remanded for further proceedings. View "Hologic, Inc. v. Comm'r, N.H. Dep't of Revenue Admin." on Justia Law

A partnership claimed a charitable deduction after donating a conservation servitude on real property. The Internal Revenue Service audited the partnership’s tax filing and, in 2025, issued a Notice of Final Partnership Adjustment, disallowing the deduction and imposing both a civil fraud penalty and several valuation-related penalties for negligence, substantial understatement, and gross-valuation misstatements. The partnership responded by filing suit in the United States District Court for the Western District of Louisiana, seeking a pre-payment jury trial to contest the penalties and requesting both injunctive and declaratory relief. The partnership also filed a parallel petition with the U.S. Tax Court for a downward adjustment of the IRS’s determination.In the district court, both parties moved for judgment on the pleadings. The court granted the IRS’s motion and dismissed the case for lack of subject matter jurisdiction, relying on the Anti-Injunction Act (AIA) and the Declaratory Judgment Act (DJA). The district court reasoned that the penalties imposed by the IRS constitute “tax” within the meaning of relevant statutes, thereby stripping federal courts of jurisdiction to hear pre-payment challenges to such assessments.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed whether accuracy-related penalties under 26 U.S.C. § 6662 are treated as “tax” for purposes of the AIA and DJA. The Fifth Circuit held that these penalties are indeed treated as “tax,” and thus, both the AIA and DJA bar federal court jurisdiction over the partnership’s pre-payment challenge. The court further determined that Tax Court provides an alternative forum for such disputes. The Fifth Circuit affirmed the district court’s dismissal for lack of subject matter jurisdiction. View "Norcave Properties v. IRS" on Justia Law

Three related business entities and an individual were audited by the Mississippi Department of Revenue (MDOR) for sales and income taxes covering various periods between 2019 and 2021. After a meeting to discuss the audit results, the taxpayers updated their mailing address with MDOR. MDOR subsequently determined that the entities and individual owed tax assessments and mailed these assessments to the updated address. The taxpayers later claimed they did not receive the assessments and missed the statutory deadline to appeal.The taxpayers attempted to appeal the assessments to the MDOR Board of Review, but their appeal was denied as untimely. They then appealed to the Board of Tax Appeals, which also affirmed the denial. The taxpayers next appealed to the Hinds County Chancery Court, arguing that MDOR had not sufficiently proven the assessments were actually mailed and that the statutory notice provisions violated due-process rights. Both parties moved for summary judgment. The chancery court granted summary judgment in favor of MDOR, finding the statutory notice provisions had previously been upheld as constitutional.The Supreme Court of Mississippi reviewed the case de novo, considering both the grant of summary judgment and the legal questions presented. The Court held that MDOR had provided sufficient evidence, through affidavits and mailing records, to establish that the assessments were mailed according to statutory requirements. The Court also held that the notice provisions in Mississippi Code Sections 27-65-37(2) and 27-77-5(1) are constitutional, as they are reasonably calculated to provide notice and an opportunity to contest the assessments, satisfying due-process requirements. The judgment of the Hinds County Chancery Court was affirmed. View "Carroll Brothers, LLC v. Graham" on Justia Law

An employee of the Internal Revenue Service, who also served as trustee for her goddaughter’s trust, was terminated from her position following an investigation into her tax returns and health insurance claims. The investigation revealed that she had improperly claimed her goddaughter and goddaughter’s son as dependents for several tax years and placed them on her federal health insurance plan, despite not meeting eligibility criteria. The employee acknowledged to investigators that she knew her actions were technically illegal. Additional incidents involving misuse of her government travel card were also considered as prior discipline. The employee challenged the resulting tax liabilities in the U.S. Tax Court, ultimately settling for a reduced amount based on a stipulation between her and the IRS.An Administrative Judge of the Merit Systems Protection Board initially reversed her removal, finding in her favor. However, following a petition for review by the IRS, the full Merit Systems Protection Board reversed the judge’s decision, sustaining her removal. The Board concluded that the IRS had proven its primary reason for removal by a preponderance of the evidence, and merged another reason into it, without reaching a third reason. The Board gave evidentiary weight to the Tax Court settlement and associated documents, which had been discounted by the Administrative Judge.On appeal, the United States Court of Appeals for the Federal Circuit reviewed whether the Board’s consideration of the Tax Court settlement documents violated evidentiary principles, specifically Federal Rule of Evidence 408. The court held that the Board did not abuse its discretion in considering those materials to establish the fact of the admitted liability, and that even if there had been an evidentiary error, the petitioner failed to show harm or prejudice. The Federal Circuit affirmed the Board’s final decision sustaining the removal. View "HARRIS-CAMPBELL v. TREASURY " on Justia Law

The Internal Revenue Service (IRS) sent a notice of transferee liability for unpaid taxes to a limited liability company (the appellant) at the address listed on its most recent tax return. The appellant did not receive the notice because it was returned by the postal service as undeliverable. The company only learned of the notice months later and subsequently filed a petition in the United States Tax Court to contest the liability, but did so 143 days after the IRS had mailed the notice. The statutory deadline for such petitions is 90 days.After the petition was filed, the IRS moved to dismiss it on the grounds that the Tax Court lacked jurisdiction because the filing was untimely. The appellant argued that the notice was not properly delivered and that the statute of limitations should bar the IRS’s assertion of liability. The Tax Court found that the IRS had exercised reasonable diligence in determining the company's address, as it used the address provided on the most recent tax return. Because the petition was not filed within the 90-day period specified by 26 U.S.C. § 6213(a), the Tax Court dismissed the case for lack of jurisdiction.On appeal, the United States Court of Appeals for the First Circuit reviewed the decision. The Court held that the IRS had complied with statutory requirements in mailing the notice to the correct address and exercised reasonable diligence. The Court further determined that the 90-day filing deadline in § 6213(a) is nonjurisdictional, meaning it does not limit the Tax Court’s power to hear late petitions. However, the Court also held that the deadline, though nonjurisdictional, is mandatory and not subject to equitable tolling. The dismissal of the petition was thus affirmed, though on different grounds than those relied upon by the Tax Court. View "Kyick Holdings, LLC v. Bessent" on Justia Law

A federally chartered savings bank headquartered in Pennsylvania operated branches in Ohio and several other states. Ohio taxes financial institutions through a regressive-rate structure, where the tax rate decreases as a bank’s Ohio business increases. The bank claimed that Ohio’s tax scheme forced it to pay more taxes than a bank of similar size operating solely within Ohio, arguing this was unconstitutional discrimination against interstate commerce.The bank filed refund claims with the Ohio tax commissioner for multiple years, asserting the tax was unconstitutional. The tax commissioner denied the request, stating that administrative agencies lack authority to rule on the constitutionality of statutes. The bank then appealed to the Ohio Board of Tax Appeals, which also declined to address the constitutional claim and affirmed the denial of a refund.The Supreme Court of Ohio reviewed the case to determine whether Ohio’s financial-institutions tax violated the dormant Commerce Clause of the United States Constitution. The court applied the internal consistency test, which asks whether identical application of a tax scheme by every state would place interstate commerce at a disadvantage or result in double taxation. The court found that Ohio’s tax only applies to the portion of a bank’s equity capital attributable to its Ohio business and would not result in double taxation if every state adopted a similar scheme. The court also determined that the tax does not discriminate against interstate commerce, as it applies evenhandedly to both intrastate and interstate banks based solely on their Ohio business activity. The court rejected the bank’s arguments and requests for statutory modification, concluding that the tax scheme was constitutional and affirming the decision of the Board of Tax Appeals. View "Dollar Bank, FSB v. Harris" on Justia Law