Justia Tax Law Opinion Summaries

Between 2011 and 2017, the Internal Revenue Service sought to collect unpaid taxes from an individual and his business. The individual was indicted on two counts of tax evasion. The indictments alleged that, among other acts, he attempted to evade the collection of taxes by using a bank account that was not disclosed to the IRS, and specifically by submitting financial disclosure forms that omitted these accounts when disclosure was required.The case was first heard in the United States District Court for the Middle District of Pennsylvania. The defendant moved to dismiss the indictments, arguing that the government had not alleged or proven an affirmative act of evasion within the applicable six-year statute of limitations. The District Court denied these motions. At trial, the government presented evidence that the defendant had knowingly failed to disclose certain bank accounts on forms submitted to the IRS within the limitations period. After the government’s case, the defendant’s motion for judgment of acquittal was denied. The jury found him guilty on both counts.On appeal, the United States Court of Appeals for the Third Circuit reviewed the District Court’s denials. The Third Circuit held that intentionally filing forms with the IRS that omitted required disclosure of bank accounts constitutes an affirmative act of tax evasion under 26 U.S.C. § 7201. The court found that the indictments, together with the bill of particulars, sufficiently identified this conduct within the statute of limitations. It also held that there was sufficient evidence for a rational jury to find guilt beyond a reasonable doubt. The Third Circuit affirmed the judgment of the District Court. View "USA v. Aumiller" on Justia Law

Caroline H. Walsh passed away in January 2012, and her son, John H. Walsh, was appointed executor of her estate. He was responsible for filing the Massachusetts estate tax return and paying the taxes by October 2012. Walsh hired an accountant who died unexpectedly, then worked with two other accountants over several years, but delays persisted due to Walsh’s failure to provide necessary documents and dissatisfaction with property appraisals. Ultimately, the estate tax return was filed nearly seven years late, along with the tax owed and a request for abatement of interest and penalties. No extension to file or pay had ever been requested.The Commissioner of Revenue assessed over $145,000 in interest and $112,327.10 in penalties for late filing and late payment. The estate’s abatement request was denied, and it appealed to the Massachusetts Appellate Tax Board. After a hearing, the Board found that Walsh did not demonstrate reasonable cause for the delays, citing evidence that Walsh had failed to provide requested information and noting the absence of credible justification for the late filing. The Board affirmed the Commissioner’s decision.The Supreme Judicial Court of Massachusetts reviewed the appeal, addressing constitutional and statutory arguments. The Court held that the interest assessed was remedial, not punitive, and thus not a “fine” under the excessive fines clauses of the Eighth Amendment or Article 26. Even assuming the penalties were fines, the Court found they were not grossly disproportional to the offense. The Court also rejected claims that the Board’s structure violated separation of powers or that a jury trial was required. Finally, it held that statutory caps on penalties did not limit the accrual of interest. The Court affirmed the Board’s decision. View "Estate of Walsh v. Commissioner of Revenue" on Justia Law

A corporation operating casinos in multiple states deducted both apportioned state income taxes and unapportioned wagering excise taxes on its federal tax returns. For Indiana tax years 2015–2017, it added back to its Indiana adjusted gross income the deduction for state-level apportioned net income taxes, as required by Indiana law, but did not add back approximately $2 billion in unapportioned wagering taxes paid to other states. The Indiana Department of State Revenue audited the corporation and determined it should also add back these wagering taxes, resulting in an additional tax assessment of nearly $8.75 million. The corporation protested, arguing the statute only required add-back of apportioned income taxes, not unapportioned excise taxes.The Indiana Department sustained the protest as to penalties but not as to the tax and interest, leading the corporation to appeal to the Indiana Tax Court. Both parties moved for summary judgment. The Indiana Tax Court granted summary judgment to the Department, holding that precedent required the addition of wagering taxes to the tax base under both state and federal law.Upon review, the Indiana Supreme Court considered whether Indiana Code section 6-3-1-3.5(b)(3) required the corporation to add back unapportioned wagering excise taxes. The Court held that the statute only requires add-back of direct income taxes and their functional equivalents—taxes subject to apportionment requirements under the federal constitution. It does not cover unapportioned excise taxes, such as the wagering taxes at issue, because they are not income taxes nor their functional equivalents. The Indiana Supreme Court reversed the Tax Court’s judgment and remanded for entry of summary judgment in favor of the corporation. View "PENN Entertainment, Inc. v. Department Of State Revenue" on Justia Law

The case centers on a charge imposed by a local water district in Tehama County, California. In 2022, the district adopted a resolution requiring all landowners in the county to pay an annual “well registration charge” of $0.29 per acre for three years, regardless of whether their property used groundwater or had a well. The stated purpose was to fund the administrative costs of a groundwater well registration program. The district later adopted additional resolutions to implement waivers for certain parcels and continued collecting the charge for noncompliant parcels. David Garst, trustee of a trust owning 40 parcels in the county, paid the charge and subsequently challenged its validity, arguing it violated California constitutional provisions adopted by Propositions 218 and 26.The Superior Court of Tehama County reviewed the case and conducted a bench trial. The court found that the district acted in good faith and imposed the charge for a legitimate purpose, but concluded the charge was not related to any specific government service or benefit provided to the landowners. The court determined the well registration charge amounted to a tax rather than a regulatory fee. The trial court issued a writ of mandate directing the district to rescind the charge, refund all collected sums, and cease further collection.The California Court of Appeal, Third Appellate District, reviewed the district’s appeal. The appellate court affirmed the trial court’s judgment as modified, holding that the well registration charge was an unconstitutional tax under Article XIII C of the California Constitution because it was imposed broadly without a nexus to regulated activity or specific government service. The court struck the provision requiring the district to refund the charge, finding Garst had not complied with the procedural requirements of the Government Claims Act. The remainder of the trial court’s judgment was affirmed. View "Garst v. Tehama County Flood Control & Wat. Conservation Dist." on Justia Law

Several related corporate taxpayers engaged in transactions that the Internal Revenue Service determined were tax shelter schemes intended to avoid federal taxes. After audits, the IRS found that each taxpayer owed substantial deficiencies, penalties, and interest. The United States Tax Court previously adjudicated the liabilities for all six taxpayers, either through contested proceedings or stipulated decisions, and those determinations are now final and not at issue in this appeal. When the IRS sought to collect the assessed amounts by filing tax liens and issuing notices of intent to levy, each taxpayer requested a collection due process (CDP) hearing with the IRS Appeals Office, as provided by statute.At each CDP hearing, the Appeals Officer sustained the IRS’s liens and proposed levies, indicating that all necessary legal and procedural requirements had been met. The taxpayers challenged these determinations in the Tax Court, arguing that the Appeals Officer failed to verify that the penalties had received written supervisory approval as required by 26 U.S.C. § 6751(b)(1). The Tax Court, following its decision in Warner Enterprises, Inc. v. Commissioner, held that when penalties had already been conclusively determined in prior proceedings, the Appeals Officer was not required to verify compliance with the supervisory approval requirement during the CDP process, and granted summary judgment for the Commissioner.On appeal, the United States Court of Appeals for the Second Circuit held that the verification obligation imposed by 26 U.S.C. § 6330(c)(1) on Appeals Officers in CDP hearings includes the requirement to verify written supervisory approval for penalties under § 6751(b)(1), regardless of whether the penalties were previously adjudicated. The court concluded that failure to perform this verification invalidates the Appeals Officer’s determination that the liens and proposed levies were proper, although it does not affect the underlying tax liabilities or penalties themselves. The Second Circuit reversed the Tax Court’s orders on this issue and remanded for further proceedings. View "Besicorp v. Commissioner of Internal Revenue" on Justia Law

A roughly 600-space parking garage on the Scioto Peninsula in Columbus was owned by RiverSouth Authority, which is a “new community authority” and a “body corporate and politic.” RiverSouth owned the garage, which sat on city-owned land, and leased it to the City of Columbus under a long-term ground lease. The city then entered into a management agreement with Capitol South, a private nonprofit entity, to manage and operate the garage. Capitol South, in turn, hired LAZ Parking Midwest, a private for-profit operator, to handle day-to-day operations. The agreements required Capitol South to operate the garage in a manner consistent with city obligations, with many operational decisions ultimately subject to city oversight.The Ohio Tax Commissioner denied RiverSouth’s request for a real property tax exemption, concluding that the garage was not entitled to exemption because it was managed by a private, for-profit entity, LAZ. RiverSouth appealed to the Ohio Board of Tax Appeals, which affirmed the denial, but for a different reason: the Board found the garage was under the direction and control of Capitol South, the nonprofit manager, rather than the city. This basis for denial was raised by the Board on its own initiative, without prior notice to the parties.On further appeal, the Supreme Court of Ohio held that the Board of Tax Appeals erred by affirming the Tax Commissioner’s decision based on a new issue not raised below and without following statutory remand procedures. The Court further held that the city’s use of a management company to operate the garage did not deprive the city of direction or control over the property for exemption purposes. The decision of the Board of Tax Appeals was vacated, and the case was remanded to the Tax Commissioner to grant the exemption and calculate the appropriate refund. View "RiverSouth Auth. v. Harris" on Justia Law

This case involves a dispute regarding the proper method for appraising three commercial condominium units in Kalispell, Montana, owned by the estate of Maxine O’Brien and the Hash Family Trust. The central issue was whether the Montana Department of Revenue (MDOR) should use the income approach or the cost approach to value the units for the 2023/24 tax cycle. O’Brien provided detailed income information from the subject property and a nearly identical adjacent property, contending this information was sufficient to mandate the income approach under Montana law. MDOR instead used the cost approach, arguing that the available data was insufficient for an income-based valuation, particularly due to limitations in its mass-appraisal data pool.After O’Brien condominiumized the property in 2021, MDOR switched from the income approach to the cost approach for the 2023/24 appraisal. CTAB accepted O’Brien’s income-based valuation and found that the basements of the units were not separately rentable and their value was reflected in the overall rents. MDOR appealed CTAB’s ruling to the Montana Tax Appeal Board (MTAB), which reversed CTAB, concluding that MDOR lacked sufficient income information and was justified in using the cost approach. O’Brien then sought judicial review in the Montana Eleventh Judicial District Court, which affirmed MTAB’s decision.The Supreme Court of Montana reviewed the case and held that MTAB erred by misinterpreting the statutory standard for sufficient, relevant income information. The Court found that O’Brien had provided adequate income information, triggering the requirement for MDOR to use the income approach. The Court reversed MTAB’s February 2025 merits decisions and reinstated CTAB’s April 2024 decisions, ordering MDOR to appraise the units using O’Brien’s income-approach valuations. View "O'Brien v. MT Dept. of Revenue" on Justia Law

The decedent in this case maintained residences in Connecticut, Arizona, and Florida, dividing his time among them. After his death, his estate’s executor filed a Connecticut domicile declaration, which triggered an audit by the Department of Revenue Services. The audit division, weighing several factors, determined the decedent was domiciled in Connecticut, making his estate subject to Connecticut estate tax. The commissioner’s appellate division affirmed this determination, and the executor appealed to the Superior Court, arguing the decedent was a Florida domiciliary and raising claims of procedural due process violations during the audit process.Upon de novo review, the Superior Court heard testimony and admitted numerous exhibits regarding the decedent’s personal, social, and property ties to Connecticut and Florida. The court found these connections to be generally equal but concluded that the executor failed to show by clear and convincing evidence that the decedent was not a Connecticut domiciliary. Thus, it upheld the tax assessment. The court also rejected the executor’s claim of procedural due process violations, holding that any such errors were cured by subsequent review and the de novo trial.The Connecticut Supreme Court reviewed the case and held that, under General Statutes § 12-391 (h) (1), the proper standard for an estate challenging a domicile determination in an estate tax appeal is the preponderance of the evidence, not clear and convincing evidence. The court concluded that the Superior Court erred by applying the higher standard, reversed the judgment upholding the commissioner’s assessment, and remanded for a new trial limited to the issue of domicile under the correct standard. The Supreme Court affirmed the trial court’s rejection of the procedural due process claim, finding that the de novo review cured any procedural deficiencies. View "Daniels v. Commissioner of Revenue Services" on Justia Law

The appellant submitted a whistleblower application to the Internal Revenue Service (IRS) alleging that two taxpayers had underpaid taxes from 2004 to 2012 and requested that the IRS also consider similar conduct for 2013 through 2017 when determining any award. The IRS had already begun investigating much of the reported conduct and ultimately collected proceeds from the taxpayers. However, the IRS’s Whistleblower Office denied the claim, reasoning that the information provided was either previously known or “tainted”—meaning it was unlawfully obtained or privileged—and asserted it did not rely on this information when auditing the later years.After receiving this denial, the appellant sought review in the United States Tax Court. The appellant requested to supplement the administrative record or conduct discovery regarding the audits for 2013 through 2017, arguing that the record did not adequately show whether her information was used. The Tax Court denied these requests, citing procedural deficiencies in how discovery was sought, and granted summary judgment to the IRS, finding the administrative record sufficient to support the IRS’s determination.The United States Court of Appeals for the District of Columbia Circuit reviewed the case. The court held that the IRS’s rationale for denying the whistleblower award for tax years 2013 through 2017 was not supported by the administrative record, which was largely silent regarding those years. The court concluded that the IRS’s decision was arbitrary and capricious because it did not reasonably investigate or explain whether the whistleblower’s application contributed to the audits for those years. The court reversed the Tax Court’s decision and remanded the case for further proceedings consistent with its opinion. View "Trongone v. Cmsnr. IRS" on Justia Law

A Virginia-based partnership owned a property in the District of Columbia. In 2002, this partnership and a limited liability company (LLC), both related entities, executed a merger under Virginia law, with the LLC surviving and acquiring the property. The merger documents referenced Virginia statutes governing mergers, and the transaction resulted in the property being transferred from the partnership to the LLC. No deed was recorded at the time, and no recordation or transfer taxes were paid.In 2019, when the LLC sought to sell the property, it attempted to record a deed reflecting the 2002 transfer as a no-consideration event, claiming the transaction was a non-taxable conversion rather than a taxable merger. The Recorder of Deeds (ROD) determined the 2002 transaction was a merger, requiring payment of recordation and transfer taxes based on the property’s 2019 fair market value, since no consideration was paid. LHL, the taxpayer, paid the taxes under protest and pursued an administrative refund, which was denied. The taxpayer then challenged the decision in the Superior Court of the District of Columbia.The Superior Court granted summary judgment to the District, finding the transfer was a taxable merger, not a conversion, and upholding the calculation of taxes based on the 2019 value. The District of Columbia Court of Appeals reviewed the case de novo and affirmed the Superior Court’s judgment. The appellate court held that the 2002 transaction was a merger between two distinct entities, making the property transfer taxable, and that taxes on no- or nominal-consideration transfers are properly based on the property’s fair market value at the time of recordation. The court also upheld the trial court’s finding of excusable neglect regarding the District’s untimely filing of its answer. View "LHL Realty Company DC LLC v. District of Columbia" on Justia Law