Justia Tax Law Opinion Summaries

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Plaintiff filed suit against Fresno Unified and the Contractor, alleging that they violated California's competitive bidding requirements, the statutory and common law rules governing conflicts of interest, and Education Code sections 17406 and 17417. Based on the Court of Appeal's review of the four corners of the construction agreements and resolution of Fresno Unified’s board, the court concluded that plaintiff properly alleged three grounds for why Education Code section 17406's exception to competitive bidding did not apply to the purported lease-leaseback contracts. The court also concluded that California's statutory and common law rules governing conflicts of interest extended to corporate consultants and plaintiff alleged facts showing Contractor participated in creating the terms and specifications of the purported lease-leaseback contracts and then became a party to those contracts. After remand, the further proceedings included defendants' motion for judgment on the pleadings, which argued the lawsuit had become moot because the construction was finished and the contracts terminated. The trial court agreed.The Court of Appeal reversed, holding that defendants and the trial court erroneously interpreted plaintiff's lawsuit as exclusively an in rem reverse validation action. Rather, plaintiff is pursuing both a validation action and a taxpayer action. In this case, plaintiff asserts violations of California's competitive bidding laws and Education Code sections 17406 and 17417 along with conflicts of interest prohibited by Government Code section 1090 and common law principles. The remedy of disgorgement is available under these counts asserted in plaintiff's taxpayer's action even though the Construction Contracts are fully performed. Therefore, the counts in plaintiff's taxpayer's action seeking disgorgement are not moot. The panel remanded for further proceedings. View "Davis v. Fresno Unified School District" on Justia Law

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The Supreme Court affirmed the decision of the Administrative Hearing Commission (AHC) determining that SEBA, LLC was liable for unpaid state sales tax, statutory interest, and a five percent addition to tax owed as assessed by the director of revenue, holding that the AHC's decision was supported by substantial and competent evidence on the record.The AHC determined that SEBA was liable for unpaid sales tax in the amount of $38,540, minus the sales tax assessed on $26,567 in income generated from SEBA's exempt sales to three organizations the auditor initially included. The AHC found SEBA liable for five percent statutory interest because it was was negligent in reporting its taxable sales. The Supreme Court affirmed, holding that substantial and competent evidence supported the AHC's decision. View "SEBA, LLC v. Director of Revenue" on Justia Law

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In 2011, Folajtar pled guilty to a federal felony: willfully making a materially false statement on her tax returns, which is punishable by up to three years’ imprisonment and a fine of up to $100,000, 26 U.S.C. 7206(1). She was sentenced to three years’ probation, including three months of home confinement, a $10,000 fine, and a $100 assessment. She also paid the IRS over $250,000 in back taxes, penalties, and interest. Folajtar was then subject to 18 U.S.C. 922(g)(1), which prohibits those convicted of a crime punishable by more than one year in prison from possessing firearms.Folajtar sued, asserting that applying section 922(g)(1) to her violated her Second Amendment right to possess firearms. The district court dismissed, finding that Folajtar did not state a plausible Second Amendment claim because she was convicted of a serious crime. The Third Circuit affirmed, noting the general rule that laws restricting firearm possession by convicted felons are valid. There is no reason to deviate from this long-standing prohibition in the context of tax fraud. View "Folajtar v. Attorney General of the United States" on Justia Law

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Proposition 218, the Right to Vote on Taxes Act, generally required local governments obtain voter approval prior to imposing taxes. Plaintiffs Jess Willard Mahon, Jr. and Allan Randall brought this certified class action against the City of San Diego (City) claiming that the City violated Proposition 218 by imposing an illegal tax to fund the City’s undergrounding program. Specifically, plaintiffs contended the City violated Proposition 218 through the adoption of an ordinance that amended a franchise agreement between the City and the San Diego Gas & Electric Company (SDG&E). The ordinance, together with a related memorandum of understanding, further specifies that part of the money to fund the undergrounding budget will be collected by SDG&E through a 3.53 percent surcharge on ratepayers in the City that will be remitted to the City for use on undergrounding (Undergrounding Surcharge). Plaintiffs claim that the surcharge is a tax. Plaintiffs further claim that the surcharge violates Proposition 218 because it was never approved by the electorate. Plaintiffs note that the City has imposed more than 200 million dollars in charges pursuant to the Undergrounding Surcharge during the class period. Through this action, plaintiffs seek a refund of those amounts, among other forms of relief. The City moved for summary judgment, which the trial court granted on two grounds: (1) the Undergrounding Surcharge constituted compensation for franchise rights and thus was not a tax; alternatively, (2) the Undergrounding Surcharge was a valid regulatory fee and not a tax. After review, the Court of Appeal concluded the trial court properly granted the City’s motion for summary on the ground that the Undergrounding Surcharge was compensation validly given in exchange for franchise rights and thus, was not a tax subject to voter approval. View "Mahon v. City of San Diego" on Justia Law

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In this tax appeal, the Supreme Court affirmed in part and reversed in part the final order of the circuit court determining that certain purchases of tangible personal property and services made by Antero Resources Corporation did not qualify for the direct use exemption under W. Va. Code 9(b)(2) and 11-15A-3(a)(2) (the direct use exemption), holding that Antero was entitled to the direct use exemption for certain purchases and services.The office of tax appeals reimposed a sale and use tax assessment against Antero for purchases and rentals of certain personal property and services. The circuit court reversed, determining that because certain purchases of tangible personal property and services made by Antero were not directly used in its natural resource production, they did not qualify for the direct use exemption. The Supreme Court reversed in part, holding that Antero (1) was entitled to the direct use exemption for crew quarters and related equipment, portable toils, sewage systems, related water systems, and septic cleaning charges; and (2) was not entitled to the exemption for the rentals of trash trailers and waste receptacles. View "Antero Resources Corp. v. Steager" on Justia Law

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The Ninth Circuit reversed the district court's determination that Shaun Allahyari's alleged security interest in property owned by his son, Komron Allahyari, a tax delinquent, was not entitled to priority over later-recorded federal tax liens. First, the panel concluded that the district court erred: (1) by holding that the deed of trust between Shaun and Komron recorded on July 26, 2005 was not entitled to priority over the later-recorded federal tax liens under local law; the 2005 Deed of Trust is protected under Washington law; and (2) by failing to consider whether past consideration is sufficient to support an agreement giving rise to a security interest under Washington law.The panel also concluded that the district court applied the incorrect standard of proof to its finding under Washington's Fraudulent Transfer Act. Finally, the panel concluded that, because 26 U.S.C. 7403(a) authorizes the United States to "subject any property, of whatever nature, of the delinquent, or in which [the delinquent] has any right, title, or interest, to the payment of such tax or liability," the United States may assert any affirmative defenses that would be available to the delinquent—including that the statute of limitations has run on payments due to senior liens. Accordingly, the panel reversed and remanded for reconsideration. View "United States v. Allahyari" on Justia Law

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Appellants, a medical doctor and the subchapter S Corporation for which he works, filed suit against the IRS due to penalties it assessed against them for their failure to inform the IRS about questionable deductions the Corporation took for contributions it made for life insurance benefits. The district court granted summary judgment to the IRS.The Eleventh Circuit affirmed the district court's decision determining that the IRS was correct to issue penalties based on the ground that appellants did not file the required notice. In this case, the multi-employer welfare benefit plan is at least substantially similar to the type of plans that the IRS has indicated do not qualify for the exemption from IRC 419 and the corresponding IRC 419A(f)(6) deduction. Therefore, the district court correctly decided to grant summary judgment to the IRS. View "Turnham v. Commissioner" on Justia Law

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The Supreme Court affirmed the decision of the court of appeals affirming the district court's grant of summary judgment to Respondent on Appellant's adverse possession claim, holding that a claim of adverse possession to a portion of a separately assessed parcel requires the adverse claimant to pay taxes for at least five consecutive years unless a statutory exemption under Minn. Stat. 541.02 paragraph 3 applies.Appellant asserted adverse possession over a portion of two separately assessed parcels owned by Respondent. The district court ruled against Appellant's claim for both parcels. The court of appeals affirmed the court's grant of summary judgment to Defendant on Appellant's adverse possession claim for the west parcel but reversed the grant of summary judgment to Respondent as to the east parcel on the grounds that the percentage claimed did not trigger the tax payment requirement in section 541.02. Appellant appealed the court of appeals' decision that his adverse possession claim to fifty-two percent of the west parcel failed, arguing that the statute requires tax payment only for a claim to an entire separately assessed parcel. The Supreme Court affirmed, holding that the plain language of section 541.02 requires tax payment on a portion of a parcel. View "St. Paul Park Refining Co. LLC v. Domeier" on Justia Law

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This appeal arose from a consolidated cases filed by plaintiff Northern New England Telephone Operations, LLC d/b/a FairPoint Communications-NNE (FairPoint), against several New Hampshire towns and cities, asserting claims of ultra vires taxation and disproportionate taxation. As “representative municipalities” in the “test cases” established for this litigation, defendants, the Town of Durham and the Town of Hanover (Towns), appealed two superior court orders challenging: (1) the grant of summary judgment on the ultra vires ruling because they contended the agreements authorizing such use or occupation did not satisfy the requirements of RSA 72:23, I(b) (2012) (amended 2017, 2018, 2020); and (2) the superior court’s decision after trial, arguing that the court committed several errors in concluding that FairPoint was entitled to abatements of its tax assessments from the Town of Durham and the Town of Hanover for tax years 2013 and 2011 respectively. The New Hampshire Supreme Court agreed with the Towns that the superior court erred with respect to the tax on the value of FairPoint's use or occupation of municipal rights-of-way was ultra vires. FairPoint’s use or occupation of municipal rights-of-way was not pursuant to a perpetual lease that gave rise to an independently taxable property interest; FairPoint met its burden to prove it was taxed disproportionately by the Towns. Judgment was affirmed in part, reversed in part and consequently abating the two tax assessments at issue. View "Northern New England Telephone Operations, LLC d/b/a FairPoint Communications - NNE v. Town of Acworth" on Justia Law

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The Eleventh Circuit affirmed the district court's grant of summary judgment in favor of TriNet in an action brought by TriNet, as the successor-in-interest of Gevity, a professional employer organization (PEO). Gevity claimed tax credits from 2004 to 2009 based on its payment of FICA taxes on the tip income of its client companies' employees. The IRS asserts that such credits were not allowed because Gevity was not the "employer" entitled to claim the credits as that term is defined in 26 U.S.C. 3401(d). The court concluded that, under the statutes applicable to the period at issue, Gevity was the statutory employer entitled to claim the FICA tip credit because it—not its client companies—controlled the payment of the wages subject to withholding. View "TriNet Group, Inc. v. United States" on Justia Law