Justia Tax Law Opinion Summaries

Esplanade Properties Corporation, a subsidiary of R.H. Macy & Co., owned the Macy’s Parcel in Kenner, Louisiana. In 1992, while Esplanade Properties was under bankruptcy protection and subject to an automatic stay, Jefferson Parish assessed ad valorem taxes for that year. In 1993, the Sheriff conducted a tax sale for nonpayment of those taxes, but the sale was later nullified because it occurred during the bankruptcy stay. For nearly two decades, the Parish took no action to collect the 1992 taxes. After subsequent transfers, the property was acquired by Esplanade Mall Realty Holding, LLC, which in 2018 received notice of a large sum due for past taxes, including the 1992 taxes, interest, and costs. The company disputed the collectibility of the old taxes, citing a statutory three-year limitation on tax sales.The 24th Judicial District Court initially dismissed the suit on procedural grounds, and the Louisiana Fifth Circuit Court of Appeal affirmed. The Louisiana Supreme Court reversed and remanded. While proceedings continued, the property was sold to Pacifica Kenner, LLC, which was substituted as plaintiff. The trial court ultimately ruled that La. R.S. 47:2131—which prohibits tax sales for taxes more than three years overdue—was unconstitutional because it conflicted with Louisiana constitutional provisions regarding tax collection and prescription. The trial court denied declaratory relief to the plaintiff.The Supreme Court of Louisiana reviewed the case and chose to avoid the constitutional issue, finding it unnecessary to resolve the dispute. Interpreting the relevant statutes, the court concluded that the Sheriff was required to include all statutory impositions, including the 1992 taxes, interest, and costs, in the 2020 tax sale price. The court held that the redemption price for the property must likewise include these amounts. The judgment was reversed, rendered, and remanded to the trial court to calculate the redemption price consistent with this interpretation. View "ESPLANADE MALL REALTY HOLDINGS, LLC VS. LOPINTO" on Justia Law

A company operating an industrial healthcare textile laundry facility in Arizona rents reusable healthcare textiles such as bedsheets, gowns, and scrubs to medical institutions. The facility processes approximately 30 million pounds of textiles annually, which must be laundered and disinfected to remove contaminants before they can be used or reused in healthcare settings. The laundering process involves specialized machinery and chemicals under regulatory oversight. Between 2014 and 2018, the company purchased equipment and chemicals for its operation, paid state and city use taxes, and later sought a refund under a statutory exemption for machinery or equipment used in “processing operations.”The Arizona Department of Revenue partially denied the refund claim. The company appealed to the Arizona Tax Court, arguing that its laundry process qualified as a “processing operation” for the use tax exemption. The Tax Court ruled against the company, finding that its business as a whole did not meet the statutory definition. On further appeal, the Arizona Court of Appeals affirmed, concluding that the company’s operations did not constitute “processing” because the business primarily rented and reprocessed textiles, rather than preparing raw materials for market.The Supreme Court of the State of Arizona reviewed the case. It held that the statutory “processing operation” exemption applies to machinery or equipment used to change the marketability of a product, not limited to operations involving raw materials or defined by the business’s downstream transactions, such as sales versus rentals. The court concluded that the company’s textile laundering and disinfecting process qualifies as a “processing operation” since it transforms the textiles into a marketable form. The Supreme Court vacated the Court of Appeals’ decision, reversed the Tax Court’s summary judgment, and remanded the matter for further proceedings. View "9W HALO v ADOR" on Justia Law

The case involves an individual who was assessed $50,000 in penalties by the Commissioner of Internal Revenue for failing to report control of a foreign business during the tax years 2005 through 2009, as required by section 6038 of the Internal Revenue Code. The penalties were $10,000 for each year of the alleged reporting violation. When the individual did not pay, the IRS filed a notice of federal tax lien, which the taxpayer challenged through a Collection Due Process hearing before the IRS Independent Office of Appeals. After that challenge was unsuccessful, the taxpayer petitioned the United States Tax Court for relief.The United States Tax Court granted summary judgment in favor of the taxpayer. The Tax Court concluded that Congress had not granted the Commissioner statutory authority to collect the section 6038(b) penalty through administrative assessment, which is the process the IRS typically uses to record tax liabilities and activate collection powers such as liens and levies. The Tax Court ruled that, instead, the Commissioner would have to bring a lawsuit in federal district court to collect this penalty.The United States Court of Appeals for the Second Circuit reviewed the case on appeal. The Second Circuit disagreed with the Tax Court’s interpretation and held that the Commissioner does have authority to assess penalties under section 6038(b) through the administrative process. The appellate court found that the history, purpose, and structure of the statute support the conclusion that the penalty is assessable, and that requiring the Commissioner to proceed only through district court would complicate and frustrate congressional intent. Accordingly, the Second Circuit vacated the Tax Court’s judgment and remanded the case for further proceedings consistent with its opinion. View "Safdieh v. Comm'r" on Justia Law

A group of organizations challenged the Internal Revenue Service (IRS) policy permitting the sharing of taxpayer address information with the Department of Homeland Security (DHS) for immigration enforcement. The plaintiffs initiated suit after reports that Immigration and Customs Enforcement (ICE) was seeking addresses from the IRS to locate undocumented immigrants. The IRS and DHS subsequently formalized an agreement (Memorandum of Understanding, or MOU) specifying procedures for ICE to request taxpayer addresses from the IRS for use in nontax criminal investigations, provided statutory requirements were met.The case was first heard in the United States District Court for the District of Columbia. After denying a temporary restraining order, the District Court denied the plaintiffs’ motion for a preliminary injunction. The District Court found that at least one plaintiff had standing and concluded the plaintiffs were unlikely to succeed on their claims. Specifically, the court found that 26 U.S.C. § 6103(i)(2) unambiguously allowed the IRS to disclose address information in response to valid requests, and that the IRS’s prior internal guidelines to the contrary did not have the force of law. The court also determined that the MOU was a nonbinding policy statement, not a final agency action subject to judicial review under the Administrative Procedure Act (APA).On appeal, the United States Court of Appeals for the District of Columbia Circuit affirmed the District Court’s denial of preliminary injunction. The appellate court held that the plaintiffs likely had standing, but were unlikely to succeed on the merits. The court ruled that § 6103(i)(2) clearly authorizes the IRS to disclose taxpayer address information, and that the MOU was not a reviewable agency action. It further held that any challenge to the agency’s change of interpretation was not viable because the court’s interpretation of the statute controls. The judgment of the District Court was affirmed. View "Centro de Trabajadores Unidos v. Bessent" on Justia Law

Several organizations and individuals petitioned to prevent the Idaho State Tax Commission from implementing a newly enacted parental choice tax credit. This tax credit, established in 2025, provides refundable credits to parents, guardians, and foster parents for certain private educational expenses, including private school tuition and related services, for dependent students not enrolled in public schools. The law caps total annual credits and includes prioritization based on income and previous participation. The petitioners, including advocacy groups, a school district, and parents, argued that the statute creates a separate, non-public education system funded by public resources, allegedly violating the Idaho Constitution’s mandate for a single, general, uniform, and thorough system of public schools. They also claimed the statute failed the “public purpose doctrine,” asserting it primarily benefits private rather than public interests.Before the Idaho Supreme Court, the petitioners sought a writ of prohibition, which would prevent the Tax Commission from carrying out the law. The respondents, including the State and the Idaho Legislature, contested the petitioners’ standing and the merits of the constitutional claims. The Supreme Court determined that the petitioners lacked traditional standing but, given the urgency and importance of the constitutional question and the absence of another suitable challenger, relaxed standing requirements to address the merits.The Supreme Court of Idaho denied the petition. It held that Article IX, section 1 of the Idaho Constitution does not restrict the legislature from enacting educational measures beyond the required public school system, so long as the public system remains intact and constitutionally sufficient. The Court also found that the tax credit serves a legitimate public purpose—supporting parental choice in education—even if private entities benefit. The petition was dismissed, and the Tax Commission was awarded attorney fees and costs. View "Committee to Protect and Preserve v. State" on Justia Law

A municipal tax collector initiated a bank execution action against an individual to collect unpaid personal property taxes owed by a business with which the individual was previously associated. The individual had moved to California years earlier and claimed that she never received notice of the tax debt or an opportunity to contest it, despite providing her new address to the tax collector. Previous bank executions had been initiated, but the individual continued to assert lack of notice. In the 2021 action, the trial court found that the tax collector failed to comply with statutory notice requirements and that the individual had not been afforded due process, leading the court to grant her exemption from the execution.Following the 2021 judgment, the tax collector withdrew its appeal and attempted a new bank execution after sending written demand to the individual's California address, but did not provide a new tax bill or opportunity to challenge it. The individual again moved for exemption. The Superior Court concluded that the new execution was a collateral attack on the previous judgment and was barred by doctrines of res judicata and collateral estoppel. The Appellate Court affirmed, finding that the issue of notice and opportunity to challenge the tax debt had been actually litigated and necessarily determined in the prior action.Upon review, the Connecticut Supreme Court held that collateral estoppel barred the municipal tax collector from relitigating whether it could execute on the individual's funds without first providing adequate notice and an opportunity to challenge the underlying tax debt. The Court determined that both independent, alternative grounds supporting the earlier judgment were entitled to preclusive effect and declined to create a public policy exception for municipal tax collection actions. The Supreme Court affirmed the judgment of the Appellate Court. View "Torrington Tax Collector, LLC v. Riley" on Justia Law

The City of Lakewood, Colorado enacted a business and occupation tax on certain telecommunications providers in 1969, which initially applied only to utility companies maintaining a telephone exchange and supplying local service within the city. Following changes in state and federal law promoting competitive neutrality and prohibiting barriers to entry, the city amended its tax ordinances in 1996 and again in 2015. The 1996 amendment expanded the tax to cover all providers of basic local telecommunications service, including some cellular services, while the 2015 amendment further broadened the scope to include all cellular and wireless voice service providers. Lakewood did not seek voter approval before enacting either amendment.After Lakewood audited MetroPCS California, LLC and assessed more than $1.6 million in unpaid business and occupation taxes, MetroPCS sued in the Jefferson County District Court. The district court granted summary judgment to MetroPCS, ruling that both the 1996 and 2015 Ordinances constituted "new taxes" under Colorado's Taxpayer's Bill of Rights (TABOR), and thus required advance voter approval. The court found the ordinances expanded the tax to previously untaxed providers and services, generating revenue that was not merely incidental or de minimis. Lakewood’s arguments that the ordinances simply clarified or updated the existing tax and did not produce significant new revenue were rejected. The district court declared both ordinances void and unenforceable for lack of voter approval.The Supreme Court of Colorado reviewed the case directly. Applying de novo review, it affirmed the district court’s judgment. The Court held that both the 1996 and 2015 Ordinances imposed new taxes within the meaning of TABOR, as they expanded the tax base to include new classes of providers and services, and the resulting revenue increases were not incidental. Because Lakewood failed to obtain voter approval prior to enacting these ordinances, both were held void and unenforceable. The Court remanded the case for consideration of MetroPCS’s request for appellate fees and costs. View "MetroPCS Cal., LLC v. City of Lakewood" on Justia Law

Several subsidiaries of a major entertainment company providing video streaming services were notified by the City of Santa Barbara that they owed significant sums in unpaid video users’ taxes, penalties, and interest for the period from 2018 to 2020. The City’s demand was based on a 2008 ordinance, approved by local voters, which imposed a tax on those using “video services” in the city. The ordinance defined “video services” broadly, including services delivered by Internet Protocol. The companies argued that their streaming services did not fall under the ordinance because streaming platforms do not provide a “channel” as contemplated by the ordinance, instead relying on customers’ independently obtained Internet services.Following the City’s deficiency notice, the companies appealed administratively. An independent hearing officer upheld the City’s position, concluding that the ordinance applied to video streaming. The companies then sought judicial review in the Superior Court of Santa Barbara County by filing a petition for a writ of administrative mandate. The trial court denied their petition, determining that the ordinance was intended to apply to streaming, that its enforcement did not violate federal or state law, and that the City was not required to provide additional notice before enforcement.On appeal, the California Court of Appeal, Second Appellate District, Division Six, affirmed the lower court’s judgment. The appellate court held that the ordinance, as approved by the electorate, applies to providers of video streaming services and that the ordinary, non-technical meaning of “channel” should govern. The court further held that applying the tax to streaming services does not violate the Internet Tax Freedom Act, the First Amendment, or the California Constitution, nor did the City’s delayed enforcement require additional voter approval or special notice under state law. The judgment denying the companies’ petition was affirmed. View "Disney Platform Distribution, Inc. v. City of Santa Barbara" on Justia Law

Sirius Solutions, L.L.L.P. is a limited liability limited partnership organized under Delaware law, operating as a business-consulting firm. The partnership consisted of both limited partners and a general partner, Sirius Solutions GP, L.L.C. For the tax years 2014, 2015, and 2016, Sirius reported all ordinary business income as allocated to its limited partners and excluded those distributive shares from net earnings from self-employment, claiming an exemption under 26 U.S.C. § 1402(a)(13) for limited partners. This resulted in Sirius reporting zero net earnings from self-employment in each year.The Internal Revenue Service audited Sirius’s returns and, through Notices of Final Partnership Administrative Adjustment, determined that Sirius’s limited partners did not qualify as “limited partners” for purposes of the statutory exception. Therefore, the IRS reclassified the distributive shares of income as subject to self-employment tax, substantially increasing Sirius’s net earnings from self-employment for the years at issue. Sirius petitioned the United States Tax Court for readjustment, and the cases for all three years were consolidated. The Tax Court, relying on its decision in Soroban Capital Partners LP v. Commissioner, 161 T.C. 310 (2023), held that only passive investors qualify as “limited partners” under § 1402(a)(13), and thus upheld the IRS’s adjustments.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the meaning of “limited partner” under § 1402(a)(13). The Fifth Circuit held that a “limited partner” is a partner in a state-law limited partnership who has limited liability, rejecting the narrower “passive investor” test applied by the Tax Court and IRS. The Fifth Circuit vacated the Tax Court’s decision and remanded for further proceedings, instructing that the distributive shares of limited partners with limited liability should be excluded from self-employment earnings for tax purposes. View "Sirius Solutions v. Commissioner of Internal Revenue" on Justia Law

Jones Apparel, a company that designs and sells apparel, shoes, and accessories, sold merchandise to DSW, Inc. from 2010 through 2016. All merchandise was initially shipped to DSW’s distribution center in Columbus, Ohio. DSW subsequently transferred merchandise from the distribution center to its retail stores, many of which are located outside Ohio. Jones Apparel did not know at the time of sale or shipment how much merchandise would remain in Ohio or be sent elsewhere. After paying Ohio’s Commercial Activity Tax (CAT) on the gross receipts from these sales, Jones Apparel later claimed that much of the merchandise ultimately left Ohio and sought a refund for the portion of receipts it believed should not have been taxed.Jones Apparel filed CAT-refund claims with the Ohio Tax Commissioner, arguing that the relevant gross receipts lacked an Ohio situs. The Tax Commissioner denied the claim, reasoning that shipping labels and bills of lading showed delivery to Ohio and that accepting secondary evidence regarding subsequent shipment outside Ohio could create administrative problems. Jones Apparel appealed to the Ohio Board of Tax Appeals (BTA), which held a hearing. The BTA acknowledged that evidence obtained after initial delivery could theoretically establish that goods were ultimately received outside Ohio, but found that Jones Apparel had failed to provide sufficient documentary evidence to establish the amount of gross receipts for merchandise transported out of Ohio. The BTA affirmed the denial of the refund claim.On further appeal, the Supreme Court of Ohio reviewed the BTA’s decision for reasonableness and lawfulness. The court rejected the Tax Commissioner’s argument that only contemporaneous records should be considered in situsing determinations, finding no such statutory requirement. However, the court held that Jones Apparel did not meet its burden of providing documentary evidence to establish the amount of gross receipts that left Ohio, as required by statute. Therefore, the Supreme Court of Ohio affirmed the BTA’s decision denying the refund. View "Jones Apparel Group/Nine West Holdings v. Harris Tax Commr." on Justia Law