Justia Tax Law Opinion Summaries

Several owners of shoreline properties along Lake Austin challenged a 2019 ordinance enacted by the City of Austin. The ordinance declared that their properties had always been within Austin’s full-purpose jurisdiction, repealed a 1986 ordinance that had previously classified the properties as limited-purpose (which restricted taxation until city services were provided), and subjected the properties to full taxation. The plaintiffs alleged that Austin taxed their properties as if they were full-purpose residents but provided fewer municipal services than other full-purpose residents, raising federal and state law claims.Initially, the United States District Court for the Western District of Texas dismissed all claims under the Tax Injunction Act. On appeal, the United States Court of Appeals for the Fifth Circuit reversed the dismissal of all but two claims and remanded the case. Upon remand, the City reasserted several grounds for dismissal, including the political-question doctrine, Pullman abstention, Burford abstention, and failure to state a claim. The magistrate judge recommended Pullman abstention, which the district court adopted, dismissing the claims without prejudice and entering final judgment. The plaintiffs appealed again.The United States Court of Appeals for the Fifth Circuit reviewed the district court’s decision and held that the case was not moot, as recent state legislation neither refunded taxes nor automatically disannexed the properties. The Fifth Circuit concluded that Pullman abstention was inappropriate because the plaintiffs’ federal equal protection claim did not hinge on any uncertain or disputed question of Texas law. Accordingly, the Fifth Circuit reversed the district court’s judgment and remanded the case for consideration of the City’s remaining grounds for dismissal, expressly declining to reach those grounds itself. View "Harward v. City of Austin" on Justia Law

Federal tax privacy law prohibits the Internal Revenue Service (IRS) from sharing taxpayer return information with other federal agencies unless strict statutory requirements are met. In 2025, after a request from Immigration and Customs Enforcement (ICE), the IRS developed and implemented a new protocol, known as the Data-Exchange Procedure, for responding to ICE’s mass requests for the addresses of over a million undocumented individuals. This streamlined process did not ensure that ICE’s requests satisfied the statutory prerequisites, such as providing a taxpayer’s actual address or identifying an appropriate point of contact personally involved in a criminal investigation. Using this flawed procedure, the IRS disclosed over 47,000 taxpayer records to ICE.The Center for Taxpayer Rights, joined by other organizations, sued in the United States District Court for the District of Columbia, arguing the IRS’s actions violated federal law and harmed their missions by eroding trust in the tax system, deterring immigrant engagement, and diverting resources. The district court found that the IRS had, in fact, adopted a new policy, concluded plaintiffs were likely to prevail on the merits, and issued a preliminary injunction halting further disclosures under the new procedure unless statutory requirements were strictly followed and the court was notified of any future requests.On appeal, the United States Court of Appeals for the District of Columbia Circuit affirmed the district court’s order. The appellate court held that the IRS’s Data-Exchange Procedure constituted final agency action reviewable under the Administrative Procedure Act (APA), did not comply with statutory requirements, and that the relief available under the Internal Revenue Code did not preclude APA review. The court found plaintiffs likely to succeed on the merits, likely to suffer irreparable harm, and that the balance of equities and public interest favored preliminary relief. The preliminary injunction was affirmed. View "Center for Taxpayer Rights v. IRS" on Justia Law

Richard Rund, a U.S. citizen and businessman, failed to report his interest in multiple foreign bank accounts over several years, specifically from 2003 to 2008, 2013, and 2014. He maintained accounts in his own name and in the names of various businesses and entities, including FOB Instruments Ltd., York Luen, and Far East Ventures Ltd. Despite knowing about his obligation to file annual FBARs (Reports of Foreign Bank and Financial Accounts), Rund omitted many accounts from his filings or failed to file altogether. He later participated in the IRS’s Offshore Voluntary Disclosure Program but was removed from it. Throughout the period, Rund experienced personal and health challenges, but continued to work with tax professionals.The United States District Court for the Eastern District of Virginia reviewed the government’s civil suit to reduce IRS-assessed penalties to judgment after Rund did not pay the $2,915,633 assessed for his willful FBAR violations. After discovery, the district court granted summary judgment for the government, finding that Rund had a financial interest in the accounts, knew of his reporting requirements, and intentionally or recklessly disregarded them. The court also held that the Excessive Fines Clause of the Eighth Amendment did not apply to civil FBAR penalties and, even if it did, the penalties were not excessive. Judgment was entered against Rund for the full penalty plus interest.The United States Court of Appeals for the Fourth Circuit reviewed the case de novo. The court affirmed summary judgment, holding that Rund’s FBAR violations were willful as a matter of law under the civil recklessness standard set out in United States v. Horowitz, 978 F.3d 80 (4th Cir. 2020). The court further held that the $2.9 million penalty did not violate the Excessive Fines Clause, as it was not grossly disproportional to the gravity of Rund’s willful, repeated violations. The judgment was affirmed. View "US v. Rund" on Justia Law

Andrew Filipowski, a software entrepreneur, accumulated significant tax liability after selling his company for $3.5 billion in 1999 and claiming $110 million in losses through a partnership later deemed a sham by the U.S. Tax Court. The IRS assessed Filipowski’s individual tax liability, including taxes, penalties, and interest totaling approximately $140 million. Filipowski did not challenge the notice of deficiency or the amount owed, nor did he make substantive payments toward the liability, aside from applying a minor tax credit. When the IRS initiated collection proceedings, Filipowski sought a Collection Due Process hearing, indicating his inability to pay and offering an installment agreement or an offer-in-compromise (OIC).After receiving Filipowski’s OIC proposing to settle his tax debt for $1.5 million, the IRS’s collections department investigated his finances. The investigation raised concerns about Filipowski’s connections to the DePasquale Trust, delayed tax filings, and alleged undisclosed assets. The IRS calculated his reasonable collection potential as $5.9 million, which was less than the owed amount but still higher than the OIC. The IRS ultimately rejected the OIC on public policy grounds, reasoning that acceptance would undermine voluntary compliance. Filipowski challenged this decision in the U.S. Tax Court, arguing that disputed facts remained and that summary judgment was inappropriate. The Tax Court granted summary judgment in favor of the IRS, concluding that the rejection was supported by Filipowski’s tax history and the magnitude of his liability.The United States Court of Appeals for the Eleventh Circuit reviewed the Tax Court’s grant of summary judgment de novo. It held that the IRS did not abuse its discretion in rejecting Filipowski’s OIC on public policy grounds and affirmed the Tax Court’s decision, finding no genuine disputes of material fact that would preclude summary judgment. View "Filipowski v. Commissioner of Internal Revenue" on Justia Law

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