Justia Tax Law Opinion Summaries

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

Nate and Jaya Maniktala, shareholders of an S-corporation, claimed research and development tax credits on their joint tax returns for 2018 and 2019. The IRS subsequently determined that the corporation was not entitled to the credits and issued a notice of deficiency to the Maniktalas, stating that they had until March 19, 2024, to file a petition with the United States Tax Court to contest the deficiency. However, the Maniktalas did not receive the notice until July 9, 2024, and filed their petition on July 19, 2024, well after the 90-day deadline.The United States Tax Court dismissed the Maniktalas’ petition, ruling that it lacked jurisdiction because the petition was not filed within the statutory period prescribed by 26 U.S.C. § 6213(a). The Maniktalas appealed, contending that the 90-day deadline is not jurisdictional and, therefore, is subject to equitable tolling, which could allow their late filing to be considered.The United States Court of Appeals for the Eighth Circuit reviewed the case de novo. The court held that the filing deadline in 26 U.S.C. § 6213(a) is not jurisdictional but is instead a claim-processing rule. The court concluded that Congress did not clearly attach jurisdictional consequences to the 90-day deadline and that the deadline is presumptively subject to equitable tolling. The court found no clear statutory language rebutting this presumption. The Eighth Circuit reversed the Tax Court’s decision and remanded the case for the Tax Court to determine, in the first instance, whether the Maniktalas qualify for equitable tolling of the filing deadline. View "Maniktala v. CIR" on Justia Law

The case concerns the founder and sole shareholder of a corporation (VPX), who elected to treat the company as a Subchapter S Corporation for federal tax purposes. After VPX and affiliated entities filed for Chapter 11 bankruptcy, a reconstituted board removed the founder from his executive and board positions, though he remained the sole shareholder. The company’s assets were later sold, and its remaining interests were vested in a trust under the reorganization plan. The founder then sought confirmation that the bankruptcy automatic stay did not prohibit him from revoking the corporation’s Subchapter S status or, alternatively, for relief from the stay to do so.The United States Bankruptcy Court for the Southern District of Florida denied his motions, holding that the Subchapter S election constituted property of the bankruptcy estate and was therefore protected by the automatic stay. The founder appealed this decision to the United States District Court for the Southern District of Florida, which denied the trustee’s motion to dismiss the appeal as moot, consolidated the appeals, and certified a direct appeal to the United States Court of Appeals for the Eleventh Circuit.The United States Court of Appeals for the Eleventh Circuit addressed several issues, including mootness, the law of the case, and whether Subchapter S status is property of the bankruptcy estate. The court held that a corporate debtor’s Subchapter S election is not property of the bankruptcy estate because the election belongs to the shareholder, not the corporation. The court found the appeal neither constitutionally nor equitably moot, determined that procedural hurdles were met, and reversed the bankruptcy court’s denial of the founder’s motions. The case was remanded for further proceedings consistent with the Eleventh Circuit’s opinion. View "Owoc v. The Liquidating Trustee on Behalf of the Liquidating Trust" on Justia Law

Tesoro, a company operating an oil refinery in the City of Carson, was assessed for underpayment of the City’s oil industry business license tax following an audit. Tesoro paid the assessed deficiency under protest and filed a claim for a tax refund with the City clerk, using the form prescribed under the California Government Claims Act (GCA). The City denied this claim. Tesoro then filed a lawsuit seeking a refund, arguing that the City was barred from seeking the payment due to expiration of the limitations period and because the City’s method for calculating the tax was unlawful.In the Los Angeles County Superior Court, the City demurred, contending that Tesoro failed to exhaust the City’s local administrative remedies—specifically, the procedures in the Carson Municipal Code requiring a taxpayer to seek a refund first from the finance director and then, if necessary, to appeal to the city manager—before filing a claim under the GCA. The trial court sustained the demurrer. The California Court of Appeal, Second Appellate District, Division Four, affirmed, holding that Tesoro had not demonstrated that the GCA preempted the City’s local administrative review process.The Supreme Court of California granted review to determine whether a local government may require a taxpayer seeking a refund to comply with local administrative procedures before submitting a claim under the GCA, or whether the GCA preempts such requirements. The Supreme Court held that the GCA occupies the entire field of presentation requirements for claims for money or damages against local public entities, including claims for local tax refunds. The Court concluded that the sections of the Carson Municipal Code imposing additional administrative prerequisites are preempted by state law and may not be enforced. The judgment of the Court of Appeal was reversed. View "Tesoro Refining & Marketing Co. LLC v. City of Carson" on Justia Law