by
The Supreme Court affirmed the North Carolina Business Court’s substantive decision interpreting N.C. Gen. Stat. 105-130.5(b)(1) so as to preclude The Fidelity Bank from deducting “market discount income” relating to discounted United States obligations for North Carolina corporate income taxation purposes. The Supreme Court, however, reversed the Business Court’s decision to dismiss the second of two judicial review petitions that Fidelity Bank filed in these cases and remanding that matter to the North Carolina Department of Revenue with instructions to vacate that portion of the Department’s second amended final agency decision relating to the deductibility issue for lack of subject matter jurisdiction, holding that the Business Court’s decision to dismiss the portions of the second judicial review petition challenging the Department’s decision concerning the deductibility issue in the second amended final agency decision was erroneous. View "Fidelity Bank v. N.C. Department of Revenue" on Justia Law

by
Respondent El Castillo Retirement Residences was a self-sustaining retirement and continuing care community, funded entirely by admission and monthly fees paid by residents who have met El Castillo’s requirements for sufficient financial resources, including a minimum net worth, and have satisfied specific health criteria. It did not accept residents who are Medicare or Medicaid-dependent, or charity-dependent or any residents who cannot afford to buy their way into the community. It neither donated any significant services or property to charitable causes, nor used its property primarily and substantially for a charitable purpose. The New Mexico Supreme Court agreed with the Court of Appeals that El Castillo did not use its property for charitable purposes and was therefore not exempt from the constitutional requirement 5 of equal taxation, the Court used the opportunity of this opinion to clarify that Section 7-36-7(B)(1)(d) must be read in harmony with controlling constitutional requirements. Accordingly, the Court held that El Castillo was not entitled to property-tax exemptions under either Section 7-36- 8 7(B)(1)(d) or Article VIII, Section 3 of the New Mexico Constitution because El Castillo did not use its property primarily for substantial public benefit furthering charitable purposes. View "El Castillo Ret. Residences v. Martinez" on Justia Law

by
DiCosola started a business that produced compact discs in novelty shapes, for use as promotional items. The business morphed into a full‐service printing business, reaching about $1 million in gross annual sales and employing up to 10 people, including DiCosola’s immigrant father, who invested his retirement savings. In 2005, DiCosola started a side business for producing music, which sapped cash from the printing business. DiCosola’s 2007 loan application was rejected. He reapplied in 2008, providing fabricated tax returns that inflated his income by hundreds of thousands of dollars. Citibank issued DeCosola a loan of $273,500. DiCosola similarly used fabricated tax returns to obtain loans from Amcore, for $450,000 and $300,000. In 2009, after a few payments, DiCosola defaulted on the loans. In 2009, DiCosola falsified IRS forms to claim a refund of $5.5 million. In 2012, DiCosola was indicted for bank fraud, 18 U.S.C. 1344; making false statements to a bank, 18 U.S.C. 1014; wire fraud affecting a financial institution, 18 U.S.C. 1343; filing false statements against the United States, 18 U.S.C. 287. DiCosola was found guilty, sentenced to 30 months’ imprisonment, and ordered to pay restitution of $822,088.00. The Seventh Circuit affirmed, rejecting challenges relating to the testimony of DiCosola’s accountant. View "United States v. DiCosola" on Justia Law

by
BCR Partnerships claimed that the Commissioner wrongfully disallowed their charitable deductions for two conservation easements, and contended that in ruling for the Commission, the Tax Court wrongfully classified the sale of limited partnership interests as disguised sales and wrongfully imposed a gross valuation misstatement penalty. The Fifth Circuit vacated the Tax Court's holding regarding the perpetuity of the easements and the baseline documentation, and remanded for consideration of the other grounds asserted by the Commissioner to support the disqualification of the easements as charitable deductions but not addressed by the Tax Court. The court vacated the Tax Court's determination that the entirety of the limited partners' contributions were disguised sales, and remanded for a determination as to the correct amount of any taxable income that resulted from the disguised sales. Finally, the court vacated and remanded to the Tax Court for it to determine whether the gross valuation misstatement penalty was applicable and if so, the proper amount of any penalty. View "BC Ranch II, LP v. CIR" on Justia Law

by
Petitioners are manufacturers, wholesalers, and consumers of cigarettes. Collectively they challenged Oklahoma Senate Bill 845, alleging that it was a revenue bill enacted outside of the procedure mandated in Article V, Section 33 of the Oklahoma Constitution. The parties agreed that the passage of SB 845 did not comply with Article V, Section 33; so the case turned on whether SB 845 was the kind of "revenue bill" that Article V, Section 33 governed. Applying a test used since 1908, the Oklahoma Supreme Court concluded that the primary purpose of Sections 2, 7, 8, and 9 of SB 845 was to raise new revenue for the support of state government through the assessment of a new $1.50 excise tax on cigarettes and that, in doing so, SB 845 levied a tax in the strict sense. As such, Sections 2, 7, 8, and 9 of SB 845 comprised a revenue bill enacted in violation of Article V, Section 33 and were unconstitutional View "Naifeh v. Oklahoma, ex rel. Oklahoma Tax Comm'n" on Justia Law

by
In a 2005 Cooperation and Option Agreement to facilitate Russell's construction and operation of the Energy Center, a natural gas-fired, combined cycle electric generating facility in Hayward, the city granted Russell an option to purchase 12.5 acres of city-owned land as the Energy Center's site and promised to help Russell obtain permits, approvals, and water treatment services. Russell conveyed a 3.5-acre parcel to the city. The Agreement's “Payments Clause” prohibited the city from imposing any taxes on the “development, construction, ownership and operation” of the Energy Center except taxes tethered to real estate ownership. In 2009, Hayward voters approved an ordinance that imposes “a tax upon every person using electricity in the City. … at the rate of five and one-half percent (5.5%) of the charges made for such electricity” with a similar provision regarding gas usage. Russell began building the Energy Center in 2010. In 2011, the city informed Russell it must pay the utility tax. The Energy Center is operational.The court of appeal affirmed a holding that the Payments Clause was unenforceable as violating California Constitution article XIII, section 31, which provides “[t]he power to tax may not be surrendered or suspended by grant or contract.” Russell may amend its complaint to allege a quasi-contractual restitution claim. View "Russell City Energy Co. v. City of Hayward" on Justia Law

by
Prior to its dissolution, Culver City’s former redevelopment agency made an unauthorized transfer to the City of about $12.5 million. The Department of Finance (DOF) discovered the unauthorized transfer after the former redevelopment agency was dissolved and the City took over as the successor agency. Based on that discovery, DOF authorized the county auditor-controller to reduce by about $12.5 million the tax increment revenue made available to the successor agency to pay the successor agency’s enforceable obligations. In a prior action, the Sacramento Superior Court held that the former redevelopment agency should have retained the $12.5 million to pay its bills rather than transferring it to the City. DOF did not seek an order requiring the City to repay the $12.5 million. And neither party appealed the superior court’s judgment. Since judgment was entered in “Culver City I”, the City has not repaid the $12.5 million to the successor agency, and DOF has continued to authorize successive reductions to the allotment of tax increment revenue to the successor agency to pay its enforceable obligations. DOF asserts that those funds held by the City are available to the successor agency for payment of its enforceable obligations, but the City maintains that it has no duty to pay the money back. In this action, the City, both in its municipal capacity and as the successor agency of the former redevelopment agency, sought mandamus relief to stop DOF’s successive reductions of tax increment revenue to pay the successor agency’s enforceable obligations. DOF sought an order reversing the former redevelopment agency’s transfer of $12.5 million to the City and requiring the City to return the money. The superior court in this action held that DOF’s successive reductions were not authorized by the Dissolution Law. Based on this holding, the superior court granted the City’s petition for writ of mandate. While recognizing Culver City I’s holding that the former redevelopment agency’ss transfer to the City was unauthorized, the superior court denied DOF’s petition for an equitable writ of mandate requiring the return of the money because there was a statutory remedy for this situation. The State Controller conducted a review and ordered the City to return the $12.5 million to the successor agency. DOF appealed, asserting that the superior court erred by: (1) denying DOF’s petition for writ of mandate directing the City to return the money and (2) finding that successive reductions to the tax increment revenue provided to the successor agency for the same $12.5 million held by the City was not authorized by the Dissolution Law. The Court of Appeal affirmed. View "City of Culver City v. Cohen" on Justia Law

by
The Eleventh Circuit affirmed the Tax Court's determination that petitioner was liable as a transferee under 26 U.S.C. 6901 for his former employer's unpaid taxes. Because the state substantive law in this case does not require exhaustion for liability to exist, the court held that the Commissioner was not required to exhaust remedies against the company before proceeding against petitioner as a transferee. In this case, applying Florida law, the court held that petitioner could not definitively prove that the Dividend Payments were a part of his employment with FECP and because he did not raise any other argument for why FECP might have received reasonably equivalent value even if the dividends were not compensation, the court must conclude that they were dividends for which FECP did not receive reasonably equivalent value. As such, the court affirmed the Tax Court's determination that the reasonable-value element of constructive fraud under the Florida Uniform Fraudulent Transfer Act was satisfied for all of the Dividend Payments. When considered together, those dividend payments were substantial enough for the Tax Court to conclude that they led to the insolvency of FECP. View "Kardash v. Commissioner of IRS" on Justia Law

by
Minnesota’s water’s edge rule, Minn. Stat. 290.17(4)(f), does not prohibit the inclusion in “net income” the income of a foreign entity that elects under federal tax law to be disregarded as a separate entity. At issue in this appeal from the tax court was whether the consequences of an election made under federal tax law by a foreign entity owned by Ashland Inc., a domestic unitary business, must be recognized in determining Ashland’s Minnesota tax liability. The Commissioner of Revenue concluded that the income and apportionment factors of the foreign entity were improperly included in Ashland’s combined return and so excluded them in calculating Ashland’s Minnesota tax liability. The tax court granted Ashland’s motion for summary judgment, concluding that the consequences of the federal election were properly included in the determination of Ashland’s net income on its Minnesota tax returns. The Supreme Court affirmed, holding that the tax court did not err in its conclusion. View "Ashland Inc. & Affiliates v. Commissioner of Revenue" on Justia Law

by
The Administrative Hearing Commission erred in finding that the St. Louis Rams did not have to pay sales tax on the entertainment license tax (ELT) they included and collected from ticket purchasers as the amount paid for admission during certain periods from 2007 through 2013. The Commission (1) ordered the director of revenue to issue a refund to the Rams for the ELT included in the period from February 2007 through January 2010; and (2) found the Rams were not liable for sales tax based on the ELT collected and remitted from February 2010 through January 2013. The Supreme Court reversed the Commission’s decision and remanded the cause for further proceedings, holding that the Commission erred in finding the portion of the ticket sales the Rams used to pay the ELT was not subject to sales tax because the ELT was included in the amount ticket purchasers paid for admission via the fixed ticket price charged by the Rams. View "St. Louis Rams LLC v. Director of Revenue" on Justia Law