In 2005 Anderson was charged with federal tax evasion (26 U.S.C. 7201) for tax years 1995 through 1999, while Anderson was an entrepreneur and venture capitalist involved in operating several international companies, including G & A, which generated hundreds of millions of dollars of income. The government alleged that because G & A was a “controlled foreign corporation,” he was required to recognize a share of its income on his tax return; that he fraudulently failed to do so; and thatAnderson had fraudulently underpaid his taxes by $184 million, 99% of which stemmed from G & A. He pleaded guilty with respect to two years and was sentenced to 108 months imprisonment. In 2007 Anderson filed a petition to redetermine his tax deficiencies, 26 U.S.C. 6213(a). The Tax Court granted partial summary judgment to the IRS. The Third Circuit affirmed. Anderson’s conviction for tax evasion in 1998 and 1999 precludes him, by virtue of collateral estoppel, from contesting in civil fraud proceedings that G & A income was taxable to him in those years. The IRS’s concession of all deficiency and penalty issues for the years 1995, 1996, and 1997 has no preclusive effect on those issues for 1998 and 1999. View "Anderson v. Comm'r of Internal Revenue" on Justia Law

An involuntary Chapter 11 bankruptcy petition was filed against Quality Stores, which eventually closed operations and terminated all employees. Under the Pre-Petition Plan, severance pay was based on job grade. Payments were made on the normal payroll schedule, not tied to receipt of unemployment compensation, and not attributable to particular services. The Post-Petition Plan was designed to encourage employees to defer their job searches; the lump-sum payments were not tied to receipt of unemployment compensation, nor attributable to provision of particular services. Quality reported the payments as wages and withheld income tax, paid the employer’s share of FICA tax, and withheld each employee’s share of FICA. Of $1,000,125 at issue, $382,362 is attributed to the Pre-Petition Plan, $214,000 for the employer share and $168,362 for the employee share; $617,763 is attributed to the Post- Petition Plan, $357,127 for the employer share and $260,636 for the employee share. Quality argued that the payments were not wages but supplemental unemployment compensation benefits, not taxable under FICA, and sought a refund of the employer share and the shares of consenting employees. When the IRS did not act, Quality filed an adversary action in the bankruptcy court, which ordered a full refund. The district court and Sixth Circuit affirmed.View "United States v. Quality Stores, Inc." on Justia Law

This case stemmed from three research projects at two production plants in Hahnville, Louisiana that UCC conducted during the 1994 and 1995 tax-credit years. The research was conducted on products that were in the process of being manufactured for sale and were in fact sold. Nevertheless, UCC requested a research credit not just for the additional costs of supplies associated with the research. Instead, it requested a research credit for the costs of all the supplies used in the production of the product even though those supplies would have been used regardless of any research performed. The Tax Court held that UCC was not entitled to research credits for the entire amount spent for the supplies at issue. Instead, as the Commissioner argued, it was entitled to credit for only those additional supplies that were used to perform the research. The court affirmed the judgment and denied UCC a credit for supplies used in the conduct of qualified research under 26 U.S.C. 41. View "Union Carbide Corp. v. Commissioner of Internal Revenue" on Justia Law

LTC Properties, Inc., which owned a congregate care assisted-living facility in Licking County, contested the tax-year 2007 valuation of its property as found by the auditor, as retained by the Licking County Board of Revision, and as affirmed by the Board of Tax Appeals (BTA). On the merits, LTC contended (1) the auditor overvalued its property by predicating his cost-based valuation on the cost schedule for nursing homes and private hospitals rather than on the cost schedule for apartment buildings with twenty to thirty-nine rental units; and (2) the BTA erred by denying LTC's request for a continuance of the evidentiary hearing. The Supreme Court affirmed, holding (1) the BTA's decision to affirm the County's use of the nursing home / private hospital cost schedule as a starting point in performing a cost valuation of LTC's assisted-living facility was neither unreasonable nor unlawful; and (2) the BTA did not abuse its discretion by denying a continuance. View "LTC Props., Inc. v. Licking County Bd. of Revision" on Justia Law

n 1993, AT&T Corporation and affiliate corporations (collectively, AT&T) filed an affiliated group, Mississippi income tax return with the Mississippi Department of Revenue f/k/a Mississippi State Tax Commission, using the statutorily-permissible "combined method" of reporting. But from 1994 to 1996, AT&T filed its returns under the "consolidated method" of reporting, which was then statutorily available only to affiliated groups with members doing business and taxable solely in Mississippi, ostensibly to challenge the constitutionality of this distinction. Following an audit in 1997, the Commission issued an Assessment of Income Taxes of more than $5 million against AT&T. After unsuccessful administrative appeals before the Commission, AT&T filed a "Petition for Appeal of Additional Income Tax Assessment Ordered by State Tax Commission, For Declaratory and Injunctive Relief, and For Refund of Overpayment of Tax" in the Chancery Court of Hinds County. The Petition challenged the constitutionality of several tax statutes under the Commerce Clause of the United States Constitution and sought associated relief. But AT&T's Petition was not 'accompanied with a bond, to be approved by the clerk . . . , in a sum double the amount in controversy[,]" as then required by Mississippi Code Section 27-7-73. Rather, AT&T paid the Assessment, then filed the Petition. Preliminarily, the chancery court found that AT&T had "properly appealed" the full Commission's Order. The chancery court then held that the subject tax statutes violated the Commerce Clause; that the"offensive limitations" were to be struck so that AT&T was granted the "tax benefits" enjoyed by other taxpayers; and, based thereon, that AT&T was entitled to an award of $12,727,174. Thereafter, the Commission appealed those rulings, while AT&T appealed only the chancery court's interest calculations. Because AT&T did not follow the then-applicable procedure for appeal, the chancery court lacked jurisdiction to hear its appeal. The Supreme Court reversed the chancery court and reinstated the Commission's order. View "Mississippi Department of Revenue v. AT&T Corporation" on Justia Law

Plaintiff appealed the district court's grant of summary judgment, arguing that the district court erred in ruling that her failure to submit a physician's statement as required by the IRS Revenue Procedure 99-21 was fatal to her claim of financial disability. Because plaintiff failed to submit a physician's statement altogether, the court agreed with the district court that she did not provide the IRS with probative evidence of financial disability, and therefore her claim was properly denied as time-barred by 26 U.S.C. 6511(b)(2)(A). View "Abston v. CIR" on Justia Law

The State appealed from a decision of the district court holding that the State improperly made income tax, FICA tax, and other deductions from a Title VII judgment for back and front pay in favor of plaintiff. The court held that such Title VII awards constituted "wages" under the Internal Revenue Code and, as such, were subject to statutory withholding. View "Noel v. New York State Office of Mental Health Central New York Psychiatric Center" on Justia Law

Barbara, an analyst at the Cleveland Clinic, and Anthony, a stay-at-home father for two-year-old triplets and ten-year-old, filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code, 11 U.S.C. 701. On Schedule B listing assets, they included a joint interest in “Anticipated 2009 Income Tax Refund,” value “unknown.” On their joint returns for 2009, they listed: adjusted gross income: $59,402; total tax liability: $2,934; total credits: $2,934; payroll taxes withheld: $6,777; and total federal tax refund: $8,542. On line 51, “Tax and Credits,” they listed $2,903 for the Child Tax Credit (CTC). On line 65, “Payments,” they listed $1,097 for additional CTC. They amended Schedule B, changing the unknown value of their tax refund. They specified $4,000 as the portion of their refund due to the CTC and $4,542 for the portion not due to the CTC. They amended Schedule C of the bankruptcy petition, to list the $4,000 portion as exempt pursuant to Ohio Rev. Code 2329.66(A)(9)(g). The Trustee objected, arguing that $2,903 of the CTC, the so-called “non-refundable portion,” was not exempt. The bankruptcy court sustained the Trustee’s objection, reducing the exemption to $1,907. The Bankruptcy Appellate Panel affirmed. The Sixth Circuit affirmed View "Zingale v. Rabin" on Justia Law

During tax years at issue, State Farm filed consolidated returns for life insurance and non-life subgroups. The IRS determined deficiencies. State Farm responded that, using a revised method for calculating alternative minimum tax, rather than owing $75 million in additional taxes, it was entitled to $500 million in additional refunds. State Farm also raised a loss reserve issue. The Tax Court ruled that State Farm should not have included a $202 million award of compensatory and punitive damages for bad faith in its insurance loss reserve for 2001 and 2002 returns. The Seventh Circuit affirmed, regarding punitive damages. Pending clearer guidance from the National Association of Insurance Commissioners (to whom Congress has commanded deference), punitive damages should be treated as regular business losses that are deductible when actually paid rather than deducted earlier as part of insurance loss reserves. With regard to the compensatory damages portion of the award, the court reversed. Extra-contractual obligations like compensatory damages for bad faith have long been included in insurance loss reserves; NAIC guidance supports that result. The court affirmed rejection of State Farm’s recalculation of alternative minimum tax, which would result in “creation from thin air of a virtual tax loss some $4 billion larger than” actual loss. View "State Farm Mut. Auto. Ins. Co. v. Comm'r of Internal Revenue" on Justia Law

The Property Appraiser and the Tax Collector appealed from an order of the district court affirming the final order of the bankruptcy court. The bankruptcy court held that debtor's request for the bankruptcy court to redetermine her ad valorem tax liability for the year 2009 was timely filed under 11 U.S.C. 108(a) and 505. The court concluded that the bankruptcy court erred in ruling that debtor's request was timely under section 108(a). The bankruptcy court's interpretation of the language in section 505(a)(2)(C) failed to give full effect to Congress's intent. Accordingly, the court reversed the judgment of the district court affirming the bankruptcy court's holding. View "Dubov, et al. v. Read" on Justia Law