Justia Tax Law Opinion Summaries

Eight rural electric cooperatives (RECs) sought judicial review after the Kansas Board of Tax Appeals (BOTA) denied their property valuation challenges for the 2019 and 2020 tax years. The RECs argued that the valuation methodology used by the Kansas Department of Revenue's Property Valuation Division (PVD) violated the requirement for "generally accepted appraisal procedures" under K.S.A. 79-5a04. The RECs elected to go to district court for a trial de novo, which allows for an evidentiary hearing where issues of law and fact are determined anew.The Shawnee County District Court agreed with the RECs, concluding that PVD's valuation methodology violated K.S.A. 79-5a04. The court found that the methodology resulted in non-uniform and unequal valuations of the RECs' properties, thus inflating their property values and taxes. The district court ordered PVD to adjust its methodology to account for the RECs' treatment of margin stabilization adjustments (MSAs) in their net operating income (NOI).On appeal, the Kansas Supreme Court reviewed whether the district court exceeded its scope of judicial review by considering issues not raised before BOTA. The Supreme Court held that a trial de novo under K.S.A. 2023 Supp. 74-2426(c)(4)(B) does not expand a district court's scope of judicial review beyond what is permitted by K.S.A. 77-617. The court determined that the RECs had only raised a constitutional issue regarding uniform and equal taxation before BOTA, not a statutory compliance issue under K.S.A. 79-5a04. Therefore, the district court exceeded its scope of review by deciding on the statutory issue.The Kansas Supreme Court reversed the district court's judgment, holding that the district court improperly expanded its scope of review by addressing the statutory compliance issue that was not litigated before BOTA. View "FreeState Electric Cooperative, Inc. v. Kansas Dept. of Revenue" on Justia Law

The Supreme Court affirmed the judgment of the district court granting an uncontested petition of the trustees of the Marvin S. Robinson Charitable Trust to retroactively modify the trust's terms to maintain its tax-exempt status as a "supporting organization" under the federal tax code, holding that Kan. Stat. Ann. 58a-416 authorized the retroactive modification of the trust.Under In Commissioner v. Estate of Bosch, 387 U.S. 456 (1967), which held that the Internal Revenue Service (IRS) and federal courts are not bound by decisions of lower state courts on issues of state law but that these entities will defer to decisions of a state's highest court, an order allowing the retroactive modification of a trust's terms to maintain its tax-exempt status is binding on federal tax authorities only if it emanates from the Supreme Court. The Supreme Court agreed to review the district court's order in accordance with Bosch and affirmed the district court's judgment granting the petition, holding modification of the trust was proper. View "In re Marvin S. Robinson Charitable Trust" on Justia Law

The Supreme Court reversed the judgment of the Board of Tax Appeals (BOTA) concluding that Johnson County's valuations for the 2016 and 2017 tax years involving eleven Walmart and Sam's Club "big box" stores in the County were too high because they improperly relied on unadjusted sales and rental income data from other properties subject to build-to-suit leases, holding that In re Prieb Properties, LLC 275 P.3d 56 (2012), is overruled.The BOTA in this case did its duty to follow Prieb, a 2012 decision that crafted a rule of law to exclude appraisal opinions founded on unadjusted build-to-suit lease data to support valuations used in the process of ad valorem taxation. The court of appeals affirmed. The Supreme Court remanded the case, holding (1) Prieb's rationale invades BOTA's longstanding province as the fact-finder in the statutory process for appraising real property at its fair market value for ad valorem tax purposes; and (2) by following Prieb, BOTA improperly imposed an exclusionary rule on the County's evidence rather than simply considering its weight and credibility. View "In re Equalization Appeal of Walmart Stores, Inc." on Justia Law

The Supreme Court affirmed the judgment of the court of appeals reversing the judgment of the district court reversing the order of the Board of Tax Appeals (BOTA) affirming the determination of the Kansas Department of Revenue (KDOR) that Gene Bicknell was a Kansas resident in 2005 and 2006, holding that the findings supported the district court's legal conclusion that Gene was domiciled in Florida in 2005 and 2006.After launching a review of Gene's 2005 and 2006 tax returns the KDOR determined that Gene was a Kansas resident during the relevant years. The BOTA affirmed. The district court reversed, concluding that Gene was a Florida resident during the assessment period. The court of appeals reversed, concluding that the district court had improperly shifted the burden of proof from Gene to KDOR. The Supreme Court affirmed, holding (1) venue for these proceedings was proper in Crawford County; and (2) the district court recognized and held Gene to his burden to prove he was a Florida resident during the assessment period. View "Bicknell v. Kansas Department of Revenue" on Justia Law

The Supreme Court affirmed the decision of the Board of Tax Appeals (BOTA) upholding county appraisers' application of the Kansas Oil and Gas Appraisal Guide developed by the Kansas Department of Revenue's Property Valuation Division for valuations given for the 2016 tax year to the working interest of River Rock Energy Co. in 203 gas wells and related equipment, holding that the BOTA did not err.In its dispute, River Rock argued that the Guide produced inflated values for its working gas leases by capping operating expense allowances to arrived at a "working interest minimum lease value." The BOTA upheld the county appraisers' application of the Guide. The court of appeals affirmed in part and reversed in part, holding that the Guide overvalued River Rock's wells. The Supreme Court affirmed in part and reversed in part, holding (1) the county appraisers correctly applied the Guide; and (2) the court of appeals correctly decided that it had jurisdiction to entertain River Rock's challenge to BOTA's order refusing to abate filing fees. View "In re Tax Appeal of River Rock Energy Co." on Justia Law

The Supreme Court affirmed in part and reversed in part the decision of the court of appeals that it lacked jurisdiction to review the failure by the Board of Tax Appeals (BOTA) to issue a full and complete opinion in an ad valorem tax dispute after the opinion was requested, holding that the court erred when it concluded that it lacked jurisdiction to review the allegation that BOTA illegally failed timely to issue a full and complete opinion.Taxpayers appealed Johnson County's ad valorem tax valuations for the 2016 tax year on seven commercial properties. The BOTA entered a written summary decision ordering lower values for each property. Five weeks later, the County asked BOTA to issue the full and complete opinion. BOTA failed to do so. The County petitioned the court of appeals for judicial review. The court of appeals dismissed the appeal for lack of jurisdiction. The Supreme Court reversed in part and remanded, holding that the court of appeals (1) had jurisdiction over the issue of whether BOTA acted properly in failing timely to issue a full and complete opinion; and (2) correctly dismissed the appeal as it pertained to the County's effort to obtain judicial review of the summary decision. View "In re Equalization Appeals of Target Corp." on Justia Law

In an appeal of a Board of Tax Appeals (BOTA) summary decision granting a compensating use tax refund to BHCMC, L.L.C., doing business as Boot Hill Casino & Resort, the Kansas Supreme Court addressed whether such a tax could be imposed on Boot Hill for electronic gaming machines it did not (and, under the law and its management agreement with Kansas Lottery, could not) own. Boot Hill challenged its payment of $801,588.95 in compensating use tax for the years 2009 through 2011. The amount assessed was based on the sale price for electronic gaming machines (EGMs) that Boot Hill purchased out of state for use at the casino it manages in Dodge City. The Court held that Boot Hill did not exercise a right or power incident to ownership of personal property in order to be subject to a compensating use tax for that property. Because Boot Hill has not exercised such a power or right, the Supreme Court affirmed BOTA's refund and the Court of Appeals panel decision that upheld it. View "In re Tax Appeal of BHCMC video" on Justia Law

In 2011, Johnson County appraised the value of Kristin Wagner’s property at $569,000. Wagner filed a protest form with the Court of Tax Appeals (COTA), which determined that the appraised value for tax year 2011 should be reduced to $553,600. Wagner appealed. While the 2011 appeal was pending, the County appraised Wagner’s property for the 2012 tax year at $537,000. Wagner challenged the 2012 appraisal. On remand, with regard to the 2011 tax appeal, COTA established the the value of Wagner’s home at $494,200. COTA then established the value of Wagner’s property for the 2012 tax year at $494,200 - the same amount as the property’s 2011 final appraised value. Wagner filed a petition for judicial review. The court of appeals affirmed COTA’s decision, ruling that COTA properly used the 2011 valuation to determine the home’s value for the 2012 tax year. The Supreme Court reversed, holding that COTA ignored evidence in the record establishing that Wagner’s home suffered a 2.94 percent decrease in value between 2011 and 2012. Remanded with directions that Wagner’s home be valued at $479,600 for the 2012 tax year. View "In re Equalization Appeal of Wagner" on Justia Law

The taxpayers in this case were out-of-state natural gas marketing companies, out-of-state local distribution companies that were certified as public utilities in their states, and out-of-state municipalities. Each taxpayer bought natural gas from producers or other marketers then delivered it to pipelines under contracts allowing the taxpayers to withdraw equivalent amounts of gas at a later time from out-of-state distribution points. The taxpayers filed requests for ad valorem tax exemption, claiming the natural gas was exempt under Kan. Const. art. 11, 1, which exempts merchants' inventory from ad valorem taxation but does not exempt tangible personal property owned by a public utility. The Kansas Court of Tax Appeals determined the natural gas was not exempt because the taxpayers were public utilities pursuant to Kan. Stat. Ann. 79-5a01. The Supreme Court held (1) the taxation at issue did not violate the Commerce Clause or the Due Process Clause of the U.S. Constitution; (2) section 79-5a01 was constitutional as applied to the out-of-state local distribution companies; but (3) section 79-5a01 was unconstitutional as applied to the out-of-state natural gas marketing companies and those taxpayers that were out-of-state municipalities because those entities were not public utilities under the meaning of the statute. View "In re Property Valuation Appeals of Various Applicants" on Justia Law

After Ian Burch's motor home was stopped by a highway patrol trooper, the trooper found drugs, drug paraphernalia, and $15,000 in cash in the vehicle. The State filed criminal charges against Burch. The district court found the trooper had unlawfully extended the scope and length of the stop and suppressed the evidence found in the vehicle. The charges against Burch were later dismissed. The Kansas Department of Revenue (KDOR) subsequently issued a tax assessment notice indicating Burch owed $17,761 in taxes and penalties on the drugs found in his motor home. The Court of Tax Appeals (COTA) granted summary judgment to KDOR on its assessment of taxes and civil penalties against Burch under the Kansas Drug Tax Act. The Supreme Court reversed, holding that COTA erred in granting summary judgment to KDOR because it failed to consider and apply the exclusionary rule to the drugs upon which the taxes were assessed. Remanded to COTA for consideration of the exclusionary rule. View "In re Tax Appeal of Burch" on Justia Law