Justia Tax Law Opinion Summaries

Articles Posted in Supreme Court of Virginia

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The Supreme Court reversed the judgment of the circuit court upholding Augusta County's tax assessments against McKee Foods Corporation for the years 2011 through 2014 and remanded the matter for a new trial, holding that the assessments were not entitled to a presumption of validity. McKee filed an application for relief from erroneous assessment for real property taxes, alleging that the assessments were above the property's fair market value, were not uniform in application, and were otherwise invalid or illegal. After a trial, the circuit court upheld the assessments. The Supreme Court reversed, holding (1) because the appraiser did not properly use any of the three generally accepted approaches to valuation the Supreme Court erred in applying the presumption of validity to his 2011 assessment; (2) the 2012 and 2013 assessments were based on the same improper methodology and were not entitled to the presumption of correctness; and (3) the 2014 assessment was not entitled to a presumption of validity because it was based on a single approach to the determination of market value. View "McKee Foods Corp. v. County of Augusta" on Justia Law

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The Supreme Court affirmed the judgment of the circuit court granting summary judgment in favor of the Tax Department on the Corporate Executive Board Company’s (CEB) complaint alleging that its income tax assessments violated the “dormant” Commerce Clause and the Due Process Clause of the United States Constitution and that the assessments were “inequitable” under the Tax Department’s regulations, holding that the circuit court did not err in declining to grant relief. CEB sought relief from the assessments for the years 2011, 2012, and 2013 and requested a redetermination of its income tax. The circuit court found in favor of the Tax Department. The Supreme Court affirmed, holding (1) the Tax Department’s apportionment of CEB’s income tax was in accord with constitutional requirements; and (2) the regulation allowing relief did not apply under its plain language. View "The Corporate Executive Board Co. v. Department of Taxation" on Justia Law

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At issue in this case was the extent to which a corporate taxpayer must include in its Virginia taxable income royalties paid to an intangible holding company. The Virginia Supreme Court held that the circuit court correctly determined that only the portion of the royalties that was actually taxed by another state falls within the subject-to-tax exception. However, the circuit court erred by failing to hold, in accordance with Kohl's alternative argument, that Kohl's Illinois need not be the entity that pays this tax for the exception to apply. Accordingly, the court reversed the circuit court's judgment and remanded for a determination of what portion of the royalty payments was actually taxed by another state and thus excepted from the add back statute. View "Kohl's Department Stores, Inc. v. Virginia Department of Taxation" on Justia Law

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At issue in this case was the extent to which a corporate taxpayer must include in its Virginia taxable income royalties paid to an intangible holding company. The Virginia Supreme Court held that the circuit court correctly determined that only the portion of the royalties that was actually taxed by another state falls within the subject-to-tax exception. However, the circuit court erred by failing to hold, in accordance with Kohl's alternative argument, that Kohl's Illinois need not be the entity that pays this tax for the exception to apply. Accordingly, the court reversed the circuit court's judgment and remanded for a determination of what portion of the royalty payments was actually taxed by another state and thus excepted from the add back statute. View "Kohl's Department Stores, Inc. v. Virginia Department of Taxation" on Justia Law

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Where an income tax return has not been filed by the return date on a writ of fieri facias, any potential income tax refunds for the applicable tax year are not “in possession of or under the control of the debtor” so as to be reachable by the lien under Va. Code 8.01-501 and -507. Creditors obtained separate judgments against Debtors and issued to Debtors writs of fieri facias. The general district court entered transfer orders in favor of Creditors requiring Debtors to turn over their 2015 income tax refunds to Creditors. Debtors appealed the transfer orders to the circuit court, arguing that the general district court lacked subject matter jurisdiction to enter the transfer orders because Debtors had not filed their 2015 income tax returns as of the return date of the writ. The circuit court ruled in favor of Creditors. The Supreme Court reversed, holding that, for purposes of Va. Code 8.01-507, Debtors were not entitled to, nor did they have a fixed property interest in, the 2015 income tax refunds at the time of the return date on the writ of fieri facias. View "Shifflett v. Latitude Properties, Inc." on Justia Law

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The Supreme Court reversed the judgment of the circuit court sustaining the Tax Department’s decision to rescind $4.9 million in land preservation tax credits it had previously awarded to the Woolford family on the grounds that the Woolfords’ appraiser was not a “qualified appraiser.” Specifically, the circuit court found that the Woolfords’ appraiser lacked the necessary education and experience, as required by applicable federal law incorporated by Va. Code 58.1-512(B), to offer a qualified appraisal. The Supreme Court disagreed and remanded the case, holding (1) the trial court erred in ruling that the Woolfords’ appraiser was not a “qualified appraiser”; and (2) the Department was not constrained from auditing the value of the tax credits claimed by the Woolfords after initially awarding them those tax credits. View "Woolford v. Virginia Department of Taxation" on Justia Law

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Kohl’s Department Stores, Inc. entered into a license agreement with Kohl’s Illinois, Inc., an affiliate of Kohl’s that operates retail stores in select states, but not Virginia, for the use of intellectual property managed and licensed by Kohl’s Illinois. Kohl’s paid royalties to Kohl’s Illinois, and when calculating its federal taxable income, Kohl’s deducted these royalty payments from its income as an ordinary and necessary business expense. Kohl’s Illinois, however, did not pay state income taxes on a substantial portion of the royalties. Kohl’s claimed that the royalty payments fell within the “subject-to-tax” exception to the add back statute. The Virginia Department of Taxation auditor required that the untaxed portion be added back to Kohl’s taxable income and issued a notices of assessment to Kohl’s for certain taxable years. The circuit court affirmed, concluding that only the portion of the royalties that was actually taxed by another state fell within the subject-to-tax exception. The Supreme Court reversed, holding that the circuit court erred by failing to hold that Kohl’s Illinois need not be the entity that pays the tax for the subject-to-tax exception to apply. Remanded for a determination of what portion of the royalty payments was actually taxed by another state and therefore excepted from the add back statute. View "Kohl's Department Stores, Inc. v. Virginia Department of Taxation" on Justia Law

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The Tax Commissioner of Virginia directed Chesterfield County to issue refunds to Verizon Online LLC for local taxes it paid for tax years 2008, 2009 and 2010 on set top boxes it owned. The circuit court upheld the Tax Commissioner’s determination that the set top boxes were not subject to local taxation but concluded that Verizon was not entitled to refunds for tax years 2008 and 2009 due to its failure to file a timely appeal with the local commissioner of revenue. The Supreme Court affirmed in part and reversed in part, holding (1) the circuit court did not err in ruling that Verizon’s set top boxes are not subject to local taxation; but (2) the issue of the timeliness of Verizon’s local appeal was not preserved for review by the circuit court, and therefore, the circuit court erred in ruling that Verizon was not entitled to refunds for tax years 2008 and 2009. View "Verizon Online LLC v. Horbal" on Justia Law

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Plaintiffs, two Arlington County taxpayers, challenged the County’s inclusion of transferrable development rights (TDRs) in their real estate assessment, arguing that the County had no authority assess and tax TDRs on their properties for tax years 2012 through 2015. The circuit court ruled in favor of the County. The Supreme Court reversed, holding (1) the County may not tax TDRs under Va. Code 15.2-2316.2 unless it enacts an ordinance that conforms to the detailed requirements of that statute; and (2) the County lacks the authority to tax TDRs under section 15.2-750 and its ordinance until it has approved and accepted a site plan. View "Johnson v. Arlington County" on Justia Law

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Western Refining Yorktown, Inc. was the owner of a refinery that was subject to the machinery and tools tax. Western challenged the Commissioner of Revenue’s 2010 and 2011 assessments in the circuit court. The trial court upheld the valuation of the refinery’s machinery and tools for purposes of levying the machinery and tools tax, concluding that Western did not carry its burden of proof to show that the property in question was valued at more than its fair market value. The Supreme Court affirmed, holding (1) the trial court did not err in upholding the assessment; and (2) the County of York did not assume inconsistent positions in successive litigation. View "Western Refining Yorktown v. County of York" on Justia Law