Justia Tax Law Opinion Summaries

Articles Posted in Supreme Court of Virginia
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The Supreme Court affirmed in part and reversed in part the judgment of the circuit court granting Isle of Wight County's motion to strike International Paper Company's application for correction of a machinery and tools tax assessment that International Paper claimed was nonuniform, invalid, and illegal, holding that the court erred in sustaining the County's motion to strike as to counts 4 and 5 regarding uniformity.International Paper owned a paper production facility in the County that utilized paper-making machinery for its manufacturing operations. International Paper filed an application for a correction of the County's "nonuniform, invalid & illegal" assessment of International Paper's machinery and tools taxes for tax year 2017. The refund action had five counts. After a bench trial, the County moved to strike International Paper's evidence and claims. The circuit court granted the motion to strike and dismissed the refund action with prejudice. The Supreme Court reversed in part and remanded this case for further proceedings, holding (1) the circuit court did not err in sustaining the County's motion to strike as to three counts regarding vested rights, separation of powers, and the County's alleged lack of statutory authority; but (2) the circuit court erred in sustaining the County's motion to strike as to two counts regarding uniformity. View "International Paper Co. v. County of Isle of Wight" on Justia Law

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In this tax assessment dispute the Supreme Court affirmed in part and reversed and remanded in part the trial court's judgments in two cases consolidated for trial, holding that a real estate appraiser need not be licensed in Virginia to offer expert testimony in a tax assessment dispute and that the taxpayer failed to meet its burden of proving that the assessment overvalued the subject property.Virginia International Gateway, Inc.'s (VIG) believed the assessments for its real and personal property were above fair market value and filed separate applications to correct the 2015-16 real estate and personal property assessments. At trial, VIG offered expert testimony to support its position that the actual fair market value of the real property was lower than the City of Portsmouth's assessment. The trial court did not recognize the appraiser as an expert because he lacked Virginia licensure at the time of trial. The trial court ultimately dismissed both of VIG's applications. The Supreme Court reversed the real estate case but affirmed the personal property case, holding (1) the trial court's exclusion of the appraiser's testimony was an abuse of discretion; but (2) the trial court did not err in ruling that VIG failed to overcome the presumption of the personal property assessment's correctness. View "Virginia International Gateway v. City of Portsmouth" on Justia Law

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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