Justia Tax Law Opinion Summaries

Defendant Kevin Hartshorn appealed a district court's issuance of an injunction against him, arguing the court erred in concluding he promoted an abusive tax shelter in violation of 26 U.S.C. 6700. Defendant organized and was appointed head minister of the Church of Compassionate Service in 2004. At that time, the church had approximately fifty active ministers. To become a minister, an individual is required to take a vow of obedience and a vow of poverty. Upon taking the vow of poverty, ministers transferred title to all of their property to the church. They also assigned to the church all income that was earned as part of their normal employment, either endorsing their employment checks in favor of the church or directing their employers to deposit their earnings directly into various church accounts. According to internal church documents, 90% of the money ministers earned and assigned to the church was "available for local ministry funding." Defendant testified that the church’s "policy [of trying] to make 90 percent available to fund ministries for their compassionate service projects [is] not tied to how much money they make." However, ministers who were deposed in the course of this litigation indicated that it was their understanding they would “get back 90 percent of whatever funds [they] generate[d] for the church.” Ministers deposed for the litigation had not filed tax returns for numerous years though the income they earned at their jobs outside the church was taxable income. The district court agreed with the government that Defendant was promoting abusive tax shelters through his church, and particularly through his representations that individuals who took vows of poverty and obedience and became ministers of his church would not be required to pay taxes on income they earned and assigned to the church. The court accordingly granted summary judgment in favor of the government and issued an injunction prohibiting Defendant from promoting or selling "the use of church-based tax-fraud schemes." On appeal, Defendant argued that the Tenth Circuit should reverse the district court’s summary judgment decision because: (1) Defendant’s statements regarding the tax benefits for vow-of-poverty ministers were correct; and (2) if any of his statements were false or fraudulent, he did not know or have reason to know of this fact. The Tenth Circuit agreed with the district court that Defendant’s representations to the ministers regarding the tax consequences of becoming a minister of the church were false or fraudulent. With respect to reversal of summary judgment because of statements Defendant made to the ministers, the Tenth Circuit found none of his arguments persuasive: "the test for injunctive relief under [26 U.S.C. 7408] is satisfied if the defendant had reason to know his statements were false or fraudulent, regardless of what he actually knew or believed. And we conclude that, whether or not Defendant actually knew his purported interpretation of federal tax law was incorrect, 'a reasonable person in [his] subjective position would have discovered' the falsity of his representations." View "United States v. Hartshorn" on Justia Law

The Internal Revenue Service issued four summonses to banks in the Eastern and Western Districts of Oklahoma for records involving nursing homes owned by Sam Jewell. Under federal law, the IRS had to notify Jewell at least 23 days before the examination date. Because the IRS waited too long to mail the notices, Jewell received the notices less than 23 days before the records were to be examined. Alleging inadequate notice, Jewell filed petitions to quash the summonses. The two courts split on how to interpret the notice requirement: the Western District of Oklahoma granted the government's summary judgment motion and denied Jewell's petition to quash, noting that he received the summonses in time to file his petition; the Eastern District of Oklahoma granted Jewell's petition to quash and denied the government's motion to dismiss, reasoning that the IRS failed to comply with the notice requirement. Jewell appealed the Western District's ruling, and the government appeals the Eastern District's. The Tenth Circuit held that the IRS could not obtain an order enforcing the summonses, affirming the ruling of the Eastern District of Oklahoma and reversing the ruling of the Western District of Oklahoma (with instructions to grant Jewell's petition to quash the two summonses).View "Jewell v. United States" on Justia Law

In 2008, the IRS levied defendant John Williamson's wife's wages to collect his back taxes dating back thirty years. The IRS sent a notice of the levy, which Defendant returned, writing across the document: "Refused for cause. Return to sender, unverified bill." He enclosed an affidavit explaining why he did not need to pay income taxes. Subsequent notices of the levy were also returned. Later that year, Defendant sent an invoice for $909,067,650.00 to two IRS agents who had worked on the matter, listing the value of real and personal property allegedly seized by the IRS, added damages for various alleged torts, and then trebled the total "for racketeering." A grand jury indicted Defendant and Mrs. Williamson on two counts: (1) "endeavor[ing] to impede the due administration of the Internal Revenue Code by filing a false and fraudulent Claim of Lien;" and (2) "fil[ing] . . . a false lien and encumbrance against the real and personal property [of the IRS agents] on account of the performance of [their] official duties." Mrs. Williamson pled guilty to the second count in return for dismissal of the first count against her. Defendant, however, proceeded to trial. His defense was essentially that he genuinely believed his lien was proper. A forensic psychologist testified that Defendant suffered from a delusional disorder that prevented him from abandoning his beliefs even when confronted with overwhelming evidence that he was wrong. Defendant requested instructions that would support his "genuine belief" defense to both charges, but the court rejected them and the jury returned verdicts of guilty on the two charges. Defendant was sentenced to four months in prison and three years of supervised release. Defendant appealed his conviction, claiming the district court erred by not giving the requested jury instructions. Finding no reversible error, the Tenth Circuit affirmed. View "United States v. Williamson" on Justia Law

The Internal Revenue Service and several oil companies agreed to settle a tax dispute over a jointly-developed pipeline system in a closing agreement. After entering the agreement, Phillips Petroleum Company (now ConocoPhillips Company) acquired Arco Transportation (one of the original signatories to the agreement). In 2000 and 2001, Conoco revisited the tax implications of its acquisition and claimed "going-forward" and "basis-increase" deductions on its amended consolidated tax returns. The IRS refunded Conoco's 2000 going-forward deductions, but disputed the remaining deductions. The parties took the dispute to federal district court, where the district court decided the issue on cross-motions for summary judgment. The court rejected Conoco's position and granted summary judgment to the IRS. Conoco appealed. After its review, the Tenth Circuit concluded that "going-forward" deductions were impermissible for interests that Arco Transportation did not own as of July 1, 1977, and "basis-increase" deductions were impermissible because the Closing Agreement did not fix the amount of a liability or exempt that liability from section 461(h) of the Internal Revenue Code. Thus, the Court held that Conoco was not entitled to the going-forward or basis-increase deductions. View "United States v. ConocoPhillips Company" on Justia Law

Various groups and several Colorado state legislators filed suit in federal district court to challenge the Taxpayer's Bill of Rights (TABOR) violated the Guarantee Clause of the federal Constitution, was in direct conflict with provisions of the Enabling Act, and impermissibly amended the Colorado Constitution. In order to avoid Eleventh Amendment sovereignty issues, the Governor of Colorado was designated as the named defendant. Governor John Hickenlooper filed his Answer to the plaintiffs' Complaint, and promptly followed with a motion to dismiss, alleging that plaintiffs lacked Article III standing and prudential standing, and that their claims were barred by the political question doctrine. That motion was denied by the district court, and the Governor appealed to the Tenth Circuit Court of Appeals, contending the district court erred. The Governor asked the Court to dismiss the case on the same bases that he presented at district court. The ultimate issue before the Tenth Circuit was: whether plaintiffs suffered a particularized injury not widely shared by the general populace that entitled them to have their case heard by the federal courts, and whether the question presented was purely political in nature and should not be reached by the courts. The Tenth Circuit concluded that these plaintiffs could bring their claims, and that the political question doctrine did not bar the Court's consideration. View "Kerr, et al v. Hickenlooper" on Justia Law

Petitioners-Appellants Esgar Corporation, George and Georgetta Tempel, and Delmar and Patricia Holmes appealed two United States Tax Court decisions, arguing that the Tax Court erred in valuing conservation easements they claimed as charitable deductions and in determining the holding period of state tax credits they sold. Upon careful consideration of the facts of this case and the Tax Court's decision, the Tenth Circuit found no reversible error and affirmed that court's decision. View "Esgar Corporation, et al v. Comm'r of Internal Rev." on Justia Law

Petitioners Scott and Audrey Blum appealed a Tax Court decision upholding the actions of the Commissioner of the Internal Revenue Service (IRS) invalidating a financial transaction as lacking economic substance and imposing two accuracy-related penalties for underpayment of taxes. "The intricacies of this offshore financial transaction and the fog of plausible deniability surrounding it cannot make up for the clarity of the big picture: this was a transaction designed to produce nothing more than tax advantages, and the Tax Court was right to uphold the Commissioner’s actions." View "Blum, et al v. CIR" on Justia Law

The government sued Defendant-Appellant/Cross-Appellant James Holmes to collect taxes owned on his now-defunct business, Colorado Gas Compression, Inc. The district court granted final judgment in favor of the government. Defendant appealed that judgment. The government cross-appealed the district court's decision regarding the date from which prejudgment interest would be awarded. Colorado Gas made a series of distributions to defendant from 1995 to 2002 as part of its winding-down process. The government brought suit in 2008 on state counts of fraudulent conveyances, unlawful distributions and as an owner of the company who received its assets. Defendant argued the government was estopped from bringing suit under the applicable state statute of limitations because the government's suit was based on state law. The government countered by arguing its claims were subject to a ten-year federal statute of limitations. Upon careful consideration, the Tenth Circuit concluded the district court did not err in ruling in favor of the government. The Court further concluded that the government did not properly preserve the issue of prejudgment interest for appeal, and declined to consider it. View "United States v. Holmes" on Justia Law

The issue in this appeal was whether Colorado's notice and reporting obligations for retailers who do not collect sales or use taxes violate the Commerce Clause. The Tenth Circuit did not reach that merits question: because the Tax Injunction Act, 28 U.S.C. 1341, deprived the district court of jurisdiction to enjoin Colorado's tax collection effort, the Court remanded the case back to the district court to dismiss DMA's Commerce Clause claims. View "Direct Marketing Association v. Brohl" on Justia Law

Pro se appellant John Schoppe petitioned the Tenth Circuit for review of a Tax Court decision that found him liable for tax deficiencies for the years 2002-2007. While the case was proceeding before the Tenth Circuit, Petitioner filed a voluntary bankruptcy petition. That filing prompted the Court to request a supplemental briefing from the parties on whether the automatic bankruptcy stay would apply to appellant's appeal before the Tenth Circuit. Finding that 11 U.S.C. 362(a)(1) of the Bankruptcy Code did not stay this appeal, the Court reviewed the Tax Court decision and affirmed it. View "Schoppe v. CIR" on Justia Law