Justia Tax Law Opinion Summaries

Entergy filed suit against Vermont seeking a declaratory judgment that Vermont's Electrical Energy Generating Tax was unconstitutional. On appeal, Entergy challenged the district court's grant of Vermont's motion to dismiss based on lack of subject matter jurisdiction. At issue was whether the Tax Injunction Act, 28 U.S.C. 1341, denied the federal courts jurisdiction to review Entergy's challenges to the Generating Tax. The Act prohibits federal courts from interfering with state taxation schemes so long as the state courts offer an adequate forum to litigate the validity of the tax. The court concluded that the Act applied to the Generating Tax and that Vermont provided a plain, speedy, and efficient mechanism for raising Entergy's objections to the validity of the tax. Accordingly, the court affirmed the judgment of the district court. View "Entergy Nuclear v. Shumlin" on Justia Law

This case involved shareholders who owned stock in a C Corporation, which in turn held appreciated property. Commissioner appealed the district court's holding that Diebold could not be held liable as a transferee of a transferee under 26 U.S.C. 6901. The court concluded that the standard of review for mixed questions of law and fact in a case on review from the Tax Court was the same as that for a case on review after a bench trial from the district court: de novo to the extent that the alleged error was in the misunderstanding of a legal standard and clear error to the extent the alleged error was in a factual determination. On the merits, the court held that the two requirements of 26 U.S.C. 6901 were separate and independent inquiries, one procedural and governed by federal law, and the other substantive and governed by state law; under the applicable state statute, the series of transactions at issue collapsed based upon the constructive knowledge of the parties involved; and the court vacated the Tax Court's decision and remanded for further proceedings. View "Diebold Foundation, Inc. v. Commissioner of Internal Revenue" on Justia Law

AmBase purchased Carteret, a federally chartered stock savings bank or thrift, and then filed consolidated income tax returns with Carteret. The dispute in this appeal related to AmBase's 1992 consolidated federal income tax return. The court held that the district court had subject-matter jurisdiction and affirmed its grant of AmBase's claimed deduction to the extent that it offset Carteret's post-seizure income for the 1992 tax year. Further, the court concluded that the district court should grant AmBase's claimed deduction to the extent that it derived from Carteret's post-seizure bad debts for the 1992 tax year. Accordingly, the court affirmed in part, vacated in part, and remanded for further proceedings. View "AmBase Corp. v. United States" on Justia Law

Plaintiff filed suit to recover withheld Federal Insurance Contributions Act (FICA), 26 U.S.C. 3101, taxes from Credit Suisse and the IRS, to which Credit Suisse had forwarded the withheld taxes. Plaintiff had filed a complaint under the Age Discrimination in Employment Act (ADEA), 29 U.S.C. 621 et seq., against Credit Suisse and the parties subsequently settled on a lump sum payment of $250,000. At issue was whether, under FICA, these settlement proceeds were fairly characterized as "wages" received by plaintiff "with respect to employment," and were thus subject to FICA taxes. The court concluded that plaintiff had not offered sufficient evidence to suggest that the settlement payment was anything else but the "[w]ages, tips, other comp[ensation]" that Credit Suisse had classified the settlement payment as. Accordingly, the court affirmed the judgment of the district court granting the IRS summary judgment and dismissing the complaint against Credit Suisse. View "Gerstenbluth v. Credit Suisse, et al." on Justia Law

This case arose when the Department imposed penalties on plaintiffs for their violation of a New York law that taxes the sale of cigarettes and provides for the issuance of tax stamps evidencing payment of the required taxes. On appeal, the Department challenged a permanent injunction issued by the district court forbidding it from imposing penalties on plaintiffs under N.Y. Tax Law 481(1)(b)(i). The court concluded that the district court was barred by the comity doctrine from granting injunctive and declaratory relief to plaintiffs because such relief would interfere with the state's administration of its tax laws; the district court erred in finding that section 481(1)(b)(i) constituted a criminal penalty; and, instead, the court concluded that section 481(1)(b)(i) provided for a civil penalty and plaintiffs therefore did not suffer double jeopardy when the Department imposed the penalties on them. Accordingly, the court reversed and remanded with instructions to the district court to dismiss the suit with prejudice. View "Abuzaid, et al. v. Woodward" on Justia Law

New York Life challenged the IRS's determination that the company could not deduct policyholder dividend amounts until the tax year of payment. The court concluded that, with respect to the two claimed deductions, "all events" had not yet occurred to fix the company's liability in the tax years in which the company took the deductions. Accordingly, the court affirmed the judgment of the district court because the liability for the dividends was contingent and it did not satisfy the regulatory requirements for deduction of an accrued expense. View "New York Life Ins. Co. v. United States" on Justia Law

The IRS challenged the district court's judgment upholding the bankruptcy court's decision to grant the objection of the reorganized Worldcom debtors to the IRS's proof of claim for taxes owed and the debtors' refund motion for the taxes WorldCom had already paid. At issue was whether WorldCom must pay federal excise taxes on the purchase of a telecommunications service that connected people using dial-up modems to the Internet. The court held that WorldCom purchased a "local telephone service" when it paid for the telecommunications service and that WorldCom must therefore pay federal communication excise taxes on those transactions. Accordingly, the court reversed and remanded for further proceedings. View "In Re: WorldCom, Inc." on Justia Law

The Town and the State appealed from the district court's adverse summary judgment ruling in a suit where the Tribe challenged the Town's imposition of the State's personal property tax on the lessors of slot machines used by the Tribe at Foxwoods Casino. The court held that the district court properly exercised jurisdiction; the Tribe had standing; neither the Indian Gaming Regulatory Act (IGRA), 25 U.S.C. 2701 et seq., nor the Indian Trader Statutes, 25 U.S.C. 261-64, expressly barred the tax; and, under the White Mountain Apache Tribe v. Bracker test, federal law did not implicitly bar the tax because the State and Town interests in the integrity and uniform application of their tax system outweighed the federal and tribal interests reflected in IGRA. Accordingly, the court concluded that the district court erred in granting summary judgment for the Tribe and in denying summary judgment for the Town and State. View "Mashantucket Pequot Tribe v. Town of Ledyard" on Justia Law

Petitioner, an attorney, appealed pro se from the tax court's grant of summary judgment in favor of the Commissioner and sustaining a proposed levy to collect outstanding income tax liabilities owed by petitioner and his wife for the 2000, 2001, and 2002 taxable years. The court concluded that petitioner's argument that the settlement officer with the IRS Appeals Office abused his discretion by issuing a determination on the proposed levy without first affording petitioner an in-person collection due process hearing was without merit. Accordingly, the court affirmed the judgment. View "Williams v. Comm'r of Internal Revenue" on Justia Law

The Commissioner appealed from the tax court's order that prevented the Commissioner from collecting City Wide's outstanding employment taxes for seven taxable quarters. The tax court held that the Commissioner was time barred from collecting these taxes under section 6501(a) of the Internal Revenue Code and that the tolling provisions under section 6501(c)(1) and (2) of the I.R.C. did not apply. The court held that an accountant who filed fraudulent tax returns on behalf of a company in order to embezzle money otherwise owed to the Commissioner intentionally evaded taxes, thereby triggering the tolling provision under section 6501(c)(1). Accordingly, the court held that the Commissioner could assess City Wide's taxes for those seven quarters at any time. View "City Wide Transit, Inc. v. Comm'r of Internal Revenue" on Justia Law