Articles Posted in U.S. Court of Appeals for the Fourth Circuit

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This case involved the differences between how ad valorem taxes are determined in South Carolina for railroad property and how they are determined for most other commercial and industrial property. CSXT filed suit against the State, alleging that the property taxes imposed for the 2014 tax year will discriminate against CSXT. CSXT sought a judgment declaring that excluding CSXT from the benefit of the caps of the South Carolina Real Property Valuation Reform Act (SCVA), S.C. Code 12-37-3140(B), violates the Railroad Revitalization and Regulatory Reform Act of 1976, 49 U.S.C. 11501(b)(4), which prohibits the imposition of "another tax that discriminates against a rail carrier." CSXT also sought preliminary and permanent injunctions. The district court ultimately rejected CSXT's section 11501(b)(4) challenge. The court explained that Congress designed section 11501(b)(4) to prohibit taxes that discriminate against railroads. In this case, CSXT alleged that if it is not allowed to benefit from the SCVA cap, its 2014 property tax will be just such a tax. The court concluded that there was no basis for precluding CSXT from proving the claim it alleged – discrimination – and requiring CSXT instead to fit its challenge into a provision that does not even address discrimination and that required proof of facts CSXT has not even alleged. Therefore, the court vacated and remanded for further proceedings because the district court granted judgment against CSXT without ever reaching the question of whether the challenged tax was discriminatory. View "CSX Transportation, Inc. v. South Carolina Department of Revenue" on Justia Law

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After petitioner unsuccessfully challenged his liability in a preassessment hearing before the Office of Appeals of the IRS, he sought to raise the same issue before the same administrative unit in his collection due process (CDP) hearing. The Office of Appeals concluded that Section 6330 of the Internal Revenue Code, I.R.C. 6330, prohibited him from disputing his liability a second time, and the Tax Court agreed. The court explained that petitioner was afforded a meaningful opportunity to challenge the imposition and amount of the reporting penalty: he had the ability to request a preassessment hearing before the Office of Appeals. The court determined that this was sufficient under Section 6330(c)(2)(B). The court also held that Section 6330(c)(4) barred petitioner from challenging his liability in the CDP context. Therefore, the court concluded that the Commissioner was entitled to judgment as a matter of law, and the court affirmed the Tax Court's judgment. View "Iames v. Commissioner of IRS" on Justia Law

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Plaintiff filed a class action against HealthPort in state court seeking damages and injunctive relief, asserting several statutory consumer protection claims and common law claims. Specifically, plaintiff challenges HealthPort’s collection of $23 in sales tax on the sale of medical records. HealthPort removed the case to federal court. The court concluded that the Tax Injunction Act, 28 U.S.C. 1341, and the related principle of federal-state comity operate to deprive the court of jurisdiction. Therefore, the court vacated the judgment of dismissal and remanded to the district court with instructions to return the action to state court. View "Gwozdz v. Healthport Technologies, LLC" on Justia Law

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QinetiQ, the successor in interest to DTRI, contends that the stock issued to an executive employee of DTRI was issued in connection with the executive’s employment and was subject to a substantial risk of forfeiture until 2008. QinetiQ argues that it is entitled to a tax deduction for the value of the stock as a trade or business expense in the tax year ending March 31, 2009. The IRS issued a Notice of Deficiency concluding that QinetiQ had not shown its entitlement to the claimed deduction. The court concluded that the IRS complied with all applicable procedural requirements in issuing the Notice of Deficiency to QinetiQ; the tax court did not err in concluding that the stock failed to qualify as a deductible expense for the tax year ending March 31, 2009, because the stock was not issued subject to a substantial risk of forfeiture; and thus the court affirmed the judgment. View "QinetiQ US Holdings, Inc. v. Commissioner of IRS" on Justia Law

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After the Court of Appeals of Maryland suspended Michael Tankersley’s law license when he refused to provide his social security number to the Client Protection Fund of the Bar of Maryland, Tankersley filed suit against the trustees of the Fund, and the judges and the clerk of the Court of Appeals. Tankersley filed suit against these defendants in their official capacities, seeking injunctive relief based on his claim that his suspension violated the federal Privacy Act, 5 U.S.C. 552a. The district court granted defendants’ motion to dismiss. Both the Tax Reform Act, 42 U.S.C. 405(c)(2)(C)(i), and the Welfare Reform Act, 42 U.S.C. 666(a)(13)(A), allow states to collect individuals’ social security numbers in specific situations. The court held that the district court erred in relying on section 666 of the Welfare Reform Act to dismiss Tankersley’s complaint. In this case, the court agreed with Tankersley that “applicant” cannot properly be read to include a Maryland attorney who must pay an annual fee to maintain his license. However, the court concluded that section 405 of the Tax Reform Act applies to Tankersley, and the state of Maryland may lawfully compel him to provide his social security number to the Fund or consequently have his law license suspended. Accordingly, the court affirmed the district court's judgment. View "Tankersley v. Almand" on Justia Law

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The Commissioner issued a Final Partnership Administrative Adjustment (FPAA) indicating that Route 231 should have reported the $3,816,000 it received from Virginia Conservation, one of its members, as gross income and not a capital contribution. The Tax Court determined that the transaction was a “sale” and reportable as gross income in 2005. The court concluded that the Tax Court did not err in agreeing with the Commissioner that the money Route 231 received from Virginia Conservation was “income” for federal tax purposes. Further, the court concluded that the Tax Court correctly determined that the tax credit sale occurred in 2005 for federal tax purposes. Accordingly, the court affirmed the judgment. View "Route 231, LLC v. Commissioner" on Justia Law

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NOM appealed the district court’s denial of its motion under 26 U.S.C. 7431(c)(3) to collect attorneys’ fees from the IRS. NOM had filed suit against the IRS seeking damages for unlawful inspection and disclosure of confidential tax information by IRS agents. NOM sought statutory damages, actual damages, punitive damages, and costs and attorneys’ fees. the district court concluded that NOM was not a “prevailing party” under section 7430(c)(4)(A) because (1) it did not “substantially prevail[] [in litigation against the IRS] with respect to the amount in controversy, or . . . the most significant . . . issues presented,” and, alternatively, (2) the government’s position in the litigation was “substantially justified” under 7430(c)(4)(B). The court could not say that the government acted unreasonably prior to the summary judgment stage of the litigation by waiting to see what NOM’s evidence was and then challenging its sufficiency. In this case, the government adopted a reasonable strategy in conceding statutory damages, but challenging the existence and amount of both actual and punitive damages. The court agreed with the district court that the government’s litigation position was “substantially justified,” which, by itself, is sufficient to find that NOM was not a “prevailing party” under the statute. Accordingly, the court affirmed the judgment. View "National Org. for Marriage v. IRS" on Justia Law