Justia Tax Law Opinion Summaries

Articles Posted in US Court of Appeals for the District of Columbia Circuit
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Chairman of the Committee on Ways and Means (“the Chairman”) invoked Section 6103(f)(1) in a writing to the Commissioner of Internal Revenue (“the 2019 Request”). The Chairman requested the federal income tax returns of then-President Donald J. Trump and that of his related companies and organizations (collectively “the Trump Parties”). The Department of the Treasury responded that it did not intend to comply with the 2019 Request because it was not supported by a legitimate legislative purpose. Later the Treasury informed the district court and the Trump Parties that it intended to comply with the 2021 Request and provide the Committee with the requested materials. The Trump Parties alleged that Section 6103(f)(1) is facially unconstitutional and that compliance with the Request would be a violation of the First Amendment.The DC Circuit affirmed. The court explained that the 2021 Request seeks information that may inform the United States House of Representatives Committee on Ways and Means as to the efficacy of the Presidential Audit Program, and therefore, was made in furtherance of a subject upon which legislation could be had. Further, the Request did not violate the separation of powers principles under any of the potentially applicable tests primarily because the burden on the Executive Branch and the Trump Parties is relatively minor. Finally, Section 6103(f)(1) is not facially unconstitutional because there are many circumstances under which it can be validly applied, and Treasury’s decision to comply with the Request did not violate the Trump Parties’ First Amendment rights. View "Committee on Ways and Means, United States House of Representatives v. TREA" on Justia Law

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Congress enacted a tax credit to incentivize the production of refined coal, which releases fewer emissions than unrefined coal. AJG Coal, Inc. responded by forming Cross Refined Coal, LLC and recruiting two other investors in that enterprise. Limited-liability companies are taxed like partnerships, so the company’s tax liabilities and credits passed through to its member investors.The IRS asserted that Cross was not a bona fide partnership for tax purposes, in part because it could never have made a profit without the tax credit. The tax court disagreed. The DC Circuit affirmed the tax court’s decision holding that partnerships formed to conduct activity made profitable by tax credits engage in legitimate business activity for tax purposes. The court further concluded that all of Cross’s members shared in its profits and losses, and thus had a meaningful stake in its success or failure. View "Cross Refined Coal, LLC v. Cmsnr. IRS" on Justia Law

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In the district court, Appellants brought suit against the Internal Revenue Service for its responses to the Appellants’ twelve Freedom of Information Act (“FOIA”) requests. The district court ultimately granted summary judgment to the IRS on all issues. Appellants appealed the district court’s order awarding summary judgment to the IRS, as well as seven opinions and orders supporting the order.   Appellants set forth three procedural arguments averring that the IRS is barred from asserting a Glomar Response to Requests 1–5: (1) collateral estoppel; (2) judicial estoppel; and (3) the official acknowledgment doctrine.  Appellants argued that the IRS benefitted from its argument to the Fifth Circuit that no informant existed, resulting in favorable evidentiary and statute of limitations rulings, and thus the IRS cannot now change its position that no informant exists.   The DC Circuit affirmed the district court’s ruling. The court explained that the IRS’s Glomar Response to the existence of whistleblower documents, as requested by the Appellants in FOIA Requests 1–5, does not bear on its prior position in the Fifth Circuit cases regarding the existence of a whistleblower. Since the IRS’s positions are not inconsistent, the IRS is not judicially estopped from its Glomar Response.  Further, the court held that the official acknowledgment doctrine does not apply to Appellants’ argument because the IRS did not officially acknowledge in any prior proceeding that it did, or did not, possess records pertaining to potential informants, the subject of Requests 1–5. View "Thomas Montgomery v. IRS" on Justia Law

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In 2018, Li filed a Form 211 with the IRS Whistleblower Office (WBO) alleging tax violations by the “target taxpayer,” seeking a monetary whistleblower award under 26 U.S.C. 7623(b). A WBO classifier reviewed Li’s Form 211 and the target taxpayer’s returns and concluded that Li’s allegations were “speculative and/or did not provide specific or credible information regarding tax underpayments or violations of internal revenue laws,” making Li ineligible for an award. The WBO did not forward Li’s form to an IRS examiner for any potential action against the target taxpayer.Li appealed to the Tax Court, which rejected the case on summary judgment. The court found that the WBO adequately performed its evaluative function and did not abuse its discretion by rejecting the form for an award. The D.C. Circuit remanded for dismissal of the case for lack of jurisdiction. The WBO rejected Li’s Form 211 for providing vague and speculative information it could not corroborate and did not forward it to an IRS examiner; the IRS did not take any action against the target taxpayer. There was no proceeding and no “award determination,” so the Tax Court had no jurisdiction to review the WBO’s threshold rejection of Li’s Form 211. View "Li v. Commissioner of Internal Revenue" on Justia Law

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After the Commissioner issued tax adjustments to the partnership of BCP, members of BCP, themselves limited partnerships, challenged the adjustments, arguing they were untimely and that the Commissioner mistakenly determined that the investment partnership was a sham. The tax court found the adjustments timely and upheld the Commissioner's adjustments.The DC Circuit concluded that the tax court applied correct legal precedent and committed no clear error in its findings upholding the Commissioner's tax adjustments. The court explained that the tax court outlined various events that occurred before the taxpayers' individual extensions or the partnership extension were signed, all of which would have put the taxpayers on notice that they should not rely on E&Y's advice any longer. The court also concluded that there was no error in the tax court's determination that BCP was a "sham" partnership. The court explained that the tax court correctly applied Luna v. Commissioner, 42 T.C. 1067 (1964), to determine whether the parties intended to, and did in fact, join together for the present conduct of an undertaking or enterprise. In this case, the tax court correctly concluded that BCP failed the Luna analysis. Finally, the court concluded that the tax court did not abuse its discretion in denying a non-participating party's intervention. Accordingly, the court affirmed the tax court's judgment. View "BCP Trading and Investments, LLC v. Commissioner of Internal Revenue" on Justia Law

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The DC Circuit denied petitions for review challenging FERC's orders concerning SFPP's tariffs. SFPP challenges FERC's decisions to deny SFPP an income tax allowance, to decline to reopen the record on that issue, and to deny SFPP's retroactive adjustment to its index rates. Shippers challenge FERC's disposition of SFPP's accumulated deferred income taxes (ADIT) and its temporal allocation of litigation costs.The court held that FERC's denial of an income tax allowance to SFPP was both consistent with the court's precedent and well-reasoned, and that FERC did not abuse its discretion or act arbitrarily in declining to reopen the record on that issue. Furthermore, FERC reasonably rejected retroactive adjustment to SFPP's index rates. The court also held that FERC correctly found that the rule against retroactive ratemaking prohibited it from refunding or continuing to exclude from rate base SFPP's ADIT balance, and that FERC reasonably allocated litigation costs. View "SFPP, LP v. Federal Energy Regulatory Commission" on Justia Law

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The DC Circuit affirmed the tax court's judgment that certain partnership currency option transactions lacked economic substance and were shams designed to look like real world trades without any of the risk or concomitant opportunity for profit. The court held that the tax court did not clearly err in concluding that the parties agreed in advance on the exact rates to be used in determining earnings and losses under the option agreements, together with a related evidentiary point. In this case, the parties fixed the forward exchange rates, ensuring that they could predict the precise amount that the winning and losing trades would pay—and ensuring that the trades had no ex ante profit potential and lacked any other legitimate nontax business purposes. The court rejected the partnerships' remaining claims and held that the tax court did not err in any material respect. View "Endeavor Partners Fund, LLC v. Commissioner" on Justia Law

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The Institute filed suit under the Freedom of Information Act (FOIA), seeking information related to all records contained in the IRS's Asset Forfeiture Tracking and Retrieval System (AFTRAK). The DC Circuit reversed the district court's grant of summary judgment for the IRS, holding that whether the Open/Closed Report covers all records "contained in" AFTRAK was itself a material, genuinely disputed question of fact, and the answer in turn depended on other disputed and material facts. The court also held that whether AFTRAK was correctly classified as a database, a matter on which the IRS's Manual and other official documents contradict its legal denial here, appeared to be an intermediate fact with potential consequences for resolving the parties' claims. View "Institute For Justice v. IRS" on Justia Law

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Appellant asked to proceed anonymously before the tax court when challenging the IRS's denial of his application for a whistleblower award, but the tax court denied the request.Determining that it had jurisdiction to hear this interlocutory appeal under the collateral order doctrine, the DC Circuit held that the tax court abused its discretion because identifying the appellant was not necessary to enable the public to gauge the extent to which serial filers affect the work of the tax court or whether any particular petitioner was a serial filer. Accordingly, the court remanded for the tax court to reconsider whether appellant has otherwise made out a fact-specific basis for protecting his identity under Tax Court Rule 345(a). View "In re: Sealed Case" on Justia Law

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26 U.S.C. 7623(b)(4) does not contain a "clear statement" that timely filing is a jurisdictional prerequisite to the tax court's hearing the whistleblower's case. In this case, the Irwin presumption has not been rebutted and the filing period in section 7623(b)(4) is subject to equitable tolling.After the IRS denied appellant's application for a whistleblower award, he sought relief from the tax court. The tax court found that his petition was untimely and dismissed it for lack of jurisdiction. Determining that it had jurisdiction, the DC Circuit reversed and remanded for further proceedings because, although the petition was untimely, the filing period was not jurisdictional and was subject to equitable tolling. View "Myers v. Commissioner" on Justia Law