Justia Tax Law Opinion Summaries

The Eighth Circuit agreed with the tax court and held that taxpayers were not entitled to a new hearing because a revenue officer included notes and correspondence about a meeting with their attorney in the official file that was later made available to the settlement officer who reviewed the case. The court explained that, under the administrative-file rule, contemporaneous statements may permissibly be included in the file as long as they are pertinent to the revenue officer's consideration of the case, even if they would otherwise be prohibited. In this case, there is no dispute that the statements in the notes and letters were contemporaneous. Furthermore, the statements were not gratuitous. Therefore, taxpayers are not entitled to a new hearing. View "Stewart v. Commissioner of Internal Revenue" on Justia Law

After the IRS concluded that Mayo, a tax-exempt organization under IRC 501(c)(3), owed unrelated business income tax (UBIT) on certain investment income it received from the investment pool it manages for its subsidiaries, the IRS issued a Notice of Proposed Adjustment and reaffirmed its position in a 2013 Technical Advice Memorandum. In this refund action, the parties dispute the $11,501,621 in UBIT for tax years 2003, 2005-2007, and 2010-2012. At issue is whether Mayo is a "qualified organization" exempted from paying unrelated business income tax on "unrelated debt-financed income" under section 514(c)(9)(C)(i) and whether it its a qualified organization under section 170(b)(1)(A)(ii) because it is an educational organization. The district court held that the Treasury Regulation is invalid "because it adds requirements -- the primary-function and merely-incidental tests -- Congress intended not to include in the statute."The Eighth Circuit concluded that Treasury Regulation 1.170A-9 is valid, but only in part, and that application of the statute as reasonably construed by the regulation to Mayo's tax years in question cannot be determined as a matter of law on this summary judgment record. Accordingly, the court reversed the district court's invalidation of Treasury Regulation 1.170A-9 to the extent it is not inconsistent with IRC 170(b)(1)(A)(ii) and remanded for further proceedings. View "Mayo Clinic v. United States" on Justia Law

This opinion supersedes the opinion issued on December 15, 2020, as rehearing by panel was granted on February 10, 2021.The Eighth Circuit reversed the tax court's grant of taxpayer's motion for summary judgment in an action where the Commissioner had determined that because taxpayer was not a bona fide resident of the United States Virgin Islands (USVI), she and her husband owed federal income tax for the 2003 and 2004 tax years. It is undisputed that taxpayers did not intend to file tax returns with the IRS, but only with the USVI's Bureau of Internal Revenue (VIBIR).The court rejected claims that taxpayer and her husband met the USVI nonresident filing requirements, beginning the three-year statute of limitations in 26 U.S.C. 6501(a) and barring the IRS's claims. In this case, the VBIR's action of sending some of their tax documents to the IRS or their action of filing the returns with the Virgin Islands alone do not meet the filing requirements. Therefore, the court reversed the tax court's finding that taxpayer and her husband could assert the statute of limitations as a defense. View "Coffey v. Commissioner" on Justia Law

The Eighth Circuit reversed the tax court's grant of appellees' motion for summary judgment in an action where the Commissioner determined that because Judith S. Coffey was not a bona fide resident of the United States Virgin Islands (USVI), she and James L. Coffey owed federal income tax for the 2003 and 2004 tax years. The Coffeys invoked the three-year statute of limitations in 26 U.S.C. 6501(a), and the USVI intervened.The court held that the statute of limitations in section 6501(a) begins only when a return is filed. In this case, because the Coffeys did not meticulously comply with requirements to file with the IRS, the court concluded that the statute of limitations never began. The court rejected the Coffeys' and the USVI's contentions that filing returns solely with the Virgin Islands Bureau of Internal Revenue began the three-year statute of limitations in section 6501(a). The court explained that without a filing, the documents are not an honest and genuine attempt to satisfy the tax law and are not filed returns. View "Coffey v. Commissioner of Internal Revenue" on Justia Law

The Eighth Circuit affirmed the district court's dismissal of Boechler's petition for review of a notice of determination from the Commissioner of the IRS based on lack of jurisdiction. Under 26 U.S.C. 6330(d)(1), a party has 30 days to file a petition for review. In this case, Boechler filed one day after the filing deadline had passed.The court held that the statutory text of section 6330(d)(1) is a rare instance where Congress clearly expressed its intent to make the filing deadline jurisdictional. The court also held that Boechler failed to demonstrate that the filing deadline is arbitrary and irrational. Rather, given the rational reasons for the calculation method, and Boechler's inability to identify any actual discrimination or discriminatory intent, the court held that the 30-day filing deadline from the date of determination does not violate the Fifth Amendment. Therefore, Boechler's petition was untimely and thus properly dismissed. View "Boechler, P.C. v. Commissioner" on Justia Law

After C&W failed to remit employment taxes, the IRS assessed the balance owed against C&W's former's owner. C&W's former owner filed suit alleging that the IRS misallocated funds it had levied from C&W, leaving him personally liable for the outstanding taxes.The Eighth Circuit affirmed the district court's dismissal of the complaint based on lack of subject matter jurisdiction. The court held that because the owner argued that his payment was made in 2006 when the IRS allegedly misallocated levied funds, his attempted administrative claim in 2015 was more than two years after the tax was paid. Therefore, the owner's claim was untimely and the United States retains its sovereign immunity. View "Barse v. United States" on Justia Law

Wells Fargo, a U.S. corporation, entered into a structured trust advantaged repackaged securities transaction (STARS) with Barclays, a United Kingdom corporation. Wells Fargo asserts its purpose was to borrow money at a favorable interest rate, to diversify its funding sources, to reduce its liquidity risk, and to provide a stable source of funding for five years. The government claimed that STARS was an unlawful tax avoidance scheme, designed to exploit the differences between the tax laws of the two countries and generate U.S. tax credits for a foreign tax that Wells Fargo did not, in substance, pay. Wells Fargo claimed foreign-tax credits on its 2003 federal tax return arising from STARS. The IRS disallowed those credits and notified Wells Fargo that it owed additional taxes. Wells Fargo paid the resulting deficiency and sued to obtain a refund. The government sought to impose a “negligence penalty” as an offset defense because Wells Fargo underpaid its 2003 taxes after claiming this credit.The Eighth Circuit affirmed that Wells Fargo was not entitled to a tax credit and was liable for a “negligence penalty.” The "sham-transaction" or "economic-substance" doctrine allows the IRS and courts “to distinguish between structuring a real transaction in a particular way to obtain a tax benefit, which is legitimate, and creating a transaction to generate a tax benefit, which is illegitimate.” STARS’s trust component had no real potential for profit outside of its tax implications and Wells Fargo had no valid purpose other than tax considerations. View "Wells Fargo & Company v. United States" on Justia Law

The Eighth Circuit held that the Indian Gaming Regulatory Act does not preempt the imposition of statewide tax on the gross receipts of a nonmember contractor for services performed in renovating and expanding the Tribe's gaming casino located on the Reservation. The court reversed the district court's grant of summary judgment for the Tribe and held that the Tribe has failed to show that the tax has more than a de minimis financial impact on federal and tribal interests. Furthermore, the State's legitimate interests in raising revenues for essential government programs that benefit the nonmember contractor-taxpayer in this case, as well as its interest in being able to apply its generally applicable contractor excise tax throughout the State, were sufficient to justify imposing the excise tax on the construction services performed on the Casino's realty. Finally, the court granted the State's motion to dismiss the State Treasurer and remanded for further proceedings. View "Flandreau Santee Sioux Tribe v. Haeder" on Justia Law

The Eighth Circuit affirmed the grant of an attorney's fee award after taxpayer prevailed in a deficiency proceeding before the United States Tax Court. The tax court granted the award, but denied taxpayer's request for an enhancement to the hourly fee rate. The court held that the tax court did not abuse its discretion by declining to find the presence of a special factor warranting an enhanced fee rate and by reducing the number of hours worked during the post-trial process. Furthermore, the tax court did not abuse its discretion by determining that the requested fee award was unreasonable. View "Tolin v. Commissioner" on Justia Law

The Eighth Circuit affirmed the district court's grant of the government's motion for summary judgment and denied taxpayer's cross motion. The court held that the government established the existence and proper mailing of the notice of deficiency for tax year 2002 by producing a copy of the notice and Form 4340. Although the government did not produce a copy of the notice for the 2009 tax year, it submitted a Case History Report that described steps taken by the IRS officer assigned to taxpayer's case. Therefore, the Case History Report and the Form 4340 produced by the government established both the existence and mailing of the notice for tax year 2009. View "United States v. Meyer" on Justia Law