Justia Tax Law Opinion Summaries

Joseph Anthony Borino, as part of a plea agreement, pleaded guilty to misprision of a felony (wire fraud) on July 8, 2021. He was sentenced to one year and one day of imprisonment on November 1, 2022. On March 30, 2023, the district court ordered restitution of $21,223,036.37 under the Mandatory Victims Restitution Act (MVRA), to be paid jointly and severally with Denis Joachim, Borino’s employer and co-conspirator.The district court proceedings began with the indictment of Denis and Donna Joachim in August 2018, followed by Borino’s separate indictment in November 2019. Borino was charged with conspiracy to defraud the IRS, making false statements, and wire fraud. He later pleaded guilty to misprision of a felony in June 2021. The district court adopted the Pre-Sentence Investigation Report (PSR) which attributed the entire loss of $25,543,340.78 to Borino, and scheduled a separate restitution hearing. At the restitution hearing, the court calculated the restitution amount based on the fees paid by the victims during the period of Borino’s offense, minus the claims paid by TTFG.The United States Court of Appeals for the Fifth Circuit reviewed Borino’s appeal, where he challenged the restitution order on three grounds: the applicability of the MVRA to his offense, the proof of actual pecuniary loss to the victims, and the causation of the losses. The Fifth Circuit affirmed the district court’s order, holding that the MVRA applied to Borino’s misprision offense because it involved concealment of wire fraud, a crime committed by fraud or deceit. The court found that the government had sufficiently proven the victims’ actual losses and that Borino’s continuous concealment of the fraud directly and proximately caused the victims’ losses. The court concluded that the district court did not err in ordering restitution of $21,223,036.37. View "United States v. Borino" on Justia Law

Memorial Hermann Accountable Care Organization (MHACO), a nonprofit corporation formed under Texas law in 2012, participated in the Medicare Shared Savings Program (MSSP) as an accountable care organization (ACO). ACOs are groups of healthcare providers that manage and coordinate care for Medicare beneficiaries, potentially sharing in cost savings achieved for the Medicare program. MHACO's patient population includes those covered by MSSP, Medicare Advantage Plans, and employer-sponsored health plans, but it does not provide services for uninsured individuals. The proportion of MHACO’s revenue from MSSP activities varies annually.The Internal Revenue Service (IRS) issued a proposed adverse determination letter, concluding that MHACO did not qualify for a tax exemption under I.R.C. § 501(c)(4). The IRS Independent Office of Appeals upheld this determination, stating that MHACO was not organized and operated for promoting social welfare and providing community benefit. MHACO petitioned the United States Tax Court for a declaratory judgment, which upheld the IRS’s determination, finding that MHACO’s non-MSSP activities primarily benefited its commercial payor and healthcare provider participants rather than the public. MHACO’s motions to vacate or revise the judgment were denied, leading to this appeal.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court affirmed the tax court’s judgment, holding that MHACO did not qualify for a § 501(c)(4) tax exemption. The court applied the "substantial nonexempt purpose" test, consistent with the Supreme Court's interpretation in Better Business Bureau of Washington, D.C. v. United States, and found that MHACO’s commercial activities constituted a substantial nonexempt purpose. The court concluded that MHACO’s operations did not exclusively promote social welfare, as required by § 501(c)(4). View "Memorial Hermann Accountable Care Organization v. CIR" on Justia Law

Texas Truck Parts & Tire, Incorporated, a wholesaler and retailer of truck parts and tires, purchased tires from Chinese manufacturers between 2012 and 2017. These manufacturers shipped the tires to Texas Truck in Houston, Texas. Texas Truck did not file quarterly excise tax returns or pay excise taxes on the tires, believing the Chinese manufacturers were the importers responsible for the tax. Following an IRS audit, Texas Truck was assessed approximately $1.9 million in taxes. Texas Truck paid a portion of the taxes and filed for a refund, which the IRS did not act upon, leading Texas Truck to file a lawsuit seeking a refund. The Government counterclaimed for the remaining taxes owed.The United States District Court for the Southern District of Texas granted summary judgment in favor of Texas Truck, determining that the Chinese manufacturers were the importers and thus liable for the excise tax. The court based its decision on the interpretation that Texas Truck did not "bring" the tires into the United States under the applicable Treasury regulation, and did not consider whether Texas Truck was the beneficial owner of the tires.The United States Court of Appeals for the Fifth Circuit reviewed the case and held that Texas Truck was the beneficial owner of the tires and therefore liable for the excise tax. The court found that the district court erred by not considering whether Texas Truck was the beneficial owner under the Treasury regulation. The Fifth Circuit concluded that the Chinese manufacturers were nominal importers and that Texas Truck, as the beneficial owner, was responsible for the excise tax. Consequently, the court reversed the district court's summary judgment in favor of Texas Truck, rendered judgment for the Government, and remanded the case to the district court to determine the damages. View "Texas Truck Parts & Tire v. United States" on Justia Law

Richard Plezia, a Houston-based personal injury attorney, was charged with conspiracy to defraud the United States, making false statements, and falsifying records in a federal investigation. The charges stemmed from allegations that Plezia conspired with other attorneys and case runners to unlawfully reduce the federal income taxes owed by Jeffrey Stern. The scheme involved funneling illegal payments through Plezia to case runner Marcus Esquivel, which were then falsely reported as attorney referral fees.The United States District Court for the Southern District of Texas held a fifteen-day jury trial, where Plezia was convicted on all counts. Plezia challenged the sufficiency of the evidence, the equitable tolling of the statute of limitations for one count, and the admission of certain witness testimonies. The district court denied his motions for acquittal and a new trial, and sentenced him to six months and one day in prison, followed by two years of supervised release.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court agreed with Plezia that the statute of limitations for the false statements charge was not subject to equitable tolling and vacated his conviction on that count, remanding with instructions to dismiss it with prejudice. However, the court affirmed the remaining convictions, finding sufficient evidence to support the jury's verdict on the conspiracy and falsification charges. The court also held that any error in admitting witness testimonies was harmless given the overwhelming evidence of guilt. View "United States v. Plezia" on Justia Law

Joseph Boswell, Sr. was convicted by a jury of bankruptcy fraud and tax evasion. Boswell operated a business servicing pizza ovens and stopped reporting income and paying taxes around 1995. He filed for bankruptcy in 2011, claiming significant back taxes owed. The government alleged that Boswell used various corporate entities, nominally owned by family members, to conceal assets from the IRS and creditors. During his bankruptcy, Boswell reported minimal assets and income, despite evidence suggesting he controlled significant funds through these entities.The United States District Court for the Western District of Louisiana oversaw the initial trial. Boswell moved to dismiss the bankruptcy fraud charge, arguing it was untimely and that the indictment was improperly sealed. The district court denied this motion, finding the government had a legitimate reason for sealing the indictment. Boswell also requested a bill of particulars, which the court denied, and he was ultimately convicted on both counts. The district court sentenced him to sixty months in prison and ordered restitution to the IRS.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court found that the government failed to demonstrate a legitimate prosecutorial purpose for sealing the indictment, which meant the statute of limitations was not tolled, rendering the bankruptcy fraud charge untimely. Consequently, the court reversed Boswell's conviction on the bankruptcy fraud charge. However, the court affirmed the tax evasion conviction, finding sufficient evidence to support the jury's verdict. The court also upheld the district court's jurisdiction to impose restitution while the appeal was pending and found no cumulative errors warranting a new trial for the tax evasion charge. View "USA v. Boswell" on Justia Law

The case involves two casino operators, PNK (Baton Rouge) Partnership, PNK Development 8 LLC, PNK Development 9 LLC, and Centroplex Centre Convention Hotel, LLC, who incentivize their patrons with rewards, including complimentary hotel stays. The City of Baton Rouge/Parish of East Baton Rouge Department of Finance and Linda Hunt, its director, discovered through an audit that the operators had not remitted state and local taxes associated with these complimentary stays for several years. The City argued that the operators needed to pay these taxes, while the operators presented various arguments as to why they did not. The City filed a lawsuit in state court, which the operators removed to federal court on diversity jurisdiction grounds.The operators' removal of the case to federal court was challenged by the City, which argued that the tax abstention doctrine (TAD) warranted abstention in this case. The United States District Court for the Middle District of Louisiana agreed with the City, finding that all five TAD factors favored abstention: Louisiana's wide regulatory latitude over its taxation structure, the lack of heightened federal court scrutiny required by the operators' due process rights invocation, the potential for the operators to seek an improved competitive position in the federal court system, the greater familiarity of Louisiana courts with the state's tax regime and legislative intent, and the constraints on remedies available in federal court due to the Tax Injunction Act.The United States Court of Appeals for the Fifth Circuit affirmed the District Court's decision. The Appeals Court found that the District Court had correctly applied the TAD and had not abused its discretion in deciding to abstain. The Appeals Court agreed that all five TAD factors favored abstention and that any doubt about the propriety of removal should be resolved in favor of remand. View "City of Baton Rouge v. PNK" on Justia Law

The case involves two casino operators, PNK (Baton Rouge) Partnership, PNK Development 8 LLC, PNK Development 9 LLC, and Centroplex Centre Convention Hotel, LLC, who incentivize their patrons with rewards, including complimentary hotel stays. The City of Baton Rouge/Parish of East Baton Rouge Department of Finance and its director, Linda Hunt, discovered that the operators had not remitted state and local taxes associated with these complimentary stays for several years. The City argued that the operators needed to pay these taxes, while the operators put forth various arguments as to why they did not. The City filed a suit in state court, which the operators removed to federal court on diversity jurisdiction.The operators' cases were initially heard in the United States District Court for the Middle District of Louisiana. The City filed a Motion to Remand, arguing that the tax abstention doctrine (TAD), as put forth in Levin v. Commerce Energy, Inc., warranted abstention. The District Court agreed with the City, stating that all five TAD factors favored abstention: Louisiana's wide regulatory latitude over its taxation structure, the lack of heightened federal court scrutiny required for the operators' due process rights under the Louisiana Constitution, the potential for the operators to seek an improved competitive position in the federal court system, the familiarity of Louisiana courts with the state's tax regime and legislative intent, and the constraints of the Tax Injunction Act on remedies available in federal court.The case was then reviewed by the United States Court of Appeals for the Fifth Circuit. The court affirmed the District Court's decision, agreeing that the TAD applied and that all five factors favored abstention. The court concluded that the District Court's decision to abstain was within its discretion. View "City of Baton Rouge v. Centroplex Centre Convention Hotel, LLC" on Justia Law

A limited-partnership subsidiary of Argent Financial Group, RSBCO, was required to file over 21,000 annual information returns with the IRS for the 2012 tax year. However, due to errors in the files, the returns were not processed on time. The IRS imposed penalties on RSBCO for the delay in filing processable 2012 returns. RSBCO paid the penalties and accrued interest in full and filed an administrative refund claim, asserting a reasonable cause defense. When the IRS failed to act on the claim within six months, RSBCO filed a complaint for a refund in federal district court.The district court denied the Government’s motions for judgment as a matter of law or a new trial. The court then granted RSBCO’s post-trial motion for attorney fees. The court determined that the Government could “not overcome the presumption that it was not substantially justified” in denying RSBCO’s refund claim “because [the IRS] did not follow its applicable published guidance[.]” The district court awarded fees at a rate exceeding the statutory rate provided in I.R.C. § 7430(c)(1)(B)(iii), finding that “special factors” were present.The United States Court of Appeals for the Fifth Circuit found that the jury instructions were irredeemably flawed, vacated the verdict, and remanded for a new trial. The court also vacated the attorney fees and costs awarded to RSBCO because RSBCO was no longer the prevailing party. The court found that the district court’s jury instruction as to “impediments” that would excuse RSBCO’s untimely filing of its 2012 information returns was fatally inconsistent with the governing Treasury Regulation. View "RSBCO v. United States" on Justia Law

Cajun Industries LLC (“Cajun”) claimed tax credits for the 2013 tax year pursuant to § 41 of the Internal Revenue Code, 26 U.S.C. Section 41. First, the Code provision at issue in this case, Section 41 offers a tax credit for “qualified research expenses” including wages and expenditures incurred in pursuit of qualified research.1 The Internal Revenue Code provides a tax credit for qualified research activities, as defined by the Code. Appellants appealed the district court’s judgment which ejected research and development tax credits claimed by Cajun Industries LLC and upheld the resulting tax deficiency.   The Fifth Circuit affirmed. The court explained that Appellants’ argument that all contracts “for the product or result” are not funded improperly conflates “amounts payable under any agreement that are contingent on the success of the research” with contracts for products or services. This argument ignores the operative portion of the sentence: “amounts payable under any agreement that are contingent on the success of the research.” Structurally, the phrase “and thus considered to be paid for the product or result of the research” merely describes or modifies “amounts payable . . . contingent on the success of the research.” It does not, as Appellants urge, stand on its own to establish an additional type of contract “not treated as funding.” Further, the court explained that Appellants are not entitled to the research credit merely because SWBNO could not claim the credit. The Regulations do not require that a tax credit be allocated in every contract. View "USA v. Grigsby" on Justia Law

The City of Austin, Texas, issued an ordinance (1) declaring that the shoreline properties are within the city’s full purpose jurisdiction; (2) repealing a 1986 ordinance that putatively declared the shoreline properties to be within the city’s limited purpose jurisdiction but promised not to tax those properties until the city made city services available to them; and (3) announcing that the shoreline properties are subject to taxation by the city, albeit without providing city services. The owners asserted claims under the due process, equal protection, takings and ex post facto clauses of the Constitution, together with state law claims, and sought various declarations, injunctions, and writs of mandamus. They alternatively sought just compensation for the taking of their properties’ jurisdictional status. The district court dismissed all claims without prejudice as barred by the Tax Injunction Act. 28 U.S.C. Section 1341 Plaintiffs appealed that judgment.   The Fifth Circuit affirmed in part, reversed in part, and remanded. The court explained that apart from two minor exceptions, Plaintiffs do not ask the district court to “enjoin, suspend or restrain the assessment, levy or collection of any tax under State law.” Their claims thus fall outside the TIA. The court explained that Plaintiffs here seek the invalidation of the 2019 ordinance and a declaration that their properties are within the city’s extraterritorial or limited purpose jurisdiction. Although the ordinance authorized the taxation of Plaintiffs’ properties, the county tax assessor had to add their properties to the Travis County Appraisal District’s rolls, appraise the properties, determine their tax liabilities, levy the taxes, collect the taxes, and remit those payments to the city. View "Harward v. City of Austin" on Justia Law