Justia Tax Law Opinion Summaries

Articles Posted in US Court of Appeals for the Tenth Circuit
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Political subdivisions of the State of Colorado challenged Colorado’s Taxpayer Bill of Rights (“TABOR”) under the Colorado Enabling Act and the Supremacy Clause, contending that TABOR contradicted the Enabling Act’s requirement that Colorado maintain a “republican form of government.” TABOR allowed the people of Colorado to raise or prevent tax increases by popular vote, thereby limiting the power of Colorado’s legislative bodies to levy taxes. The issue currently before the Tenth Circuit Court of Appeals was whether certain school districts, a special district board, and/or a county commission had standing to challenge TABOR. On a motion to dismiss for lack of subject matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1), the district court held that plaintiffs had Article III standing but that they lacked political subdivision standing and prudential standing. Accordingly, the court dismissed the complaint. The Tenth Circuit concluded that it could not properly reach its conclusions at this stage of litigation. Because the Court held the political subdivision plaintiffs were not barred by standing requirements, the district court was reversed. View "Kerr v. Hickenlooper" on Justia Law

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Louis Hansen was indicted for tax evasion and tax obstruction. Before trial, Hansen purported to waive his right to counsel. The district court held a hearing to determine whether this waiver was made knowingly and intelligently. At that hearing, the district court asked Hansen, among other things, whether he understood he would be required to follow federal procedural and evidentiary rules if he proceeded without counsel. Hansen’s response was at best ambiguous and unclear; at one juncture, he specifically told the court that he did not understand that he would be required to abide by these rules. Without seeking clarification from Hansen, the court accepted the waiver. Hansen represented himself at trial, and the jury convicted him of both tax evasion and tax obstruction. On appeal, Hansen argued that his waiver of the right to counsel was invalid because it was not made knowingly and intelligently. The Tenth Circuit concluded the district court incorrectly determined that Hansen’s waiver was knowing and intelligent. In particular, the Court determined the trial court failed to engage in a sufficiently thorough colloquy with Hansen that would properly warn him that if he proceeded pro se, he would be obliged to adhere to federal procedural and evidentiary rules. The district court’s waiver determination was reversed and the matter remanded to vacate Hansen’s conviction and to conduct further proceedings. View "United States v. Hansen" on Justia Law

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Wendy and Daryl Yurek were charged with tax evasion and bankruptcy fraud. After a joint jury trial, the Yureks were convicted on both offenses. The district court then sentenced Mrs. Yurek to a prison term of 27 months, leading her to appeal the conviction and sentence. On appeal, Mrs. Yurek challenged the sufficiency of the evidence presented against her, and claimed the district court erred in denying her motions for severance and a new trial. The Tenth Circuit affirmed in part and reversed in part: affirming Mrs. Yurek’s conviction, but vacated her sentence. The Court determined the district court applied the wrong test when deciding whether to grant a mitigating-role adjustment. View "United States v. Yurek (Wendy)" on Justia Law

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This appeal concerns the propriety of the timing of deductions by a Subchapter S corporation for expenses paid to employees who participate in the corporation’s employee stock ownership plan (ESOP). Taxpayers Stephen and Pauline Petersen and John and Larue Johnstun were majority shareholders in Petersen Inc. (the Corporation), a Subchapter S corporation. The disputed liabilities arose from Taxpayers’ income-tax returns for 2009 (offset in small part by corrections in their favor for their 2010 returns). Because the Corporation was a Subchapter S corporation, it was a pass-through entity for income-tax purposes; taxable income, deductions, and losses were passed through to its shareholders. Taxpayers appealed the United States Tax Court’s decision holding them liable for past-due taxes arising out of errors in their income-tax returns caused by premature deductions for expenses paid to their Corporation’s ESOP. Taxpayers contended the Tax Court misinterpreted the Internal Revenue Code (IRC) and, even if its interpretation was correct, miscalculated the amounts of alleged deficiencies. The Commissioner agreed a recalculation was necessary. The Tenth Circuit affirmed Taxpayers’ liability but remanded for recalculation of the deficiencies. View "Petersen v. CIR" on Justia Law

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Shawn Gorrell was an insurance salesman based in Tulsa, Oklahoma. His father was an accountant in Tulsa whose clients included several dentists and Gorrell sold insurance to some of them. In 2009, Gorrell began to pitch investments to these dentists that were outside of his typical insurance products. Some dentists initially gave Gorrell modest sums to invest, but later the amounts ballooned to hundreds of thousands of dollars. Gorrell would ultimately be convicted by jury on three counts of wire fraud and three counts of tax evasion. He appealed only the tax evasion charges, seeking a new trial on those counts. He argued the trial court plainly erred when it instructed the jury to consider “specified theories of an affirmative act (an element of tax evasion), which were legally invalid theories of guilt as a matter of law, the jury was instructed to be unanimous in finding an affirmative act, and the jury returned a general verdict of guilt.” The Tenth Circuit concluded the district court did not err, “much less plainly err,” in its instructions to the jury. Given the evidence elicited at trial, in light of those instructions, Gorrell’s convictions for tax evasion were supported. View "United States v. Gorrell" on Justia Law

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John and Deanne Roth appealed a Tax Court decision that imposed a 40% penalty for the Roths’ “gross misstatement” of the value of a conservation easement they donated to a land trust in Colorado. On appeal, the Roths largely argued that, before imposing the penalty, the IRS failed to obtain written, supervisory approval for its “initial determination” of a penalty assessment as required by I.R.C. 6751(b). The Roths also sought a deduction in 2007 for repayments they made on the proceeds from their sale of tax credits generated by their donation of a separate conservation easement in 2006. The Tenth Circuit disagreed as to both counts and therefore affirmed the Tax Court. View "Roth v. CIR" on Justia Law

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Dr. Mark Hopkins moved to vacate his 2010 conviction and sentence for tax evasion. Before trial, the district court ordered him to make monthly payments into the court’s registry to ensure he was complying with federal tax law. Several months later, Dr. Hopkins requested release of the funds so he and his wife, who was being tried with him, could pay their attorneys. The district court ordered the funds’ return. But then the IRS filed notice of a lien on the funds, prompting the court clerk to file an interpleader action. Dr. Hopkins never received the funds; he and his wife were convicted in a jury trial. Dr. Hopkins filed his motion on March 29, 2017, following the Supreme Court’s decision in Luis v. United States, 136 S. Ct. 1083 (2016). But because his conviction became final in 2013, however, Dr. Hopkins’s motion fell outside the usual one-year time limit set by 28 U.S.C. 2255(f)(1). He sought to avoid that time bar by relying on section 2255(f)(3), arguing that Luis created a “newly recognized” right that would be “retroactively applicable to cases on collateral review.” The district court held that Luis did not create such a right, dismissed the motion, and granted a certificate of appealability. Finding no reversible error in that decision, the Tenth Circuit affirmed the district court. View "United States v. Hopkins" on Justia Law

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With issues common to three appeals consolidated for review, the Government filed suit to collect unpaid taxes. In Appeal No. 17-4083, the Government appealed a district court’s determination that its state-law contract claim was time-barred because it was subject to a Utah state six-year state statute of limitations. The Tenth Circuit concluded the state-law claim was governed by the ten-year statute of limitations set out in 26 U.S.C. 6502(a) because the Government was proceeding in its sovereign capacity. Appeal No. 17-4093 was a cross-appeal of the district court’s ruling that the Government’s transferee-liability claim, brought pursuant to 16 U.S.C. 6324(a)(2), was timely. Here, the Tenth Circuit concluded the transferee-liability claim was timely filed because the limitations period applicable to the 6324(a)(2) transferees was the same as the limitations period applicable to the estate. In Appeal No. 18-4036, the Government appealed the district court’s order awarding attorney’s fees to Appellees. The Tenth Circuit concluded Appellees were not entitled to attorney’s fees because the Government’s position in this litigation was substantially justified. View "United States v. Johnson" on Justia Law

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In 2010, the Internal Revenue Service issued a refund to the Wichita Center of Graduate Medical Education (a federally qualified charitable organization) on overpaid taxes along with incorrectly calculated interest on the refund. The IRS then sought repayment of part of the interest. Under the Internal Revenue Code, corporate taxpayers received a lower refund interest rate than other taxpayers such as individuals or partnerships. The Center claimed it was not a corporation for purposes of this section and was be entitled to the higher interest rate applicable to non-corporations. The Tenth Circuit affirmed the district court’s finding that the Center was a corporation and subject to the lower interest rate: the statutory text compelled the conclusion that the Center, even though it did not issue stock or generate profit, had to be treated as an ordinary corporation for purposes of the refund statute. View "Wichita Ctr for Grad Med. Ed. v. United States" on Justia Law

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This case arose out of the efforts the IRS made to investigate the tax liability of High Desert Relief, Inc. (“HDR”), a medical marijuana dispensary in New Mexico. The IRS began an investigation into whether HDR had improperly paid its taxes, and specifically whether it had improperly taken deductions for business expenses that arose from a “trade or business” that “consists of trafficking in controlled substances.” Because HDR refused to furnish the IRS with requested audit information, the IRS issued four summonses to third parties in an attempt to obtain the relevant materials by other means. HDR filed separate petitions to quash these third-party summonses in federal district court in the District of New Mexico, and the government filed corresponding counterclaims seeking enforcement of the summonses. HDR argued that the summonses were issued for an improper purpose—specifically, that the IRS, in seeking to determine the applicability of 26 U.S.C. 280E, was mounting a de facto criminal investigation pursuant to the Controlled Substances Act. HDR also asserted that enforcement of section 280E was improper because an "official [federal] policy of non-enforcement” of the CSA against medical marijuana dispensaries had rendered that statute’s proscription on marijuana trafficking a “dead letter” incapable of engendering adverse tax consequences for HDR. The petitions were resolved in proceedings before two different district court judges; both judges ruled in favor of the United States on the petitions to quash, and separately granted the United States’ motions to enforce the summonses. HDR challenged these rulings on appeal. The Tenth Circuit determined HDR was unable to overcome the government’s demonstration of good faith under United States v. Powell, 379 U.S. 48 (1964), and its alternative “dead letter” argument was without merit. View "High Desert Relief v. United States" on Justia Law