Justia Tax Law Opinion Summaries

After CIC entered into a tax avoidance scheme and claimed over $27 million in capital losses, the IRS issued a Final Partnership Administrative Adjustment (FPAA) disallowing CIC's claimed capital loss and fee deductions on its 2000 tax return. The IRS also applied a gross valuation misstatement penalty pursuant to 26 U.S.C. 6662 and 6664.The Eleventh Circuit affirmed the tax court's judgment upholding the IRS's decisions. The court held that the tax court did not err in concluding that CIC's CARDS transaction lacked economic substance or business purpose, nor in finding that CIC was liable for a 40% gross valuation misstatement penalty for its 2000 tax return. The court also held that the tax court did not clearly err in determining that CIC lacked reasonable cause and good faith in making an understatement on its 2000 tax return. View "Curtis Investment Co., LLC v. Commissioner" on Justia Law

At issue before the Mississippi Supreme Court in this case was whether NRG Wholesale Generation’s proffered expert used an acceptable method to determine the “true value” of its power plant in computing ad valorem tax. The expert used a mixture of the sales-comparison approach, the income approach, and the cost approach to determine the true value of the facility. Lori Kerr, the tax assessor for Choctaw County, and Choctaw County, Mississippi (collectively, the “County”), contended that Mississippi law mandates a trended historical cost-less-depreciation approach to calculate the true value of industrial personal property. The circuit court found in favor of the County and excluded NRG’s proffered expert testimony. NRG argued the circuit court abused its discretion. In addition, NRG also argued the circuit court erred in denying its motion to change venue because because many of the jurors knew the county officials named as defendants in this case, a fair trial in Choctaw County was impossible. The Supreme Court held the Mississippi Department of Revenue (the “DOR”) regulation controlled and that NRG’s expert applied an unacceptable method to determine true value. Therefore, the circuit court did not err in excluding NRG’s proffered expert testimony. Additionally, because NRG was afforded a fair and impartial jury, the circuit court did not abuse its discretion in denying the motion to change venue. View "NRG Wholesale Generation LP v. Kerr" on Justia Law

Plaintiffs Ivan Smith, Jr. and Gloria G. Smith (collectively “Taxpayers”), were Louisiana residents and part owners of several limited liability companies (“LLC”) and Subchapter S corporations (“S corporation”) that transacted business in Texas, Arkansas, and Louisiana. Taxpayers filed suit seeking recovery of income taxes paid under protest against Defendant Kimberly Robinson, in her capacity as Secretary of the Department of Revenue of the State of Louisiana (the “Department”). . At issue was whether Act 109, which amended La.R.S. 47:33, a state income tax statute that provides a credit to taxpayers for income taxes paid in other states, violated the dormant Commerce Clause of the United States Constitution. After review, the Louisiana Supreme Court concurred with the trial court that Act 109 violated the dormant Commerce Clause of the United States Constitution. View "Smith v. Robinson" on Justia Law

The Supreme Court reversed the decision of the Tax Court determining that Richardson’s RV owed no Indiana sales tax because it took RVs it sold to certain out-of-state customers into Michigan before handing over the keys, holding that Richardson’s structured the Michigan deliveries solely to avoid taxes with no other legitimate business purpose.After an audit, the Department of Revenue issues proposed assessments to Richardson’s totaling nearly $250,000 in unpaid taxes and interest for the Michigan deliveries and deliveries to other states. The Tax Court granted summary judgment for Richardson’s, concluding that Indiana’s exemption statute did not apply to any of these transactions because, as a matter of law, the sales transactions at issue were not made ‘in Indiana.’” The Supreme Court reversed and remanded the case, holding (1) the Michigan deliveries were subject to sales tax because Richardson’s executed the Michigan deliveries solely to avoid paying Indiana sales tax with no other legitimate business purpose; and (2) the Tax Court must determine if the non-Michigan deliveries were taxable. View "Richardson's RV, Inc. v. Indiana Department of State Revenue" on Justia Law

The Supreme Court affirmed the decision of the tax court upholding the decision of the Commissioner of Revenue to include Pell grants in its calculation of Relators’ household income, holding that “nontaxable scholarship or fellowship grants” as used in Minn. Stat. 290A.03(3)(a)(2)(xiii) is plain and unambiguous and includes Pell grants.Household income is used to determine eligible for, and the amount of, a property tax income and includes “nontaxable scholarship or fellowship grants.” Relators argued that Pell grants are not scholarships or fellowships and therefore cannot be included in the income calculation made to determine the amount of the property tax refund. The Supreme Court disagreed, holding that Pell grants are nontaxable and therefore includable in calculating household income. View "Waters v. Commissioner of Revenue" on Justia Law

Next Century purchased the Century Plaza Hotel in mid-2008, for $366.5 million. As of January 1, 2009, the property’s enrolled assessed value was $367,612,305. Next Century sought a reduction in the assessed value because the “global economic meltdown” had caused the property’s market value to drop significantly. The Los Angeles Assessment Appeals Board considered discounted cash flow (DCF) analyses that reflected a decline in value below the enrolled value. The Assessor did not attempt to defend the enrolled value. The Board rejected the Assessor’s DCF analysis as overstating the hotel’s 2006 net operating income. Next Century asserts that if the Assessor’s analysis were corrected, it would generally support Next Century’s proposed value. The Board also rejected Next Century’s proposed valuation and upheld the enrolled value, although no party thought it correctly reflected the property’s lien date value. Next Century sued for a tax refund. The court of appeal reversed a judgment in favor of the County. The Board’s rejection of Next Century’s valuation, without sufficient explanation, and with knowledge that the Assessor’s valuation analysis—if corrected— would result in a valuation significantly lower than the enrolled value, was arbitrary, as was its decision to leave in place an enrolled value that had been repudiated by the Assessor and was unsupported by any evidence. The Board’s cryptic findings are insufficient to bridge the analytic gap between the evidence and its conclusions. View "Next Century Associates v. County of Los Angeles" on Justia Law

Plaintiff and her sister inherited a San Jose house when their mother died in 2003. They took title as tenants-in-common. A recorded deed reflected that each owned an undivided 50 percent interest. Plaintiff lived in the home; her sister did not. In 2009, plaintiff’s sister granted her a life estate in the 50 percent interest that plaintiff did not already own. The deed reflecting that transfer was recorded. The 2009 transfer resulted in plaintiff having sole ownership rights for the rest of her life, with her sister regaining a 50 percent interest in the property on plaintiff’s death. Based on the 2009 transfer, the County reassessed the property’s value under a statute allowing for recalculation of a property’s tax basis upon a change in ownership. The new valuation resulted in a higher property tax bill. Plaintiff unsuccessfully requested a revised assessment on the ground that the creation of a life estate did not constitute a change in ownership. Plaintiff then sued, seeking a property tax refund. The court appeal affirmed a holding that the 2009 deed granting plaintiff a life estate constituted a change in ownership and the reassessment was in conformity with the law. View "Durante v. County of Santa Clara" on Justia Law

The Supreme Court affirmed the decision of the board of tax appeals (BTA) affirming the tax commissioner’s denial of a charitable-use property-tax exemption for the subject property, holding that the BTA’s factual findings were supported by the record in this case.Chagrin Realty, the property owner, was a nonprofit organization exempt from federal income tax under 26 U.S.C. 501(c)(2). Chagrin leased the property to Community Dialysis Center (CDC), a nonprofit tenant, which operated a hemodialysis facility on the property. The Centers for Dialysis Care, Inc., a for-profit management company, contracted with the CDC and employed the personnel who worked for the CC. Chagrin Realty filed an application for real-property-tax exemption relating to the subject property, but the tax commissioner determined that Chagrin Realty did not satisfy the requirements for exemption under Ohio Rev. Code 5709.12 or 5709.121. The BTA affirmed, thus rejecting Chagrin Realty’s contention that its 501(c)(2) federal tax status and its reliance on vicarious-exemption theories qualified it as a “charitable” institution. The Supreme Court affirmed, holding that the BTA reasonably and lawfully found that Chagrin Realty is not a charitable institution. View "Chagrin Realty, Inc. v. Testa" on Justia Law

Michael and Vickie Kansler moved to Mississippi from New York for Michael’s job and, over the following years, exercised stock options stemming from that employment. The Kanslers took the position that the stock options’ income was taxable only in Mississippi, which reduced their tax burden significantly. New York saw things differently and found a substantial portion of the income taxable by New York. This liability to another state would have entitled the Kanslers to a credit on their Mississippi taxes worth more than $250,000. However, by the time the New York audit was finished, the Mississippi statute of limitations barred the Kanslers from amending their Mississippi returns. They argued the Mississippi statute of limitations unconstitutionally discriminated against interstate commerce. The Mississippi Supreme Court determined Mississippi’s treatment of the statute of limitations for amending tax returns was "unremarkable" and appeared to be shared with many other states. The Kanslers’ dormant Commerce Clause argument, on the other hand, was novel, and depended on an unprecedented and erroneous attempt to apply the “internal consistency test,” intended to evaluate the apportionment of taxes, to the collateral effects of a statute of limitations. The Court held that the challenge was instead governed by the discrimination/Pike v. Bruce Church, Inc. 397 U.S. 137 (1070) balancing test employed by the United States Supreme Court in Bendix Autolite Corp. v. Midwesco Enterprises Inc., 486 U.S. 888 (1988), the only United States Supreme Court case to scrutinize a statute of limitations under the dormant Commerce Clause. The Court affirmed the Mississippi Department of Revenue’s decision to refuse the refund request. View "Kansler v. Mississippi Department of Revenue" on Justia Law

The Supreme Court reversed the order of the circuit court granting Burger King’s motion for summary judgment in an action seeking relief from a tax assessment pursuant to Ark. Code Ann. 26-18-406, holding that the circuit court erred in interpreting the relevant statutes and promulgated rules to find that Burger King was only required to pay taxes on the wholesale value of the food ingredients removed from stock as opposed to the retail value of the meals.On appeal, the Supreme Court agreed with the interpretation of the statutes and rules set forth by the Director of the Arkansas Department of Finance and Administration, holding that items withdrawn from stock by Burger King should be taxed at the advertised retail price rather than the actual wholesale cost - the original purchase price. View "Walther v. FLIS Enterprises, Inc." on Justia Law