Justia Tax Law Opinion Summaries

The Supreme Court denied the writ of mandamus sought by the St. Clair Township Board of Trustees (St. Clair) seeking to compel the City of Hamilton and its officers (Hamilton) to calculate and pay lost tax revenue associated with territory that was annexed to the city before March 27, 2002 but not excluded from the township until 2016, holding that St. Clair was not entitled to relief.On March 27, 2002, S.B. 5 became effective. Under Ohio Rev. Code 709.19(B), as amended by S.B. 5, a municipality was to pay a township for lost tax revenue associated with the municipality’s annexation of territory of any township only when territory had been annexed and excluded as prescribed by Ohio Rev. Code 503.07, with the payments commencing upon exclusion. In 2016, the General Assembly repealed the S.B. 5 version of section 709.19. After the current version of section 709.19 took effect, the city created Hamilton Township, which consisted of the parts of the townships, including St. Clair, that the city annexed before the effective date of S.B. 5. Thereafter, St. Clair sought lost-tax-revenue payments from Hamilton. Hamilton refused to pay. St. Clair sought a writ of mandamus. The Supreme Court denied relief, holding that St. Clear did not establish a clear legal right to the relief requested. View "State ex rel. St. Clair Township Board of Trustees v. Hamilton" on Justia Law

In this consolidated appeal from twenty-nine General Excise Tax (GET) assessments levied by the State Director of Taxation against five online travel companies based on car rental transactions taking place in the State between 2000 and 2013, the Supreme Court held that rental cars are tourism-related services and that the assessed transactions qualified for the reduced GET rate based only on the portion of the proceeds that the online travel companies retained.The online travel companies in this case argued (1) the majority of the assessments were barred because they already litigated their GET liability for the years 2000 through 2013 to final judgment in an earlier case; and (2) the rental car transactions should qualify for a reduced GET rate calculated based only on the portion of the proceeds that they retained because rental cars are “tourism-related services” within the meaning of a statutory income-reducing provision. The Supreme Court held (1) the assessments could be considered on the merits because the claim preclusion component of res judicata is not an available defense against the government’s sovereign power of taxation; and (2) car rentals are tourism-related services that qualify for GET apportionment under the circumstances of this case. View "In re Tax Appeal of Priceline.com, Inc." on Justia Law

The Supreme Court affirmed the judgment of the trial court and court of appeal sustaining Defendants’ demurrer in this case, holding that customers who have paid sales tax reimbursement on purchases they believe to be exempt from sales tax are not authorized to file suit to compel the retailers to seek a tax refund from the California Department of Tax and Fee Administration (Department) when there has been no determination by the Department or a court that the purchases are exempt.A customer who has paid excess sales tax reimbursement has no statutory remedy to obtain a refund from the Department directly. In Javor v. State Board of Equalization, 12 Cal.3d 790 (1974), however, the Supreme Court authorized a customer suit to compel certain retailers to seek a tax refund where the Board of Equalization, upon determining that the retailers had collected excess sales tax reimbursement, had promulgated rules to provide refunds to overpaying customers. The lower courts declined to extend Javor to authorize a similar judicial remedy under the circumstances of this case. The Supreme Court affirmed, holding that plaintiffs in this case did not have an equitable cause of action to compel the retailers to seek a refund of sales taxes paid to the State. View "McClain v. Sav-On Drugs" on Justia Law

Loos sued BNSF under the Federal Employers’ Liability Act for injuries he received while working at BNSF’s railyard. A jury awarded him $126,212.78, ascribing $30,000 to lost wages. BNSF asserted that the lost wages constituted “compensation” taxable under the Railroad Retirement Tax Act (RRTA) and asked to withhold $3,765 of the $30,000. The district court and the Eighth Circuit rejected the requested offset. The Supreme Court reversed. A railroad’s payment to an employee for work time lost due to an on-the-job injury is taxable “compensation” under the RRTA. RRTA refers to the railroad’s contribution as an “excise” tax, 26 U. S. C. 3221, and the employee’s share as an “income” tax, section 3201. Taxes under the RRTA and benefits under the Railroad Retirement Act, 45 U.S.C. 231, are measured by the employee’s “compensation,” which both statutes define as “any form of money remuneration paid to an individual for services rendered as an employee.” The Court noted similar results under the Federal Insurance Contributions Act and the Social Security Act. View "BNSF Railway Co. v. Loos" on Justia Law

Plaintiffs, a group of tax return preparers, filed a class action challenging the IRS's requirement that preparers pay a fee to obtain and renew their Preparer Tax Identification Number (PTIN). The DC Circuit held that the IRS acted within its authority under the Independent Offices Appropriations Act in charging tax return preparers a fee to obtain and renew PTINs. The court also held that the IRS's decision to charge the fee was not arbitrary and capricious, because the IRS sufficiently rooted its decision to assess a PTIN fee in justifications independent of those rejected in Loving v. IRS, 742 F.3d 1013 (D.C. Cir. 2014). In this case, the IRS explained that the fee was based on direct costs of the PTIN program. Therefore, the court vacated the judgment of the district court and remanded for further proceedings. View "Montrois v. United States" on Justia Law

Taxpayers Neil Feinberg, Andrea Feinberg, and Kellie McDonald were shareholders in Total Health Concepts, LLC (THC), a Colorado company allegedly engaged in selling medical marijuana. After the Taxpayers claimed THC’s income and losses on their tax returns, the IRS conducted an audit and disallowed certain deductions under 26 U.S.C. 280E, which prohibited deductions for businesses engaged in unlawful trafficking of controlled substances. The IRS then recalculated the Taxpayers’ tax liability and issued a notice of deficiency for the unpaid balance. The Taxpayers challenged that determination in tax court, which affirmed on the basis that the Taxpayers had failed to substantiate the business expenses. Both parties agreed the tax court erred by injecting a substantiation issue into this case not raised in the notice of deficiency, and then placed the burden for refuting that claim on the Taxpayers. But the Commissioner argued the Tenth Circuit should affirm on the alternative ground that the Taxpayers did not meet their burden of proving the IRS’s determination that THC was unlawfully trafficking in a controlled substance was erroneous. The Taxpayers disagreed and contended placing the burden on them would violate their Fifth Amendment privilege. Because the Tenth Circuit concluded allocation of the burden of proof did not constitute “compulsion” under the Fifth Amendment, and because the Taxpayers made no attempt to meet their evidentiary burden, the Court affirmed the tax court on the alternative ground that section 280E prohibited the deductions. View "Feinberg v. CIR" on Justia Law

The Ninth Circuit affirmed the district court's order quashing the IRS's subpoena to the California Supreme Court that sought documents in connection with a tax audit. The panel held that "reasonable notice in advance" means notice reasonably calculated, under all the relevant circumstances, to apprise interested parties of the possibility that the IRS may contact third parties, and that affords interested parties a meaningful opportunity to resolve issues and volunteer information before third-party contacts are made. Reviewing the totality of the circumstances in this case, the panel held that Publication 1 did not provide taxpayers with the requisite reasonable advance notice. The panel explained that a reasonable notice must provide the taxpayer with a meaningful opportunity to volunteer records on his own, so that third-party contacts may be avoided if the taxpayer complies with the IRS's demand. View "J.B. v. United States" on Justia Law

The defendants took part in a decade-long scheme surreptitiously to sell tax-free cigarettes, thereby defrauding federal, state, and local governments of more than $45 million in tax revenue. The federal government eventually uncovered the scheme and charged them with 34 counts, including conspiracy to commit mail or wire fraud 18 U.S.C. 1349; conspiracy to launder money, 18 U.S.C. 1956(h); and conspiracy against the United States, 18 U.S.C. 371. Maddux pleaded guilty to 29 counts; Carman, Coscia, and Smith went to trial, where a jury convicted each of them on various counts. The Sixth Circuit affirmed their convictions and sentences--Maddux to 120 months’ imprisonment, Carman to 60 months, Smith to 42 months, and Coscia to 36 months. The scheme involved use of interstate wire communications and the United States mails; it was Congress’s prerogative to punish this combination of conduct more severely than a violation of the Jenkins Act, 15 U.S.C. 376(a), which requires cigarette sellers to file monthly reports. The court rejected an argument that the trial court should have specifically instructed the jury that defendants were not charged with a violation of either the Jenkins Act or the Cigarette Trafficking Act, 15 U.S.C. 377(a). The indictment sufficiently alleged a scheme to defraud. View "United States v. Smith" on Justia Law

The Supreme Court affirmed the decision of the court of appeals in this class action, holding that the surcharge imposed by Maricopa County on car rental agencies to fund a stadium and other sports and tourism-related ventures violated neither the dormant Commerce Clause of the United States Constitution nor the anti-diversion provision of the Arizona Constitution.Plaintiff, which rented vehicles in Maricopa County and paid the car rental surcharges, sued the Arizona Department of Revenue seeking refunds and injunctive relief for all similarly situated car rental companies. The tax court certified the class and granted summary judgment for Plaintiff, concluding that the surcharge did not violate the dormant Commerce Clause but did violate the anti-diversion provision. The court of appeals reversed, concluding that the surcharge did not violate the anti-diversion provision. The Supreme Court affirmed, concluding that the Arizona Constitution’s anti-diversion clause, which requires that revenues derived from taxes relating to the operation of motor vehicles must be allocated for public highways, does not apply to a tax relating to the operation of motor vehicles. View "Saban Rent-a-Car LLC v. Arizona Department of Revenue" on Justia Law

Murdock, an employee with the Tipton County Board of Education, received an email purporting to be from Dr. Bibb, Director of Tipton County Schools, requesting all 2016 employee W-2s and tax information. Murdock responded with a document containing information from the W-2s of every Board employee, including names, addresses, social security numbers, income information, deductions, exemptions, withholdings, tax payments and taxpayer identifying numbers. Murdock then learned that Bibb had not requested the information. The Tipton County Sheriff notified the U.S. Secret Service and the Internal Revenue Service. The Board notified employees of the information release. Smith, a Board employee, filed suit under 26 U.S.C. 6103 and 7431. Section 6103 of the Internal Revenue Code prohibits “any local agency administering a program listed in [§ 6103](l)(7)(D)” from disclosing “return information.” Smith argues that, because the Board works with the Tennessee State Board of Education to administer the National School Lunch Program, the Board provided a qualifying SNAP benefit. The Sixth Circuit affirmed the dismissal of the suit, finding that the Board does not administer a SNAP benefit in providing lunches to students as part of the National School Lunch Program. View "Smith v. Tipton County Board of Education" on Justia Law