Justia Tax Law Opinion Summaries

Plaintiff MCI Communications Services, Inc. (MCI) appealed the dismissal of its action for a state tax refund after the trial court sustained California Department of Tax and Fee Administration's (CDTFA) demurrer to MCI's first amended complaint without leave to amend. Certain categories of property are excluded from the definition of tangible personal property and therefore are not subject to sales and use taxation. This appeal required the Court of Appeal to decide whether the tax exclusion in Rev. & Tax. Code section 6016.5 extended to the pre-installation component parts that may one day be incorporated into completed telephone and telegraph systems. The Court held that section 6016.5 excluded only fully installed and completed telephone and telegraph lines from sales and use taxation, not the pre-installation component parts of such lines. Accordingly, the Court affirmed the judgment. View "MCI Communications etc. v. Cal. Dept. of Tax and Fee Admin." on Justia Law

Plaintiff Omega Forex Group LC (Omega), appearing by and through partner Robert Flath (Flath), appealed a district court decision affirming two Notices of Final Partnership Administrative Adjustment (FPAA) issued by the Internal Revenue Service to Omega. The two FPAAs, on the basis of fraud at the partnership level, eliminated large losses reported by Omega on its tax returns for years 1998 and 1999, and imposed penalties on Omega. Flath was an endodontist in private practice in Utah. At some point in 1997 or 1998, one of the endodontists in Flath’s practice suggested that Flath meet with Dennis Evanson, an “expert in options trading and general business organization and planning, tax planning and asset protection.” Evanston was Omega’s managing partner. Through their business arrangement, Flath would make contributions or investments in Omega or other entities controlled by Evanston. Evanson, in exchange for Flath’s agreed payments, “manufactured fictitious transactions to conceal income [for Flath] and create apparent [tax] deductions [for Flath].” For the years at issue here, Flath or his endodontist practice would claim pass-through losses from Omega. Flath was not completely forthcoming with his tax accountant. In 2005, a grand jury indicted Evanson and other individuals related to Omega. In February 2008, Evanson was convicted of conspiracy to commit mail and wire fraud, tax evasion, and assisting in the filing of false tax returns. Omega’s FPAAs were upheld. Flath, on behalf of Omega, raised three issues on appeal: (1) whether the district court erred in holding that the FPAAs issued by the IRS to Omega were not barred by the applicable statute of limitations; (2) even assuming the district court applied the proper statute of limitations, whether it incorrectly applied the legal standards for determining whether Flath had fraudulent intent as to his personal tax returns; and (3) whether the district court erred in determining the asserted fraud penalty at the partnership level. The Tenth Circuit rejected all of these arguments and affirmed the district court’s decision. View "Omega Forex Group v. United States" on Justia Law

BTH Quitman Hickory, LLC, challenged the amount of the ad valorem taxes assessed by the Clarke County Board of Supervisors by appealing the assessments to circuit court. However, BTH Quitman did not submit a bond with its appeals; therefore, the Board of Supervisors moved to dismiss the appeals. The circuit court found in favor of BTH Quitman, and the Board filed this interlocutory appeal. Because the Mississippi Supreme Court addressed a similar issue in its opinion in Natchez Hospital Co., LLC v. Adams County Board of Supervisors, 238 So. 3d 1162 (Miss. 2018), it reversed the circuit court’s judgment and remanded the case for the circuit court to dismiss BTH Quitman’s case for lack of subject matter jurisdiction. View "Board of Supervisors of Clarke County, Mississippi v. BTH Quitman Hickory, LLC" on Justia Law

Losantiville Country Club hosted unprofitable nonmember events for many years, consistently using those losses to avoid paying tax on its investment income. Because the Internal Revenue Service determined that Losantiville did not hold nonmember events for the primary purpose of making a profit, the club could not offset its income from investments with losses from those nonmember activities. Invalidating those deductions resulted in Losantiville having underpaid tax on its unrelated business income between 2010 and 2012. Plus, the IRS imposed accuracy-related penalties. On appeal, the Tax Court upheld this determination, reasoning that Losantiville did not intend to profit from its nonmember events. Finding no reversible error in that decision, the Sixth Circuit affirmed. View "Losantiville Country Club v. Comm'r of Internal Revenue" on Justia Law

In August 2016, the Commissioner of the Minnesota Department of Revenue issued an order assessing personal liability against David Knapp, a North Dakota resident, for $65,843.80 in unpaid Minnesota sales and use taxes relating to his interest in a business in Bemidji, Minnesota. In December 2016, the Commissioner issued a third-party levy on securities held by broker Edward Jones for Knapp by sending a notice to Edward Jones at its Missouri office. The third-party levy said Edward Jones had to sell Knapp's securities under Minn. Stat. Ann. 270C.7101(7) and send the Minnesota Department of Revenue payment up to the amount due. The levy instructed Edward Jones not to send money that was exempt or protected from the levy and cautioned that state law allowed the Commissioner to assess debt to businesses, officers, or other individuals responsible for honoring the levy, including assessing the total amount due plus a twenty-five percent penalty. Knapp petitioned the district court to dissolve the levy and for a writ of prohibition against the Commissioner and Edward Jones to prohibit them from taking any further action to levy on his account. Knapp alleged that the Commissioner had no jurisdiction in North Dakota to levy on his North Dakota property and that his property was exempt from the levy. The district court issued a preliminary writ of prohibition to stay the levy pending the filing of an answer showing cause under N.D.C.C. 32-34-05, but later concluded Knapp failed to establish he was entitled to relief. The North Dakota Supreme Court concluded the district court did not abuse its discretion in denying Knapp's petition for a writ of prohibition, and affirmed the judgment and the order. View "Knapp v. Commissioner of Minnesota Department of Revenue" on Justia Law

Petitioners-appellants John Machacek, Jr. and Marianne Machacek were the sole shareholders of John J. Machacek, Jr., Inc. (Machacek, Inc.), a corporation organized under Subchapter S of the Internal Revenue Code. John was also an employee of Machacek, Inc. The Machaceks appealed the Tax Court’s ruling requiring them to treat as income the economic benefits resulting from Machacek, Inc.’s payment of a premium on John's life insurance policy under a compensatory split-dollar arrangement. Relying on the compensatory nature of the arrangement, the Tax Court rejected the Machaceks’ argument that the economic benefits should be treated as a shareholder distribution. The Sixth Circuit reversed, finding that the Tax Court did not consider the impact of a provision of the tax regulations specifically requiring that such economic benefits be treated as shareholder distributions. View "Machacek v. Comm'r of Internal Revenue" on Justia Law

In this proceeding under Tex. Loc. Gov’t Code 72.010 authorizing property owners subject to multiple taxation to petition the Supreme Court directly to determine which county is owed taxes, the Court determined that it had original jurisdiction and that taxes on Relators’ property were owed to San Patricio County rather than Nueces County.This dispute concerned shoreline boundary on Corpus Christi Bay. For a decade both Nueces County and San Patricio County have taxed the same piers, docks, and other facilities affixed to land in San Patricio County but extending out into the water in Nueces County. After the statute was enacted and signed into law in 2017, Relators filed an original petition for a writ of mandamus in the Supreme Court praying that the Court determine which county is authorized to tax Relators' piers. The Supreme Court held (1) this case presented a compelling reason for the Court to exercise original jurisdiction; (2) section 72.010 does not violate the Texas Constitution’s prohibition against retroactive laws; and (3) San Patricio County is owed the taxes due on Relators' piers. View "In re Occidental Chemical Corp." on Justia Law

The Seventh Circuit affirmed the district court's dismissal of an action alleging the violation of the Equal Protection Clause of the Fourteenth Amendment because the county placed a disproportionate tax on commercial and industrial properties in Mattoon Township. The court analyzed plaintiffs' claim solely on comity principles and held that the district court appropriately abstained from hearing the action. View "Perry v. Coles County, Illinois" on Justia Law

The Supreme Court affirmed the circuit court’s judgment affirming a hearing examiner’s decision that an exemption from taxation for real property be increased to 100 percent but reversed the award of attorney fees, holding that the circuit court correctly upheld the hearing examiner’s decision but erred in its award of attorney fees.The Pennington County Board of Equalization established an exemption of thirty-two percent for the 2017 tax year for real property owned by American Legion Home Association Post 22. On American Legion’s administrative appeal, the hearing examiner concluded that the real property qualified for a 100 percent exemption under S.D. Codified Laws 10-4-9.2. The Supreme Court held that the circuit court (1) did not err in affirming the hearing examiner’s decision that the property was entitled to a 100 percent exemption under the statute; but (2) awarded attorney fees without sufficient information to determine a reasonable fee. The Court remanded the attorney fee issue. View "American Legion Home Ass’n Post 22 v. Pennington County" on Justia Law

When a lease of federal lands includes an option to extend its term and the tax assessor reasonably concludes that the option will likely be exercised, the value of the leasehold interest is properly based on the extended term. The Court of Appeal affirmed the judgment of dismissal entered after the trial court sustained without leave to amend the County's demurrer to Glovis's complaint for refund of property taxes. The court held that the terms of the lease evidenced the parties' mutual intent to grant Glovis the option to extend its possession of the Navy's property past the initial five-year term; the lease clearly and explicitly gave Glovis the exclusive right to lease the Navy's property under 2028; and there was no language permitting the Navy to withdraw or revoke its offer. The court independently reviewed whether to use extrinsic evidence to interpret the lease and held that there was no need to do so in this case. Finally, the court rejected Glovis's contention that the assessor erred when he determined it was reasonable to assume the option will be exercised. View "Glovis America, Inc. v. County of Ventura" on Justia Law