Justia Tax Law Opinion Summaries

This case was brought by the North Idaho Building Contractors Association, Termac Construction, Inc., and other class members (collectively, “NIBCA”), to declare a sewer connection/capitalization fee the City of Hayden enacted in 2007 to be an impermissible tax. The action was originally dismissed on the City’s motion for summary judgment; but, on appeal the Idaho Supreme Court vacated the district court's judgment and remanded for further proceedings because the record did not contain sufficient evidence to establish that the 2007 Cap Fee complied with controlling Idaho statutes and case law. On remand, the parties filed cross motions for summary judgment and the district court found that the 2007 Cap Fee was an impermissible tax and taking of property without just compensation in violation of federal takings law. In doing so, the district court refused to consider expert evidence propounded by the City which opined that the 2007 Cap Fee complied with the applicable Idaho legal standards and was reasonable. The district court subsequently ruled on stipulated facts that NIBCA was entitled to damages in the amount paid above $774 per connection, together with interest, costs, and attorney fees. The City appealed the district court’s refusal to consider its evidence and NIBCA cross-appealed the award of damages. The Idaho Supreme Court again vacated the judgment because the district court improperly refused to consider the City’s evidence on remand. View "No ID Bldg Cont Assoc v. City of Hayden" on Justia Law

The Supreme Court affirmed the decision of the Board of Tax Appeals (BTA) concluding that because Great Lakes Bar Control’s service of cleaning beer-tap lines was primarily a maintenance service, any cleaning was merely incidental to that maintenance and was therefore not subject to sales tax as a “building maintenance and janitorial service” under Ohio Rev. Code 5739.01(B)(3)(j), holding that the beer-line service did not fit the plain meaning of “cleaning” in the context of providing a “janitorial service.”Great Lakes provided services related to selling, installing, and servicing beer-dispensing systems and provided a beer-line maintenance service to remove buildup of sediment and prevent lines from becoming blocked. The Ohio Department of Taxation determined that the beer-line service involved cleaning of tangible personal property under section 5730.01(II) and was subject to the sales tax. The BTA reversed. The Supreme Court affirmed, holding that the beer-line service did not fit the plain meaning of “cleaning” in the context of providing a “janitorial service.” View "Great Lakes Bar Control, Inc. v. Testa" on Justia Law

Plaintiff H. Brooke Paige, a taxpayer and resident of Washington, Vermont, appealed the civil division’s dismissal of his complaint for declaratory and injunctive relief against the State of Vermont and the Washington Town School Board. In his complaint, he asserted that Act 46, a 2015 state law related to education funding, spending, and governance, impermissibly coerced town residents into voting to merge school districts. He further alleged that Act 46 deprived town residents of local control of education and would result in unequal educational opportunities in violation of the Education and Common Benefits Clauses of the Vermont Constitution. The Vermont Supreme Court concluded plaintiff lacked standing to bring this action and therefore affirmed the trial court judgment dismissing this case. View "Paige v. Vermont" on Justia Law

Rogers is a tax lawyer. The Seventh Circuit previously characterized as an “abusive scam” a scheme Rogers implemented for the 2003 tax year. He implemented a similar scheme for later tax years: Rogers forms a partnership (Sugarloaf) that he uses to acquire severely-distressed accounts receivables from Brazilian retailers. For tax purposes, the partnership carries the receivables at their face amount, not at fair value. The partnership then conveys the receivables to U.S. taxpayers, who deem them uncollectible and deduct from their income the associated “loss.” A 2004 Tax Code amendment prohibits such partnerships from transferring built-in-losses on uncollectible receivables to U.S. taxpayers in this manner, 118 Stat.1589. Rogers modified his scheme to involve a trust in which Sugarloaf was both the grantor and beneficiary and additional maneuvering. Under the IRS’s sham determination, the Brazilian retailers’ purported contribution of receivables to Sugarloaf was recharacterized as a sale of assets; Sugarloaf’s original basis in the receivables was reduced to fair value—nearly nothing. The Tax Court and Seventh Circuit affirmed that Sugarloaf was a sham partnership; even if Sugarloaf were a legitimate partnership, the Brazilian retailers’ redemptions of their interest in the partnership was, in substance, a sale of receivables. A 40% penalty applied (26 U.S.C. 6662(h)(1); (2)(A)(1)) to Sugarloaf’s tax underpayment resulting from its gross misstatement of the 2004 cost-of-goods-sold expense, and a 20% penalty applied (section 6662(a), (b)(1) & (2)) to underpayments attributable to its negligence when failing to include certain income and taking disallowed business expense deductions. View "Sugarloaf Fund, LLC v. Commissioner of Internal Revenue" on Justia Law

In 1973, Bedrosian opened a UBS savings account in Switzerland to make work purchases while traveling abroad. Later, he began to use it as a savings account. From 1973-2007, Handelman prepared Bedrosian’s income tax returns. In the 1990s Bedrosian told Handelman about the Swiss bank account. Handelman replied that Bedrosian had been breaking the law every year by not reporting the account but that his estate could deal with it after he was dead. Bedrosian continued not to report his UBS account. In 2005, Bedrosian created a second (investment) account. Handelman died. Bedrosian authorized his new accountant, Bransky, to obtain his records from Handelman’s offices. Bransky prepared Bedrosian’s 2007 tax return, listing the bank account, and a Report of Foreign Bank and Financial Accounts (FBAR), 31 U.S.C. 5314, showing one of Bedrosian’s UBS accounts ($240,000); the account omitted contained $2 million. Bedrosian did not review the return but simply signed. He later sought legal counsel and began correcting his prior tax filings. In 2015 the IRS assessed a penalty for “willful” failure to disclose the larger UBS account at the statutory maximum of $975,789--50% of the undisclosed account. Bedrosian paid $9,757.89 and sought to recover that payment as an unlawful exaction. The government counterclaimed for $1,007,345. The district court concluded that Bedrosian’s violation was not willful.The Third Circuit remanded, reserving the question of whether federal court jurisdiction is established when a taxpayer files suit to challenge an FBAR penalty before fully paying it. The court clarified that, to prove a “willful” FBAR violation, the government must satisfy the civil willfulness standard, which includes both knowing and reckless conduct. View "Bedrosian v. United States" on Justia Law

In 2012, the Campbell Union School District (CUSD) Governing Board enacted a fee on new residential development under Education Code section 17620. The fee, $2.24 per square foot on new residential construction, was based on a study that projected that “it will cost the District an average of $22,039 to house each additional student in new facilities.” This figure was based on a projected $12.8 million cost to build a new 600-student elementary school and a projected $24.4 million cost to build a new 1,000-student middle school. SummerHill owns a 110-unit residential development project in Santa Clara, within CUSD’s boundaries. In 2012 and 2013, SummerHill tendered to CUSD under protest development fees of $499,976.96. The trial court invalidated the fee and ordered a refund of SummerHill’s fees. The court of appeal affirmed, holding that the fee study did not contain the data required to properly calculate a development fee; it failed to quantify the expected amount of new development or the number of new students it would generate, did not identify the type of facilities that would be necessary to accommodate those new students, and failed to assess the costs associated with those facilities. View "SummerHill Winchester LLC v. Campbell Union School District" on Justia Law

The Supreme Court affirmed the decision of the Administrative Hearing Commission finding Appellant’s claim for refund of sales tax untimely under Mo. Rev. Stat. 144.190.2, holding that the refund claim was untimely because it was filed more than three years after the tax return was due and more than three years after the date Appellant paid the tax.On appeal, Appellant conceded that it filed its refund request more than three years after remitting the sales tax. Appellant, however, asserted that the request was timely because 12 C.S.R. 10-102.016(2)(A) provides that a refund claim should also be considered timely if filed within three years of the date the tax return was due and that Appellant filed the refund request within three years of the latter date. The Supreme Court affirmed without reaching the issue of whether 12 C.S.R. 10-102.016(2)(A) is valid and consistent with section 144.190.2, holding that, even if 12 C.S.R. 10-102.016(2)(A) is applicable, Appellant was incorrect about when its return was due, and therefore, Appellant’s refund request was untimely. View "Crescent Plumbing Supply Company v. Director of Revenue" on Justia Law

A member of the public cannot use a Freedom of Information Act (FOIA) request to obtain unrelated individual's tax records without his consent. The District Court affirmed the dismissal of EPIC's action seeking President Donald J. Trump's income tax records. The court held that the Internal Revenue Code's confidentiality protections extended to the ordinary taxpayer and the President alike. View "Electronic Privacy Information Center v. IRS" on Justia Law

The Second Circuit reversed the tax court's decision upholding 2008 tax deficiencies identified by the Commissioner upon application of the substance‐over‐form doctrine to recharacterize various lawful tax‐avoiding transactions as tax‐generating events for petitioners, their adult sons, a family trust, and a family‐controlled corporation. Specifically, petitioners challenged the tax court's decision to uphold a tax deficiency against them based on the Commissioner's recharacterization of Summa's tax‐deductible commission payments to a DISC as taxable dividends to Summa shareholders.The court held that the Commissioner was not precluded from defending the challenged recharacterization, but the substance‐over‐form doctrine did not support recharacterization of Summa's DISC commission payments as constructive dividends to its shareholders. Therefore, the court reversed the portion of the judgment holding petitioners liable for $77,850 in 2008 income taxes. View "Benenson v. Commissioner" on Justia Law

The Supreme Court upheld the Iowa Department of Revenue’s sales tax assessment on labor installing building components sold by Lowe’s Home Centers, LLC, except as to those transactions in which the predominant service or only service provided was carpentry installation work, holding that because the Department’s own regulations limit the definition of carpentry services subject to sales tax to those performed for repairs and omits installations services, the sales tax did not apply.The parties here disagreed whether the sales tax applied to labor installing items sold by Lowe’s to homeowners through installation contracts. The Supreme Court held that the sales tax did not apply to carpentry for installations other than repairs but that installation services by electrical and plumbing subcontractors, which involved no structural changes to the homes of customers, did not fall within the statutory exemption for “new construction, reconstruction, alteration, remodeling, or the services of a general building contractor.” See Iowa Code 423.3(37). View "Lowe's Home Centers, LLC v. Iowa Department of Revenue" on Justia Law