Justia Tax Law Opinion Summaries

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

The Supreme Court reversed the order of the Wyoming Board of Equalization (Board) concluding that the issue disputed by the parties in this case was moot, holding that the Board exceeded its authority when it decided an issue that was not before it.Solvay Chemicals, Inc. appealed to the Board the Department of Revenue’s (DOR) assessment of the taxable value of soda ash produced at its trona mine in Sweetwater County, disputing the calculations the DOR used to determine the amount of the deduction for bagging some of the soda. After a contested case hearing, the Board requested supplemental briefs to address a question of statutory construction that had not been raised by either party. The Board then decided that the issue was whether Solvay was entitled to any bagging deduction at all. The Board ultimately concluded that because the governing statute did not allow for a separate deduction for bagging the issue was moot. The Supreme Court reversed, holding that the Board exceeded its authority when it based its order on an issue not contested or addressed by either party during the contested case hearing. View "Solvay Chemicals, Inc. v. State Department of Revenue" on Justia Law

The Supreme Court reversed the decision of the Board of Tax Appeals (BTA) affirming the decision of the tax commissioner, holding that the sale-for-resale exemption of Ohio Rev. Code 5739.01(E) applied to preclude Cincinnati Reds, LLC (the Reds) from having to pay use tax on promotional items it purchased.The tax commissioner denied the Reds’ request to remove the promotional items from the use-tax assessment, concluding that there was no evidence that the promotional items were resold with admission to games. The BTA affirmed, finding that the promotional items were given away for free and that the cost of the promotional items was not included in the ticket price. The Supreme Court reversed, holding (1) consideration is given in exchange for the Reds’ agreement to supply fans with the promotional items, and therefore, the transfer of promotional items to fans constitutes a “sale” under section 5739.01(B)(1); and (2) accordingly, the promotional items were subject to the sale-for-resale exemption of section 5739.01(E). View "Cincinnati Reds, LLC v. Testa" on Justia Law

Frances and her husband John filed a joint return for 2004. The IRS subsequently found the return deficient and informed them that they owed an additional $488,177 in income taxes and underreporting penalties of $138,732. The couple filed suit. John, a Harvard-educated tax lawyer, represented them at trial. Frances, a former teacher with an MBA, doctorate, and a law degree, attended the trial. The Tax Court ruled against the couple, finding them jointly and severally liable, 26 U.S.C. 6013(d), Three years later, Frances sought innocent spouse relief, 26 U.S.C. 6015. The Tax Court rejected the claim. The Seventh Circuit affirmed, finding that her meaningful participation in the trial precluded Frances from after-the-fact seeking to avoid responsibility for those liabilities. Such relief is available only if the petitioner has not “participated meaningfully in [the] prior proceeding”—in this case, the 2012 trial. Mrs. Rogers’s contention that she lacked knowledge of business and financial matters, including complex tax matters, and otherwise did not understand what transpired during the 2012 trial lacked credibility and she had every opportunity to raise her claim during the 2012 trial. Her testimony was self-serving and at odds with her education and experience. View "Rogers v. Commissioner of Internal Revenue" on Justia Law

In this case concerning where taxes on compressors were due, the Supreme Court affirmed in part and reversed in part the judgment of the court of appeals, holding (1) Tex. Tax Code 23.1241 and 23.1242 controlled the taxable situs of the compressors at issue in this case; and (2) further proceedings were necessary to determine where taxes for the compressors were due.Valerus Compression Services owned and leased out compressor stations used to deliver natural gas into pipelines. Some of those compressors were in use in Reeves and Loving counties. In response to a 2012 amendment to the Tax Code, Valerus began paying taxes to Harris County, Valerus’s principal place of business. Reeves and Loving counties continued placing the compressors on their appraisal rolls at full market value, asserting that the compressors’ presence within the counties fixed taxable situs there. The appraisal review boards agreed with the counties. The trial court also sided with the counties, concluding that sections 23.1241 and 23.1242 were unconstitutional. The court of appeals held (1) the statutes are constitutional, and (2) the compressors’ taxable situses are Reeves and Loving counties. The Supreme Court reversed in part, holding (1) sections 23.1241 and 23.1242 control the taxable situs of the compressors; and (2) remand was necessary to determine where taxes were due. View "Reeves County Appraisal District v. Valerus Compression Services" on Justia Law

In this case concerning where taxes on compressors were due, the Supreme Court affirmed in part and reversed in part the judgment of the court of appeals, holding (1) Tex. Tax Code 23.1241 and 23.1242 controlled the taxable situs of the compressors at issue; and (2) Midland County was the taxable situs of the compressors.EXLP Leasing owned and leased out compressor stations used to deliver natural gas into pipelines. In response to a 2012 amendment to the Tax Code, EXLP began paying taxes on the compressors located in Loving County to Midland County. Loving County continued placing the compressors on its appraisal rolls at full market value, asserting that the compressors’ presence within the counties fixed taxable situs there. The appraisal review board sided with the county. The trial court agreed with the county, concluding that sections 23.1241 and 23.1242 were unconstitutional. The court of appeals held (1) the statutes are constitutional, and (2) the compressors’ taxable situs is Loving County. The Supreme Court reversed in part, holding (1) sections 23.1241 and 23.1242 control the taxable situs of the compressors; and (2) Midland County is the taxable situs of the compressors. View "Loving County Appraisal District v. EXLP Leasing LLC" on Justia Law