Justia Tax Law Opinion Summaries

The case involves two casino operators, PNK (Baton Rouge) Partnership, PNK Development 8 LLC, PNK Development 9 LLC, and Centroplex Centre Convention Hotel, LLC, who incentivize their patrons with rewards, including complimentary hotel stays. The City of Baton Rouge/Parish of East Baton Rouge Department of Finance and its director, Linda Hunt, discovered that the operators had not remitted state and local taxes associated with these complimentary stays for several years. The City argued that the operators needed to pay these taxes, while the operators put forth various arguments as to why they did not. The City filed a suit in state court, which the operators removed to federal court on diversity jurisdiction.The operators' cases were initially heard in the United States District Court for the Middle District of Louisiana. The City filed a Motion to Remand, arguing that the tax abstention doctrine (TAD), as put forth in Levin v. Commerce Energy, Inc., warranted abstention. The District Court agreed with the City, stating that all five TAD factors favored abstention: Louisiana's wide regulatory latitude over its taxation structure, the lack of heightened federal court scrutiny required for the operators' due process rights under the Louisiana Constitution, the potential for the operators to seek an improved competitive position in the federal court system, the familiarity of Louisiana courts with the state's tax regime and legislative intent, and the constraints of the Tax Injunction Act on remedies available in federal court.The case was then reviewed by the United States Court of Appeals for the Fifth Circuit. The court affirmed the District Court's decision, agreeing that the TAD applied and that all five factors favored abstention. The court concluded that the District Court's decision to abstain was within its discretion. View "City of Baton Rouge v. Centroplex Centre Convention Hotel, LLC" on Justia Law

A limited-partnership subsidiary of Argent Financial Group, RSBCO, was required to file over 21,000 annual information returns with the IRS for the 2012 tax year. However, due to errors in the files, the returns were not processed on time. The IRS imposed penalties on RSBCO for the delay in filing processable 2012 returns. RSBCO paid the penalties and accrued interest in full and filed an administrative refund claim, asserting a reasonable cause defense. When the IRS failed to act on the claim within six months, RSBCO filed a complaint for a refund in federal district court.The district court denied the Government’s motions for judgment as a matter of law or a new trial. The court then granted RSBCO’s post-trial motion for attorney fees. The court determined that the Government could “not overcome the presumption that it was not substantially justified” in denying RSBCO’s refund claim “because [the IRS] did not follow its applicable published guidance[.]” The district court awarded fees at a rate exceeding the statutory rate provided in I.R.C. § 7430(c)(1)(B)(iii), finding that “special factors” were present.The United States Court of Appeals for the Fifth Circuit found that the jury instructions were irredeemably flawed, vacated the verdict, and remanded for a new trial. The court also vacated the attorney fees and costs awarded to RSBCO because RSBCO was no longer the prevailing party. The court found that the district court’s jury instruction as to “impediments” that would excuse RSBCO’s untimely filing of its 2012 information returns was fatally inconsistent with the governing Treasury Regulation. View "RSBCO v. United States" on Justia Law

The case revolves around the issue of whether reimbursements paid to a hotel for a loyalty program member’s complimentary stay constitute gross income for purposes of Arizona’s transaction privilege tax (TPT). The hotel in question, Dove Mountain, participates in the Marriott Rewards Program. As part of the program, Dove Mountain and other participating hotels fund the program's marketing efforts by paying a percentage of room revenues and providing rooms for complimentary stays to program members. When a member redeems points for a complimentary stay at Dove Mountain, Marriott Rewards issues a reimbursement payment to the hotel.The Arizona Department of Revenue (ADOR) denied Dove Mountain's request for a refund of TPT paid on certain reimbursements between 2012 and 2016. Dove Mountain appealed ADOR’s decision to the tax court, arguing that the reimbursements were part of a rewards program not subject to TPT. The tax court concluded that Dove Mountain was not eligible for a refund and entered judgment for ADOR. The court of appeals affirmed the tax court's decision, holding that the reimbursements fell within the statutory definitions of gross receipts and gross income and were subject to TPT.The Supreme Court of the State of Arizona affirmed the lower courts' decisions. The court held that the reimbursements paid by Marriott Rewards to Dove Mountain constitute gross income for TPT purposes. The court distinguished the case from a previous case, Consumers Market, which Dove Mountain argued was materially indistinguishable. The court found that the nature and operation of the Rewards Program undermined Dove Mountain’s effort to characterize its Points-earning transactions, subsequent redemptions, and Reimbursements as analogous to the “whole transaction” at issue in Consumers Market. The court concluded that Dove Mountain's various characterizations of Reimbursements as “post-tax” reserves, returns of capital, or bank deposits were not supported by the facts or the law. View "DOVE MOUNTAIN v ADOR" on Justia Law

The case involves a dispute over two years of Minnesota individual tax returns filed by Christopher and Nancy Wendell, residents of Wisconsin. In 2019 and 2020, the Wendells filed joint tax returns reporting no Minnesota taxable income, despite receiving over $1 million in payments from Minnesota sources. The Wendells claimed that the payments were not taxable wages or ordinary business income. The Commissioner of Revenue disagreed, modified the Wendells’ reported income, assessed additional income tax, and imposed a 25 percent penalty for filing a frivolous tax return. The Wendells appealed the Commissioner’s assessment, and the Minnesota Tax Court granted summary judgment in the Commissioner’s favor.The Minnesota Tax Court found that the Wendells’ tax liability was correctly calculated and adjusted, that no material facts were in dispute, and that the frivolous return penalty statute was constitutional. The Wendells then appealed to the Minnesota Supreme Court.The Minnesota Supreme Court affirmed the decision of the tax court. The court held that the Commissioner of Revenue had the authority to adjust the Wendells’ reported federal adjusted gross income, the tax court did not err in granting summary judgment in favor of the Commissioner, and the statutory penalty for filing a frivolous return is constitutional. The court rejected the Wendells' arguments that the penalty for filing a frivolous tax return was unconstitutional under the Due Process Clauses and Excessive Fines Clauses of the United States Constitution and Minnesota Constitution or the Equal Protection Clause of the United States Constitution. View "Wendell vs. Commissioner of Revenue" on Justia Law

The case revolves around J-W Power Company (J-W Power), a company that leases, sells, and services natural gas compressors used in oil and gas operations. The company maintains these compressors in many counties across Texas and often leases them to customers in neighboring counties. The case specifically involves the taxation of compressors maintained in Ector County that were leased to customers in Sterling and Irion Counties. J-W Power filed motions to correct the appraisal rolls under section 25.25(c) of the Tax Code, arguing that the appraisal rolls included “property that does not exist in the form or at the location described in the appraisal roll.” The Appraisal Review Boards (ARBs) in both counties denied the motions, leading to the current lawsuits.Previously, the district court granted summary judgment to the appraisal districts, arguing among other things that res judicata barred the section 25.25(c) motions because those motions involved the same subject matter as the prior Chapter 41 protests. The court of appeals affirmed this decision, holding that res judicata barred J-W Power’s section 25.25(c) motions, which raised “nearly verbatim” claims as compared to its prior Chapter 41 protests.However, the Supreme Court of Texas disagreed with the lower courts' decisions. The Supreme Court held that section 25.25(l) of the Tax Code preserved J-W Power’s right to file a section 25.25(c) motion notwithstanding its prior Chapter 41 protests. The court interpreted the phrase “regardless of whether” in section 25.25(l) to mean that a property owner can file a section 25.25(c) motion regardless of whether there was a prior Chapter 41 protest related to the value of the property. Therefore, the Supreme Court reversed the judgments of the court of appeals and remanded the cases for further proceedings. View "J-W POWER COMPANY v. IRION COUNTY APPRAISAL DISTRICT" on Justia Law

The case involves Yvondia Johnson, a 100% disabled U.S. Air Force veteran, who applied for a residence homestead tax exemption for her principal residence in Converse, Texas. The Bexar Appraisal District denied her application because her husband, also a 100% disabled U.S. military veteran from whom she is separated, claimed the same exemption for his principal residence in San Antonio, Texas.The trial court granted summary judgment for the appraisal district, arguing that Ms. Johnson was ineligible for the exemption because her husband claimed the same exemption on a different home they jointly owned. Ms. Johnson appealed, and the court of appeals reversed the decision, ruling in her favor.The Supreme Court of Texas affirmed the judgment of the court of appeals. The court held that the Tax Code bestows the exemption on each individual 100% disabled veteran who meets the express statutory requirements without regard to whether the veteran’s spouse also claims the exemption on a separate residence homestead. The court found that the plain text of Section 11.131(b) of the Tax Code unambiguously states that a 100% disabled veteran is entitled to a tax exemption for his or her residence homestead. The court concluded that Ms. Johnson satisfies the express, unambiguous requirements of Section 11.131(b) and therefore is entitled to the benefit of the tax exemption for 100% disabled veterans. View "BEXAR APPRAISAL DISTRICT v. JOHNSON" on Justia Law

The case revolves around the valuation of shares for estate tax purposes following the death of a shareholder. Michael and Thomas Connelly were the sole shareholders of Crown C Supply, a building supply corporation. They had an agreement that if either brother died, the surviving brother could purchase the deceased's shares. If he declined, the corporation would be required to redeem the shares. To ensure the corporation had enough money for this, it obtained $3.5 million in life insurance on each brother. When Michael died, Thomas chose not to purchase Michael's shares, triggering Crown's obligation to do so. The value of Michael's shares was agreed to be $3 million, which was paid to Michael's estate. The Internal Revenue Service (IRS) audited the return and disagreed with the valuation, insisting that the corporation's redemption obligation did not offset the life-insurance proceeds. The IRS assessed the corporation's total value as $6.86 million and calculated the value of Michael's shares as $5.3 million. Based on this higher valuation, the IRS determined that the estate owed an additional $889,914 in taxes.The District Court granted summary judgment to the Government, holding that the $3 million in life-insurance proceeds must be counted in Crown’s valuation. The Eighth Circuit affirmed this decision.The Supreme Court of the United States affirmed the lower courts' decisions. The Court held that a corporation’s contractual obligation to redeem shares is not necessarily a liability that reduces a corporation’s value for purposes of the federal estate tax. The Court reasoned that a fair-market-value redemption has no effect on any shareholder’s economic interest, and thus, no hypothetical buyer purchasing Michael’s shares would have treated Crown’s obligation to redeem Michael’s shares at fair market value as a factor that reduced the value of those shares. The Court concluded that Crown’s promise to redeem Michael’s shares at fair market value did not reduce the value of those shares. View "Connelly v. United States" on Justia Law

The case revolves around Green Rock LLC, a company that solicited taxpayers to invest in arrangements promising conservation-easement deductions. The Internal Revenue Service (IRS) issued Notice 2017-10, which required taxpayers and their advisors to comply with reporting requirements when claiming deductions for donations of conservation easements. Green Rock challenged this notice, arguing that the IRS violated the Administrative Procedure Act by issuing the notice without public notice and comment.Previously, the district court ruled in favor of Green Rock, stating that the IRS had unlawfully promulgated Notice 2017-10 because Congress did not expressly authorize its issuance without notice and comment. The district court set Notice 2017-10 aside for Green Rock.The United States Court of Appeals for the Eleventh Circuit affirmed the district court's decision. The court held that Notice 2017-10 was a legislative rule and Congress did not expressly exempt the IRS from notice-and-comment rulemaking. Therefore, Notice 2017-10 is not binding on Green Rock. The court clarified that its decision was specific to Notice 2017-10 and did not rule on the validity of any other listed transaction not before it. View "Green Rock LLC v. Internal Revenue Service" on Justia Law

The case revolves around CCA of Tennessee, LLC (CCA), a private prison corporation, and its dealings with the New Mexico Taxation and Revenue Department (the Department). CCA housed federal prisoners at the Torrance County Detention Center (the Detention Center) and received payments directly from the United States Marshals Service (Marshals Service). CCA sought a refund of gross receipts taxes it believed it had overpaid, which required the Department to issue a nontaxable transaction certificate (NTTC) to Torrance County (the County), which the County would then execute with CCA. CCA's tax advisor misinformed the Department that the receipts for housing the Marshals Service inmates were not coming directly from the Marshals Service to CCA. Based on this misstatement, the Department issued the NTTC.The administrative hearing officer for the Department concluded that CCA did not in good faith accept the NTTC and was not entitled to the deduction from gross receipts it received for housing federal prisoners. The Court of Appeals disagreed and reversed the hearing officer's decision.The Supreme Court of the State of New Mexico agreed with the hearing officer's conclusion. The court held that under the plain language of Section 7-9-43(A), CCA did not accept the NTTC in good faith and is therefore not entitled to safe harbor protection from the payment of gross receipts tax. The court reversed the decision of the Court of Appeals. View "CCA of Tennessee v. N.M. Tax'n and Revenue Dep't" on Justia Law

Patrick Sutherland was convicted of three counts of filing false tax returns and one count of obstructing an official proceeding. He managed several insurance businesses and routed his international transactions through a Bermuda company, Stewart Technology Services (STS), which he claimed was owned and controlled by his sister. However, evidence showed that Sutherland managed all its day-to-day affairs. Between 2007 and 2011, STS sent Sutherland, his wife, or companies that he owned more than $2.1 million in wire transfers. Sutherland treated these transfers as loans or capital contributions, which are not taxable income, while STS treated them as expenses paid to Sutherland. Sutherland did not report the $2.1 million as income on his tax returns. In 2015, a federal grand jury indicted Sutherland for filing false returns and for obstructing the 2012 grand jury investigation. The jury found Sutherland guilty on all charges.Sutherland appealed his convictions, but the Court of Appeals affirmed them. He then filed a 28 U.S.C. § 2255 petition to vacate his obstruction conviction and a petition for a writ of error coram nobis to vacate his tax fraud convictions. The district court denied both petitions without holding an evidentiary hearing. Sutherland appealed this decision.The United States Court of Appeals for the Fourth Circuit affirmed the district court's decision. The court found that Sutherland failed to show how the proffered testimony from his brother and a tax expert would have undermined his obstruction conviction. The court also found that Sutherland had not demonstrated ineffective assistance of counsel and thus could not show an error of the most fundamental character warranting coram nobis relief. View "United States v. Sutherland" on Justia Law