Justia Tax Law Opinion Summaries

Austin Ray was convicted by jury convictions for one count of conspiracy to defraud the United States, five counts of aiding in the preparation of a false tax return, and two counts of submitting a false tax return. Ray argued on appeal: (1) the government violated the Interstate Agreement on Detainers Act (IAD) of 1970; (2) the government engaged in vindictive prosecution; (3) the district court violated his rights under the Speedy Trial Act (STA) of 1974; (4) the government violated his due-process rights by destroying certain evidence; and (5) the district court constructively amended the indictment. The Tenth Circuit affirmed in all respects, finding: (1) the government never lodged a detainer against Ray, meaning the IAD didn’t apply; (2) Ray established neither actual nor presumptive vindictiveness; (3) Ray’s STA argument was waived for failing to raise it below; (4) the evidence at issue lacked any exculpatory value, and even if the evidence were potentially useful to Ray’s defense, the government didn’t destroy it in bad faith; and (5) the district court narrowed, rather than broadened, the charges against Ray. View "United States v. Ray" on Justia Law

In 2017, the Oregon legislature enacted a law that imposed a tax imposed on each vehicle dealer "for the privilege of engaging in the business of selling taxable motor vehicles at retail in this state.” The issue in this case was whether that tax was subject to Article IX, section 3a, of the Oregon Constitution. As relevant here, Article IX, section 3a, provided that taxes “on the ownership, operation or use of motor vehicles” “shall be used exclusively for the construction, reconstruction, improvement, repair, maintenance, operation and use of public highways, roads, streets and roadside rest areas in this state.” Petitioners AAA Oregon/Idaho Auto Source, LLC (Auto Source), AAA Oregon/Idaho, and Oregon Trucking Associations, Inc. argued the Section 90 tax fell within paragraph (1)(b) because it was a tax “on the owner- ship *** of motor vehicles.” Specifically, petitioners contended that taxes “on the ownership *** of motor vehicles” included taxes levied on the exercise of any of the rights of ownership, including the rights to sell and use. Petitioners posited that the voters would have understood “the concept of ownership” to include “multiple segregable rights or incidents, principal among which were the rights to sell and to use,” and, therefore, it is likely that the voters would have understood taxes levied “on the ownership *** of motor vehicles” to include taxes levied on the sale or use of motor vehicles. The Oregon Supreme Court disagreed with petitioners' contention: the Section 90 and Section 91 taxes worked together, so that the Section 91 privilege tax could be imposed on in-state vehicle dealers without placing them at a competitive disadvantage to out-of-state vehicle dealers, which supported the conclusion that the Section 90 tax was a business privilege tax. Therefore, the Court held the Section 90 tax was not a tax “on the ownership, operation or use of motor vehicles,” as that phrase is used in Article IX, section 3a. View "AAA Oregon/Idaho Auto Source v. Dept. of Rev." on Justia Law

The Supreme Judicial Court held that an individual resident of Maine was not entitled to a Maine income tax credit for any portion of business taxes imposed by New Hampshire on a New Hampshire limited liability company of which the Maine resident was a member.Appellants, Maine residents, appealed from the judgment of the Business and Consumer Docket affirming the State Tax Assessor’s denial of a tax credit for a share of a New Hampshire business taxes paid by a New Hampshire LLC proportional to the membership interest that Appellants had in the LLC. The court reasoned that no income tax credit applied because (1) the New Hampshire business taxes were imposed on the LLC and were not an “amount of income tax imposed on [an] individual,” Me. Rev. Stat. 36, 5217-A; and (2) Maine’s tax statutes do not violate the Commerce Clause of the federal Constitution. The Supreme Judicial Court affirmed, holding (1) the lower court correctly interpreted Maine’s income tax statutes; and (2) the court did not err in concluding that Maine’s tax statutes are constitutionally sound. View "Goggin v. State Tax Assessor" on Justia Law

The Supreme Court held that the tax court erred in determining that the timeliness of an appeal of real property tax assessments was determined by county ordinance and not state law.Appellant filed a notice of appeal to the tax court for each of fourteen parcels challenging the City Council of the City and County of Honolulu’s assessment notices. The notices of appeal were filed the next business day following the deadline set by a county real property tax ordinance. The appeal deadline fell on a Sunday and was followed by a State holiday. The tax court dismissed the appeals, concluding that the county ordinance superseded the “weekend rule” established by Hawai’i state law. The Supreme Court vacated the tax court, holding (1) the City did not possess the constitutional authority to invalidate via an ordinance the statutory weekend rule as it applied to the tax court’s jurisdiction; and (2) therefore, Appellant’s notices of appeal were timely filed. View "Kalaeloa Ventures, LLC v. City & County of Honolulu" on Justia Law

The Eighth Circuit affirmed the tax court's dismissal of a petition for relief from a determination that petitioner owed additional employment tax. The court held that there was no actual controversy involving a determination that petitioner was an employee for Federal Insurance Contributions Act (FICA) purposes. Even assuming there was an actual controversy, it did not involve a determination that petitioner was an employee for FICA purposes. In this case, the only issue the Commissioner examined was the amount of remuneration for petitioner's services and this determination did not give the tax court jurisdiction. View "Martin S. Azarian, P.A. v. Commissioner" on Justia Law

The American Recovery and Reinvestment Act of 2009 provides a cash grant to entities that “place[] in service” certain renewable energy facilities. The amount is determined using the basis of the tangible personal property of the facility. Alta placed windfarm facilities into service and sought $703 million in grants. The government awarded $495 million. Alta filed suit, seeking an additional $206 million. The government counterclaimed, asserting that it had overpaid $59 million. The difference was attributable to the calculation of basis. The portion of the purchase prices attributable to grant-ineligible tangible property (real estate, transmission equipment, and buildings) must be deducted: Alta argued that the entire remainder can be allocated to grant-eligible tangible personal property, with none allocated to intangibles. The Claims Court found in favor of Alta, rejecting the government’s argument that basis must be calculated using the residual method of 26 U.S.C. 1060, which applies to the acquisition of a business. The court reasoned that no intangible goodwill or going concern value could have attached to the windfarms at the time of the transaction.The Federal Circuit vacated. The Alta purchase prices were well in excess of their development and construction costs (book value), and the transactions involved numerous related agreements, such as the leasebacks and grant-related indemnities. Goodwill and going concern value could have attached, so those assets constitute a “trade or business” within the meaning of section 1060; the transactions count as “applicable asset acquisitions.” View "Alta Wind v. United States" on Justia Law

After the IRS refused to grant the foreign shipping corporation Good Fortune an exemption to some of its U.S.-based income from taxation, the tax court ruled in favor of the IRS. The DC Circuit reversed, holding that the IRS's interpretation of Internal Revenue Code 883 in the 2003 Regulation was unreasonable and could not stand. Even if the IRS reasonably concluded that sometimes—maybe oftentimes—bearer shares were incapable of proving the residence of their owners, the court held that the 2003 Regulation's categorical bar on considering bearer shares did not follow from that premise. The court explained that the IRS has not justified treating all bearer shares as incapable of proving ownership; and if some corporations' bearer shares were not kept in record form, and thus were not capable of proving the location of an owner, then the IRS should have identified those corporations' shares and tailored its rule accordingly. View "Good Fortune Shipping SA v. Commissioner" on Justia Law

The Supreme Court affirmed the decision of the Board of Tax Appeals (BTA) upholding a use-tax assessment on the purchases of natural gas by East Manufacturing Corporation (East) and not granting an exemption under Ohio Rev. Code 5739.011(B)(4), (B)(8), or (C)(5).East manufactures custom aluminum truck trailers. The tax commissioner issued a use-tax assessment for East’s natural gas purchases, exempting only the portion of natural gas used in painting operations. On appeal to the BTA, East argued that the natural gas used to heat the its buildings was exempt because maintaining the temperature at fifty degrees Fahrenheit or higher in the plant’s buildings was essential to its manufacturing process. The BTA affirmed the commissioner’s assessment on the portion of the natural gas that East used to heat its plant and denied East’s claim for exemption in its entirety. The Supreme Court affirmed, holding that the BTA correctly determined that East did not qualify for an exemption for total environmental regulation of a “special and limited area” of the facility, for items used in a manufacturing operation, or for gas used in a manufacturing operation. View "East Manufacturing Corp. v. Testa" on Justia Law

Hartman and Ott co-founded Spectrum Tool & Design and divided management responsibilities. Ott was supposed to handle the company’s payroll taxes, which required him to withhold federal taxes from employees’ wages and send the money to the IRS. When Spectrum encountered financial difficulties, however, Ott failed to pay the taxes several times in 2004 and 2005. Hartman continued to rely on Ott to pay the taxes even after discovering the delinquency. After Spectrum went bankrupt, the government sued Hartman to recover the unpaid taxes. The district court granted the government summary judgment. The Sixth Circuit affirmed, noting that Hartman “willfully” failed to pay Spectrum’s taxes. The government imposes personal liability for outstanding payroll taxes on anyone who was “required to” pay these taxes and “willfully” failed to pay the funds to the IRS, 26 U.S.C. 6672(a). Hartman acted willfully by repeatedly claiming to believe that Ott paid the taxes when he no longer had any plausible basis for thinking that was so. He knew of Ott’s past failures and had ample means to identify and remedy Ott’s misconduct. View "United States v. Hartman" on Justia Law

The Supreme Court held that the tax court lacked jurisdiction to consider a motion filed in a case arising from a tax petition that was automatically dismissed by operation of law.Ronald and Dee Johnson challenged the County’s assessment of their property taxes. The County automatically dismissed the petition by operation of law because the Johnsons had not paid a portion of their property taxes by the date required by law. The tax court declined to consider the Johnsons’ motion regarding their petition because the petition had been automatically dismissed by statute and had not been reinstated. The Supreme Court affirmed, holding that the tax court correctly concluded that it no longer had jurisdiction over the dismissed petition.Specifically, the Court held (1) the requirements of Minn. Stat. 783.03(1) were met; and (2) the Johnsons’ arguments challenging the constitutionality of section 278.03(1) were without merit. View "Johnson v. County of Hennepin" on Justia Law