Justia Tax Law Opinion Summaries

These consolidated appeals stemmed from the Commissioner's efforts to hold the former shareholders of a close corporation, Slone Broadcasting, responsible for taxes owed on the proceeds of its sale of assets to another broadcasting company, Citadel. The shareholders followed up the asset sale to Citadel by selling Slone Broadcasting's stock to another company, Berlinetta, an affiliate of Fortrend. Berlinetta and Slone Broadcasting then merged into a new company called Arizona Media.The Ninth Circuit reversed the tax court's judgment on the petition for redetermination of federal income tax deficiency challenging the shareholders' liability for taxes in connection with an asset and stock sale. The panel applied Arizona's Uniform Fraudulent Transfer Act and held that the transaction was constructively fraudulent as to the creditor (the IRS) because the debtor (Slone Broadcasting) did not receive a reasonably equivalent value in exchange for the transfer to the shareholders and was left unable to satisfy its tax obligation. In this case, the purpose of the shareholders' transaction with Berlinetta was tax avoidance and thus reasonable actors in the shareholders' position would have been on notice that Berlinetta never intended to pay Slone Broadcasting's tax obligation. The panel held that the shareholders' sale to Berlinetta was a cash-for-cash exchange lacking independent economic substance beyond tax avoidance. The panel also held that the shareholders were liable to the government for Slone Broadcasting's federal tax obligation as "transferees" under 26 U.S.C. 6901, because Slone Broadcasting's liquidating distribution to the shareholders was a constructively fraudulent transfer under Arizona law. View "Slone v. Commissioner of Internal Revenue" on Justia Law

26 C.F.R. 1.482-7A(d)(2), under which related entities must share the cost of employee stock compensation in order for their cost-sharing arrangements to be classified as qualified cost-sharing arrangements and thus avoid an IRS adjustment, was not invalid under the Administrative Procedure Act (APA). The Ninth Circuit reversed the tax court's decision declaring 26 C.F.R. 1.482-7A(d)(2) invalid and held that the challenged regulation was not arbitrary and capricious, but rather a reasonable execution of the authority delegated by Congress to Treasury. Therefore, the regulation was entitled to Chevron deference. View "Altera Corporation & Subsidiaries v. Commissioner of Internal Revenue" on Justia Law

Plaintiffs were financing companies that sought tax refunds under Michigan’s bad-debt statute, MCL 205.54i, for taxes paid on vehicles financed through installment contracts. Defendant Department of Treasury (the Department) denied the refund claims on three grounds: (1) MCL 205.54i excluded debts associated with repossessed property; (2) plaintiffs failed to provide RD-108 forms evidencing their refund claims; and (3) the election forms provided by plaintiff Ally Financial Inc. (Ally), by their terms, did not apply to the debts for which Ally sought tax refunds. The Court of Claims and the Court of Appeals affirmed the Department’s decision on each of these grounds. The Michigan Supreme Court held the Court of Appeals erred by upholding the Department’s decision on the first and third grounds but agreed with the Court of Appeals’ decision on the second ground. Accordingly, the Court of Appeals was affirmed as to the second ground, and the matter reversed in all other respects. The case was remanded to the Court of Claims for further proceedings. View "Ally Financial, Inc. v. Michigan State Treasurer" on Justia Law

This appeal stemmed from a dispute between the parties as to how the County may tax Time Warner's possessory interests in using public rights-of-way. The trial court found that the Assessor may tax the possessory interests only on the franchise fee because anyone can obtain an identical franchise for five percent of television revenue.The Court of Appeal held that there was no legal restriction on the County valuing the possessory interests in providing television, broadband, and telephone services. The court agreed with the trial court that the Assessor's valuation was not supported by substantial evidence; that the County erred in taxing the entire five percent of revenue rather than the value of the possessory interests alone; and that substantial evidence supported the Los Angeles County Assessment Appeals Board's finding that the reasonably anticipated term of possession of Time Warner's rights-of-way was 10 years. Accordingly, the court affirmed in part, reversed in part, and remanded. View "Time Warner Cable Inc. v. County of Los Angeles" on Justia Law

The Supreme Court affirmed the judgment of the trial court determining that Plaintiff, Walgreen Eastern Company, Inc., had established aggrievement under Conn. Gen. Stat. 12-117a by showing that the valuation of Plaintiff’s property by Defendant, the Town of West Hartford, was excessive. The Court further affirmed the trial court’s judgment determining the true and actual value of the subject property and concluding that the Town’s valuation of the subject property was not manifestly excessive under Conn. Gen. Stat. 12-119.After the Board of Assessment Appeals (Board) upheld the town assessor’s valuation, Plaintiff appealed to the superior court, which (1) found Plaintiff satisfied its burden of proving aggrievement; and (2) rendered judgment in favor of Plaintiff on its section 12-117a count and in favor of the Town on Plaintiff’s section 12-119 count. The Supreme Court affirmed, holding (1) the relief awarded by the trial court was sufficient because the court properly determined the true and actual value of Plaintiff’s property; and (2) the trial court properly determined that Plaintiff did not meet its burden to establish a claim under section 12-119. View "Walgreen Eastern Co. v. Town of West Hartford" on Justia Law

Certain limited liability companies (LLCs) paid a levy under Revenue and Taxation Code section 17942, which was later determined by the court of appeal to be unconstitutional. After two separate actions seeking class treatment for the payment of refund claims were coordinated, the trial court rejected a jurisdictional argument from the Franchise Tax Board (FTB) that the LLCs had failed to adequately exhaust their administrative remedies as a class and could not proceed on a classwide basis. The court, however, went on to deny the motion for class certification on multiple other grounds, including lack of ascertainability, numerosity, predominance, and superiority. The court of appeal reversed. The court agreed with the trial court’s exhaustion determination but concluded that its class certification analysis was fundamentally flawed. The court deemed the matter “eminently suitable for treatment on a classwide basis.” There is no bar to certification of a class action for refund of unconstitutional taxes so long as all class members have filed their own individual claims and thereby exhausted their administrative remedies; no purpose would be served by erecting a jurisdictional barrier to class treatment of those claims on the formalistic ground that no class claim for refund was filed. View "Franchise Tax Board Limited Liability Corp. Tax Refund Cases" on Justia Law

The Eleventh Circuit affirmed the district court's order denying the quashing of IRS summonses to Bank of America in the course of investigating the federal income tax liabilities of a lawyer, his law firm, and associated parties (plaintiffs). The court held that neither plaintiffs nor their law firm clients whose interests plaintiffs attempted to invoke have a viable Fourth Amendment objection to the IRS's collection of plaintiffs' bank records from plaintiffs' bank. Plaintiffs' arguments were foreclosed by the Supreme Court's holdings in United States v. Miller, 425 U.S. 435 (1976), and United States v. Powell, 379 U.S. 48 (1964). View "Presley v. United States" on Justia Law

The tax court correctly dismissed the appeals brought by several cooperatives (the Cooperatives) challenging the valuation orders of the Commissioner of Revenue for the 2014, 2015, and 2016 tax years because the appeals were not filed within the sixty-day deadline for appeals from orders of the Commissioner.On appeal, the Cooperatives argued that the two appeal paths provided by Minn. Stat. 273.372(2) effectively establish the single deadline of April 30 of the year in which the tax becomes payable. The Supreme Court disagreed, holding (1) the Cooperatives’ view that a single filing deadline governs all appeals under section 273.372 fails because the plain language of that statute establishes two different filing deadlines, depending on the appeal path chosen; and (2) the Cooperatives’ notices of appeal were governed only by a sixty-day deadline, and therefore, the tax court properly dismissed the appeals as untimely. View "Lake Country Power Cooperative v. Commissioner of Revenue" on Justia Law

The Supreme Court held that four irrevocable inter vivos trusts (the Trusts) lacked sufficient relevant contacts with Minnesota during the relevant tax year to be permissibly taxed, consistent with due process, on all sources of income as “resident trusts.”The Trusts filed their 2014 Minnesota income tax returns under protest, asserting that Minn. Stat. 290.01(7b)(a)(2), the statute classifying them as resident trusts, was unconstitutional as applied to them. The Trusts sought refunds for the difference between taxation as resident trusts and taxation as non-resident trusts. The Commissioner of Revenue denied the refund claims. The Minnesota Tax Court granted summary judgment for the Trusts, holding that the statutory definition of “resident trust” violates the Due Process Clauses of the Minnesota and United States Constitutions as applied to the Trusts. The Supreme Court affirmed, holding that, for due process purposes, the State lacked sufficient contacts with the Trusts to support taxation of the Trusts’ entire income as residents. View "Fielding v. Commissioner of Revenue" on Justia Law

The Pennsylvania Supreme Court allowed this appeal to address the City of Philadelphia's so-called "soda tax." In June 2016, City Council enacted the challenged ordinance, which imposed a tax regarding specified categories of drinks sold, or intended to be sold, in the municipal limits. Appellants -- a group of consumers, retailers, distributors, producers, and trade associations -- filed suit against the City and the Commissioner of the Philadelphia Department of Revenue, in the court of common pleas, challenging the legality and constitutionality of the tax and seeking declaratory and injunctive relief. The common pleas court differentiated the soda tax as a “non-retail, distribution level tax” and that the tax did not apply to the same transaction or subject as the state sales tax, thus, no violation of the "Sterling Act," Act of August 5, 1932, Ex. Sess., P.L. 45 (as amended 53 P.S. sections 15971–15973). A divided, en banc panel of the Commonwealth Court affirmed, the majority reasoning that in determining whether a tax was duplicative, the focus is upon the incidence of the tax; such incidence is ultimately determined according to the substantive text of the enabling legislation; and the concept of legal incidence does not concern post-tax economic actions of private actors. Because the City’s beverage tax and the state sales and use tax are imposed on different, albeit related, transactions and measured on distinct terms, the majority likewise concluded that the Sterling Act was not offended. The Supreme Court affirmed, finding that the Sterling Act conferred upon the City "a broad taxing power subject to preemption," while clarifying that “any and all subjects” are available for local taxation which the Commonwealth could, but does not presently, tax. The Commonwealth could, but did not, tax the distributor/dealer-level transactions or subjects targeted by the soda tax. "Moreover, the legal incidences of the Philadelphia tax and the Commonwealth’s sales and use tax are different and, accordingly, Sterling Act preemption does not apply." View "Williams v. City of Philadelphia" on Justia Law