Justia Tax Law Opinion Summaries

Income earned by Americans typically is taxed in the U.S., regardless of where it is earned. European countries only tax income earned within their borders. To address possible “double taxation” the U.S. generally provides credits for taxes paid to foreign governments; European systems typically exempt from taxation income earned abroad. Congress, believing that the exemption method puts American companies at a trade disadvantage, has enacted various tax regimes, then received push-back from its European trading partners, who claimed each was an effective export subsidy.The 2000 ETI Act, intended to ease the burden of the tax revisions on domestic producers, was rejected in the World Trade Organization (WTO). Congress responded with the 2004 American Jobs Creation Act (AJCA), 118 Stat. 1418. Section 101 repeals the ETI provision that excluded extraterritorial income from taxation, effective for “transactions after December 31, 2004.” Section 101(d), provides: In the case of transactions during 2005 or 2006, the amount includible in gross income by reason of the amendments made by this section shall not exceed the applicable percentage of the amount which would have been so included but for this subsection. In 2005, WTO found that the ACJA improperly maintained prohibited ETI subsidies through transitional and grandfathering measures. Congress repealed section 101(f), effective for “taxable years beginning after” May 17, 2006. It did not repeal or revise section 101(d).Pursuant to a 2006 Agreement, DWA recognized qualifying extraterritorial income for 2006, invoked section 101(d), and excluded 60% from gross income. The IRS allowed the exclusion. DWA subsequently sought refunds for 2007-2009, claiming the section 101(d) exclusion. The Federal Circuit, disagreeing with the IRS and the Claims Court, held that section 101(d) unambiguously provides transitional relief for all extraterritorial income received from transactions entered into in 2005 and 2006, even income received in later years. View "DWA Holdings LLC v. United States" on Justia Law

The Supreme Court affirmed the judgment of the district court dismissing Plaintiffs’ complaint against Weber County claiming that the County had violated Utah Code 59-22-103 and 59-2-103.5, which establish the tax exemption for primary residential property.Plaintiffs paid taxes on their primary residence but later learned that the County had not given them the residential exemption. The district court entered a judgment on the pleadings dismissing Plaintiffs’ causes of action, concluding, inter alia, that the assessor acted within the scope of his authority in reclassifying Plaintiffs’ property as “non-primary residential.” In affirming, the Supreme Court held that Plaintiffs’ challenges to the taxes they paid must fall under Utah Code 59-2-1321, which requires taxpayers to point an “error or illegality that is readily apparent from county records.” Because Plaintiffs did not challenge this requirement or show that the alleged errors or illegalities were readily apparent, the district court did not err in its judgment. View "Hammons v. Weber County" on Justia Law

The Fifth Circuit affirmed the district court's grant of the Government's motion to dismiss taxpayers' action seeking a refund for an overpayment because it was time-barred. The court agreed with the district court and the government that the claim was filed after the general limitations period in I.R.C. 6511(a) and that the special limitations period in I.R.C. 6511(d)(3)(A) did not apply as the overpayment was not attributable to foreign taxes for which credit was allowed. View "Schaeffler v. United States" on Justia Law

At issue was whether Plaintiffs, a group of taxpayers in the Town of Portsmouth, were required to base their tax appeals on the fair market value of their properties as of December 31 in the year of the last update or revaluation.The value of Plaintiffs’ properties decreased in 2008 and 2009. The trial justice found that Plaintiffs could challenge the Portsmouth tax assessor’s (Defendant) tax assessments for tax years 2009 and 2010 using the fair market values of their properties as of December 31, 2008 and December 31, 2009, respectively, thus concluding that Plaintiffs were not confined to December 31, 2007 valuations. The Supreme Court affirmed, holding that Plaintiffs were authorized under chapter 5 of title 44 of the Rhode Island General Laws to challenge Defendant’s assessments for tax years 2009 and 2010 by employing the fair market values of their properties as of December 31, 2008 and December 31, 2009, respectively. View "Balmuth v. Dolce" on Justia Law

The order of the Tax Commissioner of the State of West Virginia penalizing Ashland Specialty Company, Inc. (Ashland) $159,398 for unlawfully selling 12,230 packs of cigarettes in West Virginia that were not approved for sale - a penalty equal to 500 percent of the cigarettes’ retail value - was not an abuse of discretion.The Office of Tax Appeals (OTA) ordered the Commissioner’s penalty reduced by twenty-five percent, finding the Commissioner’s original penalty to be erroneous, unlawful, void, or otherwise invalid. The circuit court reversed the order of the OTA and reinstated the Commissioner’s original penalty. The Supreme Court affirmed, holding (1) the circuit court did not simply substitute its own judgment for that of the OTA when it reinstated the Commissioner’s original penalty; (2) the Commissioner’s penalty was not an abuse of the discretion afforded him by W. Va. Code 16-9D-8(a) and need not be cancelled or reduced due to circumstances that allegedly mitigated their unlawful cigarette sales; and (3) the Commissioner’s penalty did not violate the Excessive Fines Clause of the West Virginia Constitution or the Eighth Amendment to the United States Constitution. View "Ashland Specialty Co., Inc. v. Steager, State Tax Commissioner of West Virginia" on Justia Law

The order of the Tax Commissioner of the State of West Virginia penalizing Ashland Specialty Company, Inc. (Ashland) $159,398 for unlawfully selling 12,230 packs of cigarettes in West Virginia that were not approved for sale - a penalty equal to 500 percent of the cigarettes’ retail value - was not an abuse of discretion.The Office of Tax Appeals (OTA) ordered the Commissioner’s penalty reduced by twenty-five percent, finding the Commissioner’s original penalty to be erroneous, unlawful, void, or otherwise invalid. The circuit court reversed the order of the OTA and reinstated the Commissioner’s original penalty. The Supreme Court affirmed, holding (1) the circuit court did not simply substitute its own judgment for that of the OTA when it reinstated the Commissioner’s original penalty; (2) the Commissioner’s penalty was not an abuse of the discretion afforded him by W. Va. Code 16-9D-8(a) and need not be cancelled or reduced due to circumstances that allegedly mitigated their unlawful cigarette sales; and (3) the Commissioner’s penalty did not violate the Excessive Fines Clause of the West Virginia Constitution or the Eighth Amendment to the United States Constitution. View "Ashland Specialty Co., Inc. v. Steager, State Tax Commissioner of West Virginia" on Justia Law

In this property-tax dispute regarding ownership of tangible personal property, the Supreme Court held (1) when, as in this case, an ownership correction to an appraisal roll does not increase the amount of property taxes owed for subject property in the year of the correction, an appraisal district’s chief appraiser has statutory authority under Tex. Code Ann. Prop. 25.25(b) to make such a correction even when the correction necessarily alters the taxing units’ expectation of who is liable for payment of property taxes; (2) an agreement under Tex. Code Ann. Prop. 1.111(e) may be rendered voidable if it is proven that it was induced by fraud; and (3) a purported owner challenging ownership on the appraisal roll is not entitled to attorney’s fees under Tex. Code Ann. Prop. 42.29. Accordingly, the Court reversed the judgment of the court of appeals ruling that Willacy County Appraisal District lacked authority to change a property ownership determination under section 25.25(b), without reaching the issue of whether a section 1.111(e) agreement may be voided if it was induced by fraud, and remanding the case for a determination of attorney’s fees consistent with section 42.29. The Supreme Court remanded the case to the court of appeals for further proceedings. View "Willacy County Appraisal District v. Sebastian Cotton & Grain, Ltd." on Justia Law

Alabama rail carriers pay a 4% sales and use tax on diesel fuel. Motor carriers and water carriers are exempt from that tax but motor carriers pay a Motor Fuels Excise Tax of $0.19 per gallon of diesel. Water carriers pay no tax for diesel fuel. The Eleventh Circuit previously determined that Alabama failed to sufficiently justify the scheme under the Railroad Revitalization and Regulatory Reform Act, 49 U.S.C. 11501, which forbids states from discriminating against rail carriers in assessing property or imposing taxes. The Supreme Court reversed and remanded. On remand, the district court again ruled that Alabama’s tax scheme does not violate the Act. The Eleventh Circuit then reversed. The excise tax justifies the motor carrier exemption. As to water carriers, their exemption is not “compelled by federal law.” Although imposing the sales and use tax on water carriers transporting freight interstate might “expose” the state to a lawsuit under federal law, compulsion requires more than exposure. The water carrier exemption is “compelled by federal law” only if imposition of the sales and use tax would violate federal law. It would not, so it violates the Act. View "CSX Transportation, Inc. v. Alabama Department of Revenue" on Justia Law

Larson was involved with—and later convicted of crimes related to—the organization of fraudulent tax shelters. The IRS then required organizers/promoters to register tax shelters not later than the day of the first offering for sale, 26 U.S.C. 6111(a). Organizers/promoters who failed to register were subject to a penalty of the greater of one percent of the aggregate amount invested in the tax shelter, or $500. Eight years after the IRS notified Larson that he was under investigation, it informed him that it considered him an organizer with a duty to register and was subject to penalties of $160,232,0261 for failure to do so. The IRS Office of Appeals reduced the penalties to $67,661,349, stating that Larson would need to pay the remaining penalty and file a Claim for Refund if he wanted to contest the assessment. Larson paid $1,432,735 and filed his Refund Claim. The IRS rejected Larson’s claim for failure to pay the entire amount. Larson filed suit. The government moved to dismiss, arguing that because Larson had not paid the assessed penalties in full, the court lacked jurisdiction. The court agreed, concluding that application of the full-payment rule did not violate Larson’s due process rights. The Second Circuit affirmed, holding that the full‐payment rule applies to Larson’s section 6707 penalties and that his tax refund, due process, Administrative Procedure Act, and Eighth Amendment claims were properly dismissed. View "Larson v. United States" on Justia Law

Within the 2006 through 2010 tax years, the Oklahoma Tax Commission and the Oklahoma State Board of Equalization issued certified assessments of certain public property physically located within the boundaries of the Stroud school district. Ad valorem taxes associated with these properties were distributed by the Lincoln County Treasurer to the Cushing and Wellston districts, instead of to Stroud. The error was discovered and subsequently corrected by the Lincoln County Board of Tax Roll Corrections during the 2010-2011 fiscal year. There was no disagreement among the three school districts that they were not responsible for the errors made in the distribution of the ad valorem taxes. To recover the funds that should have been Stroud's, Stroud sued Cushing and Wellston school districts. Stroud filed its petition on April 22, 2013. The defendant school districts filed a motion for summary judgment in December of 2014. In the same month, the plaintiff responded with its own motion for summary judgment. Stroud received the taxes from the property identified as within its district; Cushing received the taxes from the property identified as within its district; and Wellston received the taxes from the property identified as within its district. The Oklahoma Supreme Court found Stroud received the same amount for its general funds that it would have received had the ad valorem taxes been properly allocated. Nevertheless, it demanded additional funds from Cushing and Wellston that it would have received if the real property had been correctly identified. The Court determined if that amount was paid to Stroud, then Cushing and Wellston would have deficits in those districts that they would not have if the real property had been correctly identified. Stroud did not believe the other two school districts are entitled to a setoff if they paid Stroud the misallocated ad valorem taxes. The Court found all three school districts were victims of this error, but no district failed to receive the funds needed for their respective districts. The Court reversed judgments against the Cushing and Wellston districts and that in favor of Stroud: "county and state officials will make mistakes in the taxing of property and the distribution of taxes." View "Independent Sch. Dist. No. 54 v. Independent Sch. Dist. No. 67" on Justia Law