Justia Tax Law Opinion Summaries

The issue this case presented for the Louisiana Supreme Court’s review centered on whether the Court of Appeal erred in declaring unconstitutional certain provisions of Senate Concurrent Resolution No. 55 of 2014, which applied the formula contained in La.R.S. 17:3995 and allocated Minimum Foundation Program (“MFP”) funding to New Type 2 charter schools. After review, the Supreme Court determined the appellate court erred in declaring the constitution prohibits the payment of MFP funds to New Type 2 charter schools. In this case, the plaintiffs’ view was that local taxes were being used to improve privately-owned facilities to which the public had no title or interest. The Court determined this was a mischaracterization. “[L]ocal revenue is considered in the allotment of MFP funds to public schools. Calculation of the local cost allocation includes sales and ad valorem taxes levied by the local school board. These figures are used to calculate a per-pupil local cost allocation. A public school’s allotment of MFP funding is based on the number of students enrolled in that particular public school irrespective of whether the improvements made to that particular public school are vested in the public or not. Thus, the use of a phrase in an ad valorem tax, such as ‘improvements shall vest in the public’ does not prohibit the use of local revenue in the funding of New Type 2 charter schools and cannot be used as defense to thwart the goal of La. Const. art. VIII, §13(C). Thus, SCR 55 does not transfer actual local tax revenue to charter schools.” Thus, the appellate court’s declaration of unconstitutionality was reversed. View "Iberville Parish Sch. Bd. v. Louisiana Board of Elementary & Secondary Education" on Justia Law

At issue in consolidated cases was the correctness of administrative decisions issued by the Louisiana Tax Commission (“Commission”) on review of the valuations, for the 2014 and 2015 tax years, by the Orleans Parish Tax Assessor (“Assessor”) of a low-income housing development, owned by Opportunity Homes Limited Partnership (“Opportunity Homes”), for purposes of assessment of ad valorem taxes. The Commission ruled in favor of Opportunity Homes for both tax years. The administrative decisions were upheld by the district court but reversed by the appellate court. The Louisiana Supreme Court reversed the appellate court and reinstated the assessment values as determined by the Commission. The Court found no conflict between La. R.S. 47:2323, providing parish assessors a choice of three generally recognized appraisal methods to utilize to determine fair market value (the market approach, the cost approach, and/or the income approach), and La. Admin. Code, Title 61, Part V, sec. 303(C), which recommended the use of the income approach for assessing affordable rental housing, such as the Opportunity Homes LIHTC development. The Supreme Court found this case turned purely on the facts established before the Commission, proving that the income approach was the more appropriate method for determining fair market value in this case. Consequently, the appellate court erred in holding that the Commission’s decisions were in violation of statutory provisions, in excess of its authority, based upon unlawful procedures, and legally incorrect. View "Williams v. Opportunity Homes Limited Partnership" on Justia Law

GMRI, Inc. a restaurant operator, appealed a judgment entered in favor of the State Board of Equalization (the Board) after the trial court granted the Board’s summary judgment motion. Between 2002 and 2004 (period in dispute), GMRI operated Olive Garden and Red Lobster restaurants in California. Customers of these restaurants were notified on their menus that an “optional” gratuity of either 15 or 18 percent (depending on which restaurant and time period within the period in dispute) “will be added to parties of 8 or more.” When it was added, a manager was required to swipe his or her manager’s card through the restaurant’s point- of-sale (POS) system and then manually add the gratuity to the bill. The bill generated and presented to the customer would then contain the total cost of the meal, the applicable tax, the amount of the large party gratuity added by the manager, and the sum of these amounts as the total amount to be paid. In line with the word “optional,” the Company’s policy was that its restaurant managers would always remove a large party gratuity if asked by the customer to do so. However, unless such a request was made, the large party gratuity would remain on the bill as a portion of the total amount. And where that customer paid with a credit card, the credit card slip would contain the amount of the meal plus tax, the amount of the large party gratuity, the total amount, and then a blank line designated, “Add’l Tip,” followed by another blank line designated, “Final Total.” The trial court concluded a 15 or 18 percent gratuity restaurant managers automatically added to parties of eight or more without first conferring with the customer amounted to a “mandatory payment designated as a tip, gratuity, or service charge” under California Code of Regulations, title 18, section 1603 (g), and therefore part of the Company’s taxable gross receipts, in one circumstance: where the large party gratuity was added and neither removed nor modified by the customer. Finding no error in affirming the Board's decision, the Court of Appeal affirmed the trial court. View "GMRI, Inc. v. CA Dept. of Tax & Fee Admin." on Justia Law

In returns for 1995, 1996, and 1997, Stephens a shareholder of SF, a subchapter S corporation, reported "passive activity" passthrough income and passive activity losses (deductible from passive activity income) and passive activity credits (claimed against taxes allocable to passive activities). The IRS audited SF’s returns and Stephens’s individual returns for 1995 and 1996; the 1997 return was audited separately. The IRS concluded that Stephens had materially participated in some SF activities, finalized its audit of the 1995 and 1996 returns, and, in 2009, sent Stephens a notice of deficiency, as proposed in 2003 and 2008. Stephens did not contest the notice but made payment and never filed a formal refund claim, allegedly believing he could carry over the disallowed passive activity losses to 1997. The IRS extended the deadline for a 1997 refund claim to 2008. In 2009, Stephens mailed an amended 1997 return, seeking to carry over the 1995 and 1996 passive activity losses. In 2011, Stephens asserted the mitigation provisions, which, in specified circumstances, “permit a taxpayer who has been required to pay inconsistent taxes to seek a refund” otherwise barred by section 7422(a) (requiring that a “claim for refund or credit has been duly filed”) or section 6511(a), specifying the limitations period for refund claims. The IRS proposed to disallow the Stephenses’ refund claim as untimely and rejected an equitable recoupment argument. The Federal Circuit affirmed the dismissal of the Stephenses suit, concluding that a timely refund claim was a “prerequisite for a refund suit.” View "Stephens v. United States" on Justia Law

Under Federal Rule of Appellate Procedure 13, the statutory 90-day window to appeal a Tax Court decision to this court runs from either: 1) the entry of the Tax Court decision being appealed or 2) if a party moves to vacate or revise the Tax Court's decision, from the entry of the Tax Court's ruling on that motion to vacate or revise the decision. At issue was whether a party may file successive motions to vacate or revise with the effect of extending the time to appeal into perpetuity. The Fifth Circuit held that successive motions to vacate or revise a Tax Court decision, raising substantially the same grounds as the first motion, will not affect the time period in which a party may appeal a Tax Court decision. The court explained that, where successive post-decision motions are filed in the Tax Court, the statutory 90-day window to appeal the Tax Court decision runs from the Tax Court's ruling on the first motion to vacate or revise filed. In this case, the court dismissed the appeal for lack of appellate jurisdiction because the notice was filed more than 90 days after the Tax Court disposed of the first motion to vacate. View "Annamalai v. CIR" on Justia Law

This direct cross-appeal to the South Carolina Supreme Court involved the scope of the authority the Department of Revenue (DOR) to enforce various provisions of state law relating to the imposition of a transportation penny tax by Richland County (County) and the County's expenditure of the funds generated by the tax. After DOR conducted an audit and informed the County that DOR intended to cease future remittances to the County based on purported misuse of funds, the County filed a declaratory judgment action in circuit court, arguing DOR lacked the authority to stop payments and seeking a writ of mandamus compelling DOR to continue remitting revenues. DOR counterclaimed seeking a declaration that the County's expenditures were unlawful, an injunction to prohibit future unlawful expenditures, and alternatively, the appointment of a receiver to administer the County's tax revenues. Following a hearing, the circuit court issued a writ of mandamus compelling DOR to remit the tax revenues, denied injunctive relief, and refused to appoint a receiver. Both the County and DOR appealed. After review, the Supreme Court affirmed in all respects except it reversed the circuit court's denial of DOR's request for injunctive relief. DOR was entitled to an injunction requiring the County to expend the funds generated by the tax solely on transportation-related projects in accordance with the law. View "Richland County v. So. Carolina Dept. of Revenue" on Justia Law

CDLA filed suit against the DMV, alleging that the DMV conducts administrative hearings to determine whether automatic suspension of a driver's license was warranted after the driver has been arrested for driving under the influence. CDLA claimed that at these hearings, the hearing officers simultaneously act as advocates for DMV and as triers of fact. The Court of Appeal reversed the trial court's grant of DMV's motion for summary judgment, holding that taxpayer standing under Code of Civil Procedure section 526a was appropriate under the circumstances of this case, in which a group of taxpayers has alleged that a government entity was engaging in "waste" by implementing and maintaining a hearing system that violated drivers' procedural due process rights. Accordingly, the court remanded for further proceedings. View "California DUI Lawyers Assoc. v. California Department of Motor Vehicles" on Justia Law

CDLA filed suit against the DMV, alleging that the DMV conducts administrative hearings to determine whether automatic suspension of a driver's license was warranted after the driver has been arrested for driving under the influence. CDLA claimed that at these hearings, the hearing officers simultaneously act as advocates for DMV and as triers of fact. The Court of Appeal reversed the trial court's grant of DMV's motion for summary judgment, holding that taxpayer standing under Code of Civil Procedure section 526a was appropriate under the circumstances of this case, in which a group of taxpayers has alleged that a government entity was engaging in "waste" by implementing and maintaining a hearing system that violated drivers' procedural due process rights. Accordingly, the court remanded for further proceedings. View "California DUI Lawyers Assoc. v. California Department of Motor Vehicles" on Justia Law

In 2003, the Legislature enacted Water Code section 1525, which required the holders of permits and licenses to appropriate water to pay an annual fee according to a fee schedule established by the Board. At the same time, the Legislature enacted sections 1540 and 1560, which allowed the Board to allocate the annual fee imposed on a permit or license holder who refuses to pay the fee on sovereign immunity grounds to persons or entities who contracted for the delivery of water from that permit or license holder. Plaintiffs Northern California Water Association, California Farm Bureau Federation, and individual fee payors claimed that the annual fee imposed in fiscal year 2003-2004 constituted an unlawful tax, as opposed to a valid regulatory fee because it required fee payors to pay more than a de minimis amount for regulatory activities that benefited nonfee-paying right holders. Plaintiffs also claimed that the fees allocated to the water supply contractors violated the supremacy clause of the United States Constitution because they exceeded the contractors’ beneficial interests in the USBR’s water rights. The California Supreme Court previously ruled sections 1525, 1540, and 1560 were constitutional on their face. The Supreme Court found that the record was unclear as to: (1) “whether the fees were reasonably apportioned in terms of the regulatory activity’s costs and the fees assessed;” and (2) “the extent and value of the [contractors’ beneficial] interests.” Accordingly, the Supreme Court directed the Court of Appeal to remand the matter to the trial court to make findings on those issues. Following a 10-day bench trial, the trial court issued a statement of decision that determined inter alia that the statutory scheme as applied through its implementing regulations imposed a tax, as opposed to a valid regulatory fee, by allocating the entire cost of the Division’s regulatory activities to permit and license holders, while nonpaying-water-right holders who benefit from and place burdens on the Division’s activities pay nothing. The trial court likewise found that the fees passed through to the water supply contractors in fiscal year 2003-2004 pursuant to regulation 1073 ran afoul of the supremacy clause “because the allocation of fees [was] not limited to the contractors’ beneficial or possessory use of the [USBR’s] water rights.” In addition, the trial court found that the fee regulations were invalid because they operated in an arbitrary manner as to a single payor, Imperial Irrigation District. Accordingly, the trial court invalidated regulations 1066 and 1073, “as adopted by Resolution 2003-0077 in 2003-2004.” The Board appealed, contending the trial court erred in invalidating the fee regulations. The Court of Appeal concluded the trial court’s central premise was wholly incorrect because it failed to recognize the role that general fund money played in fiscal year 2003-2004: the fees assessed on permit and license holders were proportionate to the benefits derived by them or the burdens they placed on the Division. The trial court erred in determining that the fee regulations were invalid based on their application to a single payor. Accordingly, the Court reversed the judgment invalidating the fee regulations. View "No. CA Water Assn. v. St. Water Resources Control Bd." on Justia Law

Galveston County failed to rebut the presumed constitutionality of a statutory formula determining the taxable value of leased natural-gas compressors located in its jurisdiction. Further, Washington County was the taxable situs for the compressors.The Supreme Court reversed the judgment of the Court of Appeals, which held that the parties failed to produce summary judgment evidence demonstrating, as a matter of law, that the statutory formula was either a reasonable or an unreasonable method of calculating the compressors’ reasonable market value. The court of appeals also held that Galveston County was the taxable situs of the compressors. The Supreme Court held (1) the court of appeals erred by not rendering judgment that the County failed to rebut the presumed constitutionality of the valuation statutes; and (2) the legislature’s statutory taxation scheme sets situs in the county where the dealer does business, and therefore, Washington County was the proper taxable situs for the compressors. View "EXLP Leasing, LLC v. Galveston Central Appraisal District" on Justia Law