Justia Tax Law Opinion Summaries

At issue in this appeal was a judgment dismissing an action seeking to recover money unlawfully collected by the City of Pocatello from users of the City’s water and sewer systems. In 2005, the city government decided that the City should be able to operate its water and sewer systems at a profit like private utilities. By law, the City was required to charge and collect sufficient fees so that its water and sewer systems “shall be and always remain self-supporting.” Those fees had to be sufficient to pay when due all bonds and interest as required by Idaho Code section 50-1032(a) and “to provide for all expenses of operation and maintenance of such works . . . , including reserves therefor,” as required by Idaho Code section 50-1032(b). The City wanted to obtain a profit in excess of the amounts necessary for the water and sewer systems to remain self-supporting. This profit was paid into the general fund. The City instituted a program called "PILOT," which stood for payment in lieu of taxes, under which city-owned water and sewer departments paid "property taxes" to the City as if they were private entities, and the departments then passed this cost on to their customers. The “property taxes” were then paid into the City’s general fund. Plaintiffs sought a refund of the PILOT sums that they had paid. In granting summary judgment, the district court held that the imposition of the PILOT was not a compensable taking. The district court appeared to rely upon two grounds for that decision: (1) "Some courts have made that determination on the grounds that money is not 'property' within the meaning of the Takings Clause," and (2) "Other courts ‘have concluded that governmental-imposed obligations to pay money are not the sort of governmental actions subject to a takings analysis.?” The Idaho Supreme Court determined both of these rationales were incorrect, reversed and remanded for further proceedings. View "Hill-Vu Mobile Home Pk v. City of Pocatello" on Justia Law

At issue in this appeal was a judgment dismissing an action seeking to recover money unlawfully collected by the City of Pocatello from users of the City’s water and sewer systems. In 2005, the city government decided that the City should be able to operate its water and sewer systems at a profit like private utilities. By law, the City was required to charge and collect sufficient fees so that its water and sewer systems “shall be and always remain self-supporting.” Those fees had to be sufficient to pay when due all bonds and interest as required by Idaho Code section 50-1032(a) and “to provide for all expenses of operation and maintenance of such works . . . , including reserves therefor,” as required by Idaho Code section 50-1032(b). The City wanted to obtain a profit in excess of the amounts necessary for the water and sewer systems to remain self-supporting. This profit was paid into the general fund. The City instituted a program called "PILOT," which stood for payment in lieu of taxes, under which city-owned water and sewer departments paid "property taxes" to the City as if they were private entities, and the departments then passed this cost on to their customers. The “property taxes” were then paid into the City’s general fund. Plaintiffs sought a refund of the PILOT sums that they had paid. In granting summary judgment, the district court held that the imposition of the PILOT was not a compensable taking. The district court appeared to rely upon two grounds for that decision: (1) "Some courts have made that determination on the grounds that money is not 'property' within the meaning of the Takings Clause," and (2) "Other courts ‘have concluded that governmental-imposed obligations to pay money are not the sort of governmental actions subject to a takings analysis.?” The Idaho Supreme Court determined both of these rationales were incorrect, reversed and remanded for further proceedings. View "Hill-Vu Mobile Home Pk v. City of Pocatello" on Justia Law

The City of Rutland appealed a superior court decision that two buildings owned by the Rutland County Parent Child Center (RCPCC) were exempt from property taxation. The City argued neither property met the requirements of the public use tax exemption in 32 V.S.A. 3802(4). RCPCC is one of fifteen parent-child centers in Vermont. Under the statutory definition, a parent-child center is a “community-based organization established for the purpose of providing prevention and early intervention services." The superior court determined on summary judgment that RCPCC’s properties did not qualify for the public school tax exemption but, after a bench trial, decided that RCPCC’s use of the properties in question met the three-prong public use exemption test from American Museum of Fly Fishing, Inc. v. Town of Manchester, 110, 557 A.2d 900 (1989), and that, accordingly, both properties were exempt from property tax assessment. The Vermont Supreme Court found that RCPCC's use of the buildings met all elements of the American Museum of Fly Fishing's test, and affirmed the superior court's judgment. View "Rutland County Parent Child Center, Inc. v. City of Rutland" on Justia Law

Kohl’s Department Stores, Inc. entered into a license agreement with Kohl’s Illinois, Inc., an affiliate of Kohl’s that operates retail stores in select states, but not Virginia, for the use of intellectual property managed and licensed by Kohl’s Illinois. Kohl’s paid royalties to Kohl’s Illinois, and when calculating its federal taxable income, Kohl’s deducted these royalty payments from its income as an ordinary and necessary business expense. Kohl’s Illinois, however, did not pay state income taxes on a substantial portion of the royalties. Kohl’s claimed that the royalty payments fell within the “subject-to-tax” exception to the add back statute. The Virginia Department of Taxation auditor required that the untaxed portion be added back to Kohl’s taxable income and issued a notices of assessment to Kohl’s for certain taxable years. The circuit court affirmed, concluding that only the portion of the royalties that was actually taxed by another state fell within the subject-to-tax exception. The Supreme Court reversed, holding that the circuit court erred by failing to hold that Kohl’s Illinois need not be the entity that pays the tax for the subject-to-tax exception to apply. Remanded for a determination of what portion of the royalty payments was actually taxed by another state and therefore excepted from the add back statute. View "Kohl's Department Stores, Inc. v. Virginia Department of Taxation" on Justia Law

This appeal presents a narrow question of law relating to state income tax liability. Zippora Stahl was an Idaho resident who died in 2010. At the time of her death, Stahl owned real property located in Chino, California that had substantially appreciated in value. The Estate made a "1022 Election" following the sale of the Chino property in its 2012 federal income tax return. The Estate also filed an Idaho income tax return for 2012. When it did so, the Estate initially used the same modified carryover basis for the Chino property as it had for its federal income tax return. The Estate computed its state tax liability as $1,029,107, which the Estate paid. The Idaho State Tax Commission processed the Estate’s 2012 Idaho income tax return and determined that the Estate had incorrectly computed a credit for taxes paid to other states. Kathleen Krucker, personal representative of the Estate, appealed the district court’s grant of summary judgment in favor of the Commission and the district court’s denial of the Estate’s motion for reconsideration. The district court held that the Estate could not use a different figure as the starting point for calculating its Idaho taxable income for 2012 than it reported to the Internal Revenue Service for that year. Finding no reversible error in that judgment, the Idaho Supreme Court affirmed. View "Krucker v. Idaho State Tax Commission" on Justia Law

The Supreme Court affirmed the North Carolina Business Court’s substantive decision interpreting N.C. Gen. Stat. 105-130.5(b)(1) so as to preclude The Fidelity Bank from deducting “market discount income” relating to discounted United States obligations for North Carolina corporate income taxation purposes. The Supreme Court, however, reversed the Business Court’s decision to dismiss the second of two judicial review petitions that Fidelity Bank filed in these cases and remanding that matter to the North Carolina Department of Revenue with instructions to vacate that portion of the Department’s second amended final agency decision relating to the deductibility issue for lack of subject matter jurisdiction, holding that the Business Court’s decision to dismiss the portions of the second judicial review petition challenging the Department’s decision concerning the deductibility issue in the second amended final agency decision was erroneous. View "Fidelity Bank v. N.C. Department of Revenue" on Justia Law

Respondent El Castillo Retirement Residences was a self-sustaining retirement and continuing care community, funded entirely by admission and monthly fees paid by residents who have met El Castillo’s requirements for sufficient financial resources, including a minimum net worth, and have satisfied specific health criteria. It did not accept residents who are Medicare or Medicaid-dependent, or charity-dependent or any residents who cannot afford to buy their way into the community. It neither donated any significant services or property to charitable causes, nor used its property primarily and substantially for a charitable purpose. The New Mexico Supreme Court agreed with the Court of Appeals that El Castillo did not use its property for charitable purposes and was therefore not exempt from the constitutional requirement 5 of equal taxation, the Court used the opportunity of this opinion to clarify that Section 7-36-7(B)(1)(d) must be read in harmony with controlling constitutional requirements. Accordingly, the Court held that El Castillo was not entitled to property-tax exemptions under either Section 7-36- 8 7(B)(1)(d) or Article VIII, Section 3 of the New Mexico Constitution because El Castillo did not use its property primarily for substantial public benefit furthering charitable purposes. View "El Castillo Ret. Residences v. Martinez" on Justia Law

DiCosola started a business that produced compact discs in novelty shapes, for use as promotional items. The business morphed into a full‐service printing business, reaching about $1 million in gross annual sales and employing up to 10 people, including DiCosola’s immigrant father, who invested his retirement savings. In 2005, DiCosola started a side business for producing music, which sapped cash from the printing business. DiCosola’s 2007 loan application was rejected. He reapplied in 2008, providing fabricated tax returns that inflated his income by hundreds of thousands of dollars. Citibank issued DeCosola a loan of $273,500. DiCosola similarly used fabricated tax returns to obtain loans from Amcore, for $450,000 and $300,000. In 2009, after a few payments, DiCosola defaulted on the loans. In 2009, DiCosola falsified IRS forms to claim a refund of $5.5 million. In 2012, DiCosola was indicted for bank fraud, 18 U.S.C. 1344; making false statements to a bank, 18 U.S.C. 1014; wire fraud affecting a financial institution, 18 U.S.C. 1343; filing false statements against the United States, 18 U.S.C. 287. DiCosola was found guilty, sentenced to 30 months’ imprisonment, and ordered to pay restitution of $822,088.00. The Seventh Circuit affirmed, rejecting challenges relating to the testimony of DiCosola’s accountant. View "United States v. DiCosola" on Justia Law

BCR Partnerships claimed that the Commissioner wrongfully disallowed their charitable deductions for two conservation easements, and contended that in ruling for the Commission, the Tax Court wrongfully classified the sale of limited partnership interests as disguised sales and wrongfully imposed a gross valuation misstatement penalty. The Fifth Circuit vacated the Tax Court's holding regarding the perpetuity of the easements and the baseline documentation, and remanded for consideration of the other grounds asserted by the Commissioner to support the disqualification of the easements as charitable deductions but not addressed by the Tax Court. The court vacated the Tax Court's determination that the entirety of the limited partners' contributions were disguised sales, and remanded for a determination as to the correct amount of any taxable income that resulted from the disguised sales. Finally, the court vacated and remanded to the Tax Court for it to determine whether the gross valuation misstatement penalty was applicable and if so, the proper amount of any penalty. View "BC Ranch II, LP v. CIR" on Justia Law

Petitioners are manufacturers, wholesalers, and consumers of cigarettes. Collectively they challenged Oklahoma Senate Bill 845, alleging that it was a revenue bill enacted outside of the procedure mandated in Article V, Section 33 of the Oklahoma Constitution. The parties agreed that the passage of SB 845 did not comply with Article V, Section 33; so the case turned on whether SB 845 was the kind of "revenue bill" that Article V, Section 33 governed. Applying a test used since 1908, the Oklahoma Supreme Court concluded that the primary purpose of Sections 2, 7, 8, and 9 of SB 845 was to raise new revenue for the support of state government through the assessment of a new $1.50 excise tax on cigarettes and that, in doing so, SB 845 levied a tax in the strict sense. As such, Sections 2, 7, 8, and 9 of SB 845 comprised a revenue bill enacted in violation of Article V, Section 33 and were unconstitutional View "Naifeh v. Oklahoma, ex rel. Oklahoma Tax Comm'n" on Justia Law