Justia Tax Law Opinion Summaries

IRS Form 1040, filed after the IRS made an assessment of the taxpayer’s liability, did not constitute “returns” for purposes of determining the dischargeability in bankruptcy of tax debts under 11 U.S.C. 523(a)(1)(B). Giacchi filed his tax returns on time for the years 2000, 2001, and 2002 years after they were due and after the IRS had assessed a liability against him. In 2010, Giacchi filed for Chapter 7 bankruptcy; in 2012 he filed a Chapter 13 petition and brought an adversary proceeding seeking a judgment that his tax liability for the years in question had been discharged in the Chapter 7 proceeding. The district court and Third Circuit affirmed the bankruptcy court’s order denying the discharge. The tax debt was nondischargeable under 11 U.S.C. 523(a)(1)(B) because Giacchi had failed to file tax returns for 2000, 2001, and 2002, and Giacchi’s belatedly filed documents were not “returns” within the meaning of section 523(a)(1)(B) and other applicable law. View "Giacchi v. United States" on Justia Law

Unreliable corporate meeting minutes were properly excluded in tax fraud trial. Petrunak was the sole proprietor of Abyss, a fireworks business regulated by ATF. In 2001, ATF inspectors inspected Abyss and reported violations. An ALJ revoked Abyss’s explosives license. Abyss went out of business. Five years later, Petrunak mailed the inspectors IRS W-9 forms requesting identifying information and then sent them 1099s, alleging that Abyss had paid each of them $250,000. Because the inspector’s tax return did not include the fictional $250,000, the IRS audited her and informed her that she owed $101,114 in taxes; she spent significant time and energy unraveling the situation. Petrunak submitted those sham “payments” as business expenses; he reported a loss exceeding $500,000 in his personal taxes. Petrunak admitted to filing the forms and was charged with making and subscribing false and fraudulent IRS forms, 26 U.S.C. 7206(1). He sought to introduce corporate meeting minutes under the business records exception, claiming that the records would have demonstrated his state of mind in preparing the forms. The minutes included statements bemoaning that the IRS was not more helpful, and declarations that the ATF agents perjured themselves. The Seventh Circuit upheld exclusion of the records, noting that the records contained multiple instances of hearsay and had no indicia of reliability. View "United States v. Petrunak" on Justia Law

In connection with its operation of a land-based casino in New Orleans, Jazz Casino Company, L.L.C. (Jazz) entered into contracts with various hotels for rooms made available to casino patrons on a complimentary or discounted basis. Jazz was required to pay for a specific number of rooms for the duration of the contract even if the rooms were not used by Jazz patrons. As a result of these hotel room rentals, hotel occupancy taxes were remitted to the Louisiana Department of Revenue (Department). The taxes consisted of state general sales taxes and sales tax collected on behalf of the following three entities: Louisiana Tourism Promotion District, the Louisiana Stadium and Exposition District, and the New Orleans Exhibition Hall Authority. In August 2004, Jazz filed three claims for refund with the Department, alleging that Jazz overpaid hotel occupancy taxes for various hotel room rentals from October 1999, and June 2004. Following the denial of its claims by the Department, Jazz filed suit with the Louisiana Board of Tax Appeals, seeking a determination of overpaid taxes in accordance with La. R.S. 47:1621. Finding that these statutory duties were ministerial, the district court issued a writ of mandamus to the tax collector to compel payment of the tax refund judgment. The court of appeal reversed and recalled the writ due to the lack of evidence needed to obtain a writ of mandamus. Based on the ministerial nature of the constitutional and statutory duties owed by the tax collector in connection with the taxpayer’s refund judgment, the Supreme Court reversed the decision of the appellate court, and reinstated the district court’s judgment. View "Jazz Casino Co, LLC v. Bridges" on Justia Law

Taxpayer, having challenged a penalty in a pre-assessment hearing, may not again contest its liability in a CDP hearing. The employer had an employee‐benefit plan with one employee-participant and took tax deductions for its payments into the plan. The employee claimed no income. The IRS proposed a section 6707A penalty for the company’s failure to report its participation in the plan; deficiency penalties; a section 6662(a) penalty, for making a substantial understatement and acting with negligence or disregard of the rules or regulations; and a section 6662A penalty, for making an understatement related to a reportable transaction that was disclosed inadequately. An appeals officer sustained a $200,000 penalty. After the IRS assessed the penalty and issued a final notice of intent to levy, the company requested a Collection Due Process (CDP) hearing. An appeals officer reviewed transcripts from the earlier pre-assessment hearing and determined that the Appeals Office had already considered a liability challenge to the same penalty, so that section 6330(c)(2)(B) precluded another liability challenge. The Federal Circuit affirmed summary judgment for the government. Under section 6330(c)(4)(A)’s plain language, because the company raised the issue of its liability in a prior hearing before the Appeals Office, and participated meaningfully in that hearing, the company could not contest its liability again in its CDP hearing. View "Our Country Home Enterprises, Inc. v. Commissioner of Internal Revenue" on Justia Law

This tax dispute arose out of a failed real estate investment that resulted in significant tax consequences for Germaine Harmon, the widow of one of the original investors. Harmon challenged the Commissioner of Revenue’s assessment of her 2010 Minnesota income-tax liability, which the Commissioner based on a Schedule K-1 filed by the partnership in charge of the foreclosed real estate investment. The Supreme Court affirmed the tax court’s grant of summary judgment in favor of the Commissioner, holding that the tax court did not err by determining that Harmon failed to overcome the presumption of validity of the Commissioner’s assessment of taxes. View "Harmon v. Commissioner of Revenue" on Justia Law

Pennsylvania statute, prohibiting payment of fire insurance proceeds to named insured when there are delinquent property taxes, is not limited to situations where the named insured is also responsible for those taxes. Conneaut Lake Park, in Crawford County, included a historic venue, “the Beach Club,” owned by the Trustees. Restoration operated the Club under contract with the Trustees. Restoration insured the Club against fire loss through Erie. When the Club was destroyed by fire, Restoration submitted a claim. In accordance with 40 Pa. Stat 638, Erie required Restoration to obtain a statement of whether back taxes were owed on the property. The statement showed $478,260.75 in delinquent taxes, dating back to 1996, before Restoration’s contract, and owed on the entire 55.33-acre parcel, not just the single acre that included the Club. Erie notified Restoration that it would transfer to the taxing authorities $478,260.75 of the $611,000 insurance proceeds. Erie’s interpleader action was transferred after the Trustees filed for bankruptcy. Restoration argued that Section 638 applied only to situations where the owner of the property is insured and where the tax liabilities are the financial responsibility of the owner. The Third Circuit reinstated the bankruptcy court holding, rejecting Restoration’s argument. The statute does not include any qualifications. When Restoration insured the Club, its rights to any insurance proceeds were subject to the claim of the taxing authorities. Without a legally cognizable property interest, Restoration has no cognizable takings claim. View "In re: Trustees of Conneaut Lake Park, Inc." on Justia Law

“Lowrie v. United States,” (824 F.2d 827 (10th Cir. 1987)), is still the controlling case law in matters challenging “activities leading up to and culminating in” an assessment. The Green Solution was a Colorado-based marijuana dispensary being audited by the Internal Revenue Service for tax deductions and credits taken for trafficking in a “controlled substance.” Green Solution sued the IRS seeking to enjoin the IRS from investigating whether it trafficked in a controlled substance in violation of federal law, and seeking a declaratory judgment that the IRS was acting outside its statutory authority when it made findings that a taxpayer trafficked in a controlled substance. Green Solution claimed it would suffer irreparable harm if the IRS were allowed to continue its investigation because a denial of deductions would: (1) deprive it of income, (2) constitute a penalty that would effect a forfeiture of all of its income and capital, and (3) violate its Fifth Amendment rights. The IRS moved to dismiss for lack of subject matter jurisdiction. According to the IRS, Green Solution’s claim for injunctive relief was foreclosed by the Anti-Injunction Act (AIA), which barred suits “for the purpose of restraining the assessment or collection of any tax.” Similarly, the IRS asserted that the claim for declaratory relief violated the Declaratory Judgment Act (DJA), which prohibited declaratory judgments in certain federal tax matters. The district court dismissed the action with prejudice for lack of subject matter jurisdiction, relying on “Lowrie.” Green Solution timely appealed, contending the district court had jurisdiction to hear its claims because the Supreme Court implicitly overruled Lowrie in “Direct Marketing Association v. Brohl,” (135 S. Ct. 1124 (2015)). The Tenth Circuit concluded it was still bound by Lowrie and affirmed. View "Green Solution Retail v. United States" on Justia Law

The Tax Tribunal erred by concluding that MCL 211.7n, a statute specifically exempting from taxation the real or personal property owned and occupied by nonprofit educational institutions, controlled over the more general statute, MCL 211.9(1)(a), which authorized a tax exemption for educational institutions without regard to the institution’s nonprofit or for-profit status. SBC Health Midwest, Inc., challenged the city of Kentwood’s denial of its request for a personal property tax exemption in the Tax Tribunal. SBC Health, a Delaware for-profit corporation, had requested a tax exemption under MCL 211.9(1)(a) for personal property used to operate the Sanford-Brown College Grand Rapids. The Michigan Supreme Court held the nonprofit requirement in MCL 211.7n did not negate a for-profit educational institution like SBC Health from pursuing an exemption under MCL 211.9(1)(a). The tax exemption outlined in the unambiguous language in MCL 211.9(1)(a) applies to all educational institutions, for-profit or nonprofit, that meet the requirements specified in MCL 211.9(1)(a). View "SBC Health Midwest, Inc. v. City of Kentwood" on Justia Law

At issue in this case was whether the Commerce Clause’s limitations on a state’s power to tax interstate commerce bar property taxes levied on natural gas held in Texas without a destination while awaiting future resale and shipment to out-of-state customers. The court of appeals found the tax in this case valid. The Supreme Court affirmed, holding (1) a nondiscriminatory tax on surplus gas held for future resale does not violate the Commerce Clause; and (2) the tax levied in this case withstands constitutional scrutiny, and because it does not violate the Commerce Clause, neither does it violate Tex. Tax Code 11.12, which provides a state-law exemption for taxes that would otherwise violate federal law. View "Etc Marketing, Ltd. v. Harris County Appraisal District" on Justia Law

At issue in this case was the adjustment of the valuation of three subclasses of residential real property in Douglas County. The Tax Equalization and Review Commission (TERC) issued an order to show cause why it should not increase the valuation of two properties by seven percent and decrease the valuation of a third property by eight percent. TERC voted to adjust the valuations. Douglas County filed a motion to reconsider, which the TERC commissioners overruled. The Supreme Court affirmed in part and reversed in part, holding (1) TERC’s order to decrease the valuation of one property by eight percent was not supported by competent evidence and was arbitrary, capricious, and unreasonable; (2) TERC’s order to increase the valuation of the other two properties was supported by competent evidence and was not arbitrary, capricious, and unreasonable; and (3) TERC did not abuse its discretion by denying Douglas County’s motion to reconsider its order. View "County of Douglas v. Nebraska Tax Equalization & Review Commission" on Justia Law