Justia Tax Law Opinion Summaries

The case involves Yvondia Johnson, a 100% disabled U.S. Air Force veteran, who applied for a residence homestead tax exemption for her principal residence in Converse, Texas. The Bexar Appraisal District denied her application because her husband, also a 100% disabled U.S. military veteran from whom she is separated, claimed the same exemption for his principal residence in San Antonio, Texas.The trial court granted summary judgment for the appraisal district, arguing that Ms. Johnson was ineligible for the exemption because her husband claimed the same exemption on a different home they jointly owned. Ms. Johnson appealed, and the court of appeals reversed the decision, ruling in her favor.The Supreme Court of Texas affirmed the judgment of the court of appeals. The court held that the Tax Code bestows the exemption on each individual 100% disabled veteran who meets the express statutory requirements without regard to whether the veteran’s spouse also claims the exemption on a separate residence homestead. The court found that the plain text of Section 11.131(b) of the Tax Code unambiguously states that a 100% disabled veteran is entitled to a tax exemption for his or her residence homestead. The court concluded that Ms. Johnson satisfies the express, unambiguous requirements of Section 11.131(b) and therefore is entitled to the benefit of the tax exemption for 100% disabled veterans. View "BEXAR APPRAISAL DISTRICT v. JOHNSON" on Justia Law

The case revolves around the valuation of shares for estate tax purposes following the death of a shareholder. Michael and Thomas Connelly were the sole shareholders of Crown C Supply, a building supply corporation. They had an agreement that if either brother died, the surviving brother could purchase the deceased's shares. If he declined, the corporation would be required to redeem the shares. To ensure the corporation had enough money for this, it obtained $3.5 million in life insurance on each brother. When Michael died, Thomas chose not to purchase Michael's shares, triggering Crown's obligation to do so. The value of Michael's shares was agreed to be $3 million, which was paid to Michael's estate. The Internal Revenue Service (IRS) audited the return and disagreed with the valuation, insisting that the corporation's redemption obligation did not offset the life-insurance proceeds. The IRS assessed the corporation's total value as $6.86 million and calculated the value of Michael's shares as $5.3 million. Based on this higher valuation, the IRS determined that the estate owed an additional $889,914 in taxes.The District Court granted summary judgment to the Government, holding that the $3 million in life-insurance proceeds must be counted in Crown’s valuation. The Eighth Circuit affirmed this decision.The Supreme Court of the United States affirmed the lower courts' decisions. The Court held that a corporation’s contractual obligation to redeem shares is not necessarily a liability that reduces a corporation’s value for purposes of the federal estate tax. The Court reasoned that a fair-market-value redemption has no effect on any shareholder’s economic interest, and thus, no hypothetical buyer purchasing Michael’s shares would have treated Crown’s obligation to redeem Michael’s shares at fair market value as a factor that reduced the value of those shares. The Court concluded that Crown’s promise to redeem Michael’s shares at fair market value did not reduce the value of those shares. View "Connelly v. United States" on Justia Law

The case revolves around Green Rock LLC, a company that solicited taxpayers to invest in arrangements promising conservation-easement deductions. The Internal Revenue Service (IRS) issued Notice 2017-10, which required taxpayers and their advisors to comply with reporting requirements when claiming deductions for donations of conservation easements. Green Rock challenged this notice, arguing that the IRS violated the Administrative Procedure Act by issuing the notice without public notice and comment.Previously, the district court ruled in favor of Green Rock, stating that the IRS had unlawfully promulgated Notice 2017-10 because Congress did not expressly authorize its issuance without notice and comment. The district court set Notice 2017-10 aside for Green Rock.The United States Court of Appeals for the Eleventh Circuit affirmed the district court's decision. The court held that Notice 2017-10 was a legislative rule and Congress did not expressly exempt the IRS from notice-and-comment rulemaking. Therefore, Notice 2017-10 is not binding on Green Rock. The court clarified that its decision was specific to Notice 2017-10 and did not rule on the validity of any other listed transaction not before it. View "Green Rock LLC v. Internal Revenue Service" on Justia Law

The case revolves around CCA of Tennessee, LLC (CCA), a private prison corporation, and its dealings with the New Mexico Taxation and Revenue Department (the Department). CCA housed federal prisoners at the Torrance County Detention Center (the Detention Center) and received payments directly from the United States Marshals Service (Marshals Service). CCA sought a refund of gross receipts taxes it believed it had overpaid, which required the Department to issue a nontaxable transaction certificate (NTTC) to Torrance County (the County), which the County would then execute with CCA. CCA's tax advisor misinformed the Department that the receipts for housing the Marshals Service inmates were not coming directly from the Marshals Service to CCA. Based on this misstatement, the Department issued the NTTC.The administrative hearing officer for the Department concluded that CCA did not in good faith accept the NTTC and was not entitled to the deduction from gross receipts it received for housing federal prisoners. The Court of Appeals disagreed and reversed the hearing officer's decision.The Supreme Court of the State of New Mexico agreed with the hearing officer's conclusion. The court held that under the plain language of Section 7-9-43(A), CCA did not accept the NTTC in good faith and is therefore not entitled to safe harbor protection from the payment of gross receipts tax. The court reversed the decision of the Court of Appeals. View "CCA of Tennessee v. N.M. Tax'n and Revenue Dep't" on Justia Law

Patrick Sutherland was convicted of three counts of filing false tax returns and one count of obstructing an official proceeding. He managed several insurance businesses and routed his international transactions through a Bermuda company, Stewart Technology Services (STS), which he claimed was owned and controlled by his sister. However, evidence showed that Sutherland managed all its day-to-day affairs. Between 2007 and 2011, STS sent Sutherland, his wife, or companies that he owned more than $2.1 million in wire transfers. Sutherland treated these transfers as loans or capital contributions, which are not taxable income, while STS treated them as expenses paid to Sutherland. Sutherland did not report the $2.1 million as income on his tax returns. In 2015, a federal grand jury indicted Sutherland for filing false returns and for obstructing the 2012 grand jury investigation. The jury found Sutherland guilty on all charges.Sutherland appealed his convictions, but the Court of Appeals affirmed them. He then filed a 28 U.S.C. § 2255 petition to vacate his obstruction conviction and a petition for a writ of error coram nobis to vacate his tax fraud convictions. The district court denied both petitions without holding an evidentiary hearing. Sutherland appealed this decision.The United States Court of Appeals for the Fourth Circuit affirmed the district court's decision. The court found that Sutherland failed to show how the proffered testimony from his brother and a tax expert would have undermined his obstruction conviction. The court also found that Sutherland had not demonstrated ineffective assistance of counsel and thus could not show an error of the most fundamental character warranting coram nobis relief. View "United States v. Sutherland" on Justia Law

A dispute arose over whether a transfer of property from a family corporation to a trust constituted a "change in ownership" under California's Proposition 13, which would trigger a reassessment of the property's value for tax purposes. The Los Angeles County Assessor determined that the transfer did constitute a change in ownership because the transfer eliminated the interests of individual shareholders who held nonvoting stock in the corporation. The Los Angeles County Assessment Appeals Board reversed this decision, asserting that the beneficial interest in the corporation's real property was held by the persons who controlled the corporation through its voting stock. The Superior Court granted a petition by the assessor to vacate the Appeals Board's decision, and the Court of Appeal affirmed the Superior Court's decision.The Supreme Court of California affirmed the Court of Appeal's decision. The court held that the term "ownership interests" in the relevant statute, Revenue and Taxation Code section 62, subdivision (a)(2), refers to beneficial ownership interests in real property, not interests in a legal entity. For a corporation, these beneficial ownership interests are measured by all corporate stock, not just voting stock. The court rejected the argument that the term "stock" in section 62, subdivision (a)(2) must be interpreted to mean voting stock. The court concluded that the transfer of the properties from the corporation to the trust resulted in a change in ownership because the proportional beneficial ownership interests in the properties did not remain the same before and after the transfer. View "Prang v. Los Angeles County Assessment Appeals Board" on Justia Law

In 2014, Salvatore Groppo pleaded guilty to aiding and abetting the transmission of wagering information as a "sub-bookie" in an unlawful international sports gambling enterprise. He was sentenced to five years' probation, 200 hours of community service, a $3,000 fine, and a $100 special assessment. In 2022, Groppo moved to expunge his conviction, seeking relief from a potential tax liability of over $100,000 on his sports wagering activity. He argued that the tax liability was disproportionate to his relatively minor role in the criminal enterprise.The district court denied Groppo's motion to expunge his conviction. The court reasoned that expungement of a conviction is only available if the conviction itself was unlawful or otherwise invalid. The court also stated that the IRS's imposition of an excise tax does not provide grounds for relief as 'government misconduct' that would warrant expungement.On appeal, the United States Court of Appeals for the Ninth Circuit affirmed the district court's decision. The appellate court held that because Groppo alleged neither an unlawful arrest or conviction nor a clerical error, the district court correctly determined that it did not have ancillary jurisdiction to grant the motion to expunge. The court explained that a district court is powerless to expunge a valid arrest and conviction solely for equitable considerations, including alleged misconduct by the IRS. View "USA V. GROPPO" on Justia Law

A group of online travel companies (OTCs), including Hotels.com, Expedia, and Priceline, were found liable by the Jefferson County Circuit Court for unpaid taxes under several Arkansas tax statutes. The court ordered the OTCs to pay the unpaid taxes, along with penalties, interest, and attorney's fees. The OTCs appealed, arguing that the court erred in imposing the taxes and awarding penalties.The case began in 2009 when the Pine Bluff Advertising and Promotion Commission and Jefferson County, Arkansas, filed a declaratory-judgment action against the OTCs, seeking a declaration that the OTCs were liable for local gross receipts tax and local tourism tax. The City of North Little Rock intervened in the case in 2011, alleging a similar claim. The circuit court granted class certification in 2013. In 2018, the circuit court denied the OTCs' motion for summary judgment and granted the class appellees' motion, finding that the OTCs were liable for the taxes.The Supreme Court of Arkansas reversed the lower court's decision. The court found that the OTCs were not entities subject to the pre-2019 versions of the state and local gross receipts tax and the state tourism tax. The court also found that the OTCs did not rent, lease, or furnish rooms under the plain meaning of the local tourism tax statute. Therefore, the court held that the OTCs were not liable for the pre-2019 hotel taxes. The court did not address the OTCs' remaining arguments for reversal. View "HOTELS.COM, L.P. V. PINE BLUFF ADVERTISING AND PROMOTION COMMISSION" on Justia Law

In 2015, GPT Maple Avenue Owner, LP (GPT) purchased a property that was subject to a lease to Equinix, LLC (Equinix). At the time of GPT’s acquisition, the remaining term of the lease was 26 years. The Los Angeles County Assessor’s Office (Assessor) determined that GPT’s acquisition resulted in a “change in ownership” permitting reassessment for property tax purposes because, at the time of the sale, the remaining term of the lease was under 35 years. This was based on the statutes implementing Proposition 13, which state that whether the transfer of a lessor’s interest in taxable real property results in a change in ownership generally depends on the length of the remaining lease term at the time of the transfer.Equinix appealed the Assessor’s 2015 change in ownership determination to the Los Angeles County Assessment Appeals Board, which found in favor of the county. Equinix and GPT then presented a refund claim to the county, which the county denied. Equinix and GPT filed a lawsuit, and the trial court ruled in favor of the county, concluding that, under the “express language” of the relevant statutes, the sale of the Property to GPT in March 2015 resulted in a change in ownership because at the time of sale the remaining term of Equinix’s lease was less than 35 years.In the Court of Appeal of the State of California Second Appellate District Division One, the court affirmed the trial court’s decision. The court found that under the unambiguous language of the relevant statute, the 2015 transaction is a change in ownership permitting reassessment. The court rejected the appellants' arguments that the statute is inconsistent with Proposition 13 and another section in the statutory scheme. The court also rejected the appellants' argument that the statute is inconsistent with the overarching rules set forth in another section of the law. The court concluded that the Legislature was not required to adhere to the task force’s recommendations and that the statute as enacted did not render the law illogical. View "Equinix LLC v. County of Los Angeles" on Justia Law

Meyer, Borgman & Johnson, Inc. (MBJ), a structural engineering firm, sought research tax credits for expenses incurred in creating designs for building projects. MBJ claimed approximately $190,000 in tax credits for the years ending September 30, 2010, 2011, and 2013. The Commissioner of Internal Revenue denied these credits.The United States Tax Court affirmed the Commissioner's decision, ruling that MBJ's research was "funded" within the meaning of 26 U.S.C. § 41(d)(4)(H), and therefore, MBJ did not qualify for the credits. The Tax Court's decision was based on a summary judgment.The United States Court of Appeals for the Eighth Circuit reviewed the Tax Court's decision de novo. MBJ argued that the Tax Court erred because its right to payment was contingent on the success of its research, and its contracts had inspection, acceptance, and quality assurance provisions. MBJ claimed that its payments were contingent on the success of its research because it was required to create a design that met all the owner's requirements, complied with all pertinent codes and regulations, and was sufficiently detailed for a contractor to successfully construct it.However, the Court of Appeals disagreed with MBJ's arguments. It found that MBJ's contracts did not expressly or by clear implication make payment contingent on the success of MBJ’s research. The court distinguished between "successful performance"—meeting detailed, barometers of success—and "proper performance"—providing deliverables pursuant to a general professional standard of care and promising work free from negligence, error, or defects. The court found that MBJ's contracts fell into the latter category.The Court of Appeals affirmed the Tax Court's ruling that MBJ’s research did not merit the research tax credit. View "Meyer, Borgman & Johnson, Inc. v. CIR" on Justia Law