Justia Tax Law Opinion Summaries

The Internal Revenue Service classified Ballard, a securities broker, as a non-filer in 2008 and investigated. Ballard lied about his income, hid money in family members’ bank accounts, and filed then dismissed several Chapter 13 bankruptcy petitions, attempting to avoid paying $848,798 in taxes arising from his income between 2000 and 2008. He eventually pled guilty to violating 26 U.S.C. 7212(a), which prohibits “corruptly . . . obstruct[ing] or imped[ing] . . . administration of [the tax laws].” Ballard urged the court to use the U.S.S.G. for obstruction of justice. The district court rejected Ballard’s argument that he never intended to evade paying his taxes but was merely delaying the payments and used the tax evasion guideline to calculate a higher offense level and an increase in the sentencing range from eight–14 months to 24–30 months. Ballard was sentenced to 18 months’ incarceration. The Sixth Circuit affirmed. What matters in the choice between guidelines sections is which section is more precisely tailored to reflect offense characteristics—like tax evasion and tax loss—and which section covers a more closely related group of crimes. What Ballard did, and what the government charged, was a lie to the tax collector about his earnings. View "United States v. Ballard" on Justia Law

The Tax Commissioner of Virginia directed Chesterfield County to issue refunds to Verizon Online LLC for local taxes it paid for tax years 2008, 2009 and 2010 on set top boxes it owned. The circuit court upheld the Tax Commissioner’s determination that the set top boxes were not subject to local taxation but concluded that Verizon was not entitled to refunds for tax years 2008 and 2009 due to its failure to file a timely appeal with the local commissioner of revenue. The Supreme Court affirmed in part and reversed in part, holding (1) the circuit court did not err in ruling that Verizon’s set top boxes are not subject to local taxation; but (2) the issue of the timeliness of Verizon’s local appeal was not preserved for review by the circuit court, and therefore, the circuit court erred in ruling that Verizon was not entitled to refunds for tax years 2008 and 2009. View "Verizon Online LLC v. Horbal" on Justia Law

The Association filed a property tax refund suit against the County under Revenue and Taxation Code section 5140. The County argued that the action was barred because the Association failed to file a timely refund claim pursuant to Revenue and Taxation Code section 5097, subdivision (a)(3)(A)(i). The superior court determined that the Association filed a timely claim, reversed the Board's decision, and remanded. The County appealed the superior court's judgment in favor of the Association, and the Association appealed the superior court's post-judgment order denying its motion for attorney's fees. Section 5097, subdivision (a)(3)(A)(i) sets the procedural time limit within which a party in the Association's position must file a claim with the County for a refund of taxes. The court explained that the one year time limit was not affected by the timing of the party's payment of the property taxes due. Because the Association did not file their claim for refund of taxes with the County within the one year time limit of section 5097, subdivision (a)(3)(A)(i), the court concluded that the superior court lacked jurisdiction over the Association's subsequent property tax refund action against the County. Accordingly, the court reversed and remanded with directions to dismiss the action. View "Cal. State University Fresno Association v. County of Fresno" on Justia Law

Before January 1, 2015,Mississippi Code Section 27-77-7 required taxpayers wishing to appeal tax assessments affirmed by the Board of Tax Appeals to post surety bonds for half the assessed taxes or pay the taxes under protest. But the Legislature amended the statute to remove that bonding requirement for appeals from assessments imposed after the amendment’s effective date of January 1, 2015. Marlena Robinson failed to post a bond or pay her taxes when she appealed a February 4, 2014, tax assessment, so the chancellor dismissed her appeal. Finding no reversible error in the chancellor’s dismissal, the Supreme Court affirmed. View "Robinson v. Morgan" on Justia Law

Bratt filed for Chapter 13 bankruptcy, proposing to pay overdue taxes to Nashville, which held a $5,136 over-secured lien on Bratt’s real property. Under 11 U.S.C. 511(a), the interest rate for tax claims should “enable a creditor to receive the present value of the allowed amount of a tax claim” and be “determined under applicable nonbankruptcy law.” The Code does not allow assessment of post-petition penalties. Tennessee Code 67-5-2010 set an interest rate of 12% per year for overdue taxes, with a 6% per year penalty. A Tennessee bankruptcy court held that only the post-petition interest and not the penalty portion could be collected for over-secured claims in bankruptcy proceedings. In response, the Tennessee legislature added subsection (d): For purposes of any claim in a bankruptcy proceeding pertaining to delinquent property taxes, the assessment of penalties pursuant to this section constitutes the assessment of interest. Bratt argued that the amendment should not apply. Tennessee admitted that the 18% rate exceeded what was required to maintain the tax claim's present value. The bankruptcy court held that subsection (d) violated the Supremacy Clause. The Bankruptcy Appellate Panel affirmed that 12% was the appropriate interest rate, reasoning that subsection (d) is not a “nonbankruptcy law” and is not applicable for determining the interest rate under section 511(a). The Sixth Circuit affirmed, adopting the BAP’s reasoning. View "Tennessee v. Corrin" on Justia Law

Plaintiff filed suit seeking damages under Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, alleging that IRS employees barred him from representing taxpayers before the Service without due process in violation of the Fifth Amendment. The district court dismissed the case because the Internal Revenue Code's remedial scheme for tax practicitioners foreclosed a Bivens action. The court did not reach the issue and ruled on the alternative ground that plaintiff failed to state a claim under Federal Rule of Civil Procedure 12(b)(6) because his complaint contains no allegation that defendants deprived him of a constitutionally protected interest. Accordingly, the court affirmed the judgment. View "Bowman v. Iddon" on Justia Law

The issue presented for the Tenth Circuit’s review centered on whether a taxpayer may challenge a tax penalty in a Collection Due Process hearing (“CDP hearing”) after already having challenged the penalty in the Appeals Office of the Internal Revenue Service (“IRS”). Keller Tank Services II, Inc. participated in an employee benefit plan and took deductions for its contributions to the plan. The IRS notified Keller of: (1) a tax penalty for failure to report its participation in the plan as a “listed transaction” on its 2007 tax return; and (2) an income tax deficiency and related penalties for improper deductions of payments to the plan. Keller protested the tax penalty at the IRS Appeals Office. It then attempted to do so in a CDP hearing but was rebuffed because it already had challenged the penalty at the Appeals Office. Keller appealed the CDP decision to the Tax Court, which granted summary judgment to the Commissioner of Internal Revenue (“Commissioner”). Finding no reversible error in the Tax Court’s judgment, the Tenth Circuit affirmed. View "Keller Tank Services v. Commissioner, Internal Rev. Svc." on Justia Law

After receiving notices of federal tax lien and of intent to levy, the taxpayers requested that the IRS hold a Collection Due Process hearing. The IRS took five months to process the request. At the hearing, the presiding agent refused to discuss multiple issues. The taxpayers were still dissatisfied after a second hearing before a different agent and sued the government for the agents’ alleged misbehavior under 26 U.S.C. 7433. They also requested a temporary restraining order against further tax-collection efforts. The district court dismissed, finding that the challenged activity did not fall within the scope of section 7433, and the Tax AntiInjunction Act, 26 U.S.C. 7431(a) precluded a restraining order. The Sixth Circuit affirmed. The government has not consented to being sued in this case, so the district court lacked jurisdiction. A person may sue the federal government for damages under 26 U.S.C. 7433 “[i]f, in connection with any collection of Federal tax with respect to [the] taxpayer, any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence, disregards any provision of” the tax code or any regulation promulgated thereunder. This suit falls outside this waiver of sovereign immunity because the challenged conduct did not occur in connection with tax collection. View "Agility Network Services, Inc. v. United States" on Justia Law

Barry Ackerley died in 2011. In 2008 and 2010, Ackerley made substantial gifts of money. On these inter vivos gifts, Ackerley paid the required federal gift taxes, which amounted to over $5.5 million. Upon his death, Ackerley was required under the federal estate tax code to include the value of the gift taxes paid in his federal taxable estate because he died within three years of making the gifts. Ackerley's estate thus included the gift taxes in its federal estate tax return. But when Ackerley's estate filed his Washington estate tax return, it did not include the $5.5 million in federal gift taxes paid as part of the Washington taxable estate. The Department of Revenue issued a notice of assessment, notifying Ackerley's estate that it owed additional Washington estate taxes on the amount of federal gift taxes paid. The Estate and Transfer Tax Act, chapter 83.100 RCW, made clear that calculating a Washington taxable estate begins with the federal taxable estate and that the Washington definition of "transfer" is the same as the federal definition. Under federal estate tax law, the gift tax paid is included in the taxable estate under the "gross-up rule" and, as such, is transferred upon death as part of the entire estate. Following the legislature's clear mandate, the Washington Supreme Court must also find that the gift tax paid is part of the Washington taxable estate and transferred upon death as part of the entire estate. Thus, the DOR properly included the gift tax paid in its assessment of Ackerley's estate. View "Estate of Ackerley v. Dep't of Revenue" on Justia Law

Tax attorneys advised the family to use a “domestic international sales corporation” (DISC) to transfer money from their family-owned company to Roth Individual Retirement Accounts. DISCs incentivize companies to export goods by deferring and lowering taxes on export income. An exporter avoids corporate income tax by paying the DISC “commissions” of up to 4% of gross receipts or 50% of net income from qualified exports. The DISC pays no tax on commission income up to $10,000,000, 26 U.S.C. 991, 995(b)(1)(E), and may hold onto the money indefinitely, though its shareholders must pay annual interest on their shares of deferred tax liability. Money and other assets may exit the DISC as dividends, taxable at the qualified dividend rate, which is lower than the corporate income rate that otherwise would apply to the export revenue. The IRS acknowledged that the family complied with the law, but reasoned that the effect of the transactions was to evade the Roth IRA contribution limits and applied the “substance-over-form doctrine” to recharacterize the transactions as dividends followed by excess Roth IRA contributions. The Tax Court affirmed. The Sixth Circuit reversed, stating: If the government can undo transactions that the terms of the Code expressly authorize, it’s fair to ask what the point of making these terms accessible to the taxpayer and binding on the tax collector is. “Form” is “substance” when it comes to law. View "Summa Holdings, Inc. v. Commisioner of Internal Revenue" on Justia Law