Justia Tax Law Opinion Summaries

Plaintiff filed a class action against HealthPort in state court seeking damages and injunctive relief, asserting several statutory consumer protection claims and common law claims. Specifically, plaintiff challenges HealthPort’s collection of $23 in sales tax on the sale of medical records. HealthPort removed the case to federal court. The court concluded that the Tax Injunction Act, 28 U.S.C. 1341, and the related principle of federal-state comity operate to deprive the court of jurisdiction. Therefore, the court vacated the judgment of dismissal and remanded to the district court with instructions to return the action to state court. View "Gwozdz v. Healthport Technologies, LLC" on Justia Law

Appellant, a coal producer that reports the taxable value of its coal to the Department of Revenue using the proportionate profits valuation method, challenged two of the Departments determinations, arguing (1) the Department improperly applied Wyoming law when it set the point of valuation for its coal for production years 2009 through 2011; and (2) the Department improperly categorized certain government-imposed and environmental expenses in the tax valuation formula. The Board of Equalization upheld the Board’s determinations. The Supreme Court affirmed, holding (1) the Board correctly upheld the Department’s decision on the point of valuation; and (2) the Board’s decision on the categorization of the environmental and government-imposed expenses was not final, and the issue was not ripe for judicial review. View "Wyodak Resources Development Corp. v. Wyoming Department of Revenue" on Justia Law

Diversified filed suit seeking a declaratory judgment that the Interstate Income Act (IIA), 15 U.S.C. 381, deprives Ohio of jurisdiction to assess and collect the Commercial Activity Tax (CAT) on Diversified's sales of goods manufactured and shipped from outside Ohio to locations in Ohio, and an order enjoining the State Tax Commissioner from asserting that jurisdiction. The district court dismissed the suit as barred by the Tax Injunction Act (TIA), 28 U.S.C. 1341, and by long-standing principles of comity. The court held that the TIA applies to a suit in federal court seeking to enjoin assessment, levy or collection of a state tax “where a plain, speedy and efficient remedy may be had in the courts of such State.” Here, Diversified's argument that the Ohio CAT does not provide a "plain" state court remedy is without merit. In this case, the Ohio Revenue Code provides taxpayers an appeal of right to an Ohio appellate court which will “hear and decide” a claim that a state tax has been invalidly assessed or collected. The court explained that this obviously includes authority to decide that imposing the CAT on Diversified’s out-of-state transactions violates the IIA, regardless of the Ohio Legislature’s contrary intention. The court further concluded that its decision that the TIA effectively transferred jurisdiction over Diversified’s equitable claims to the Ohio state courts is not at odds with comity principles. Accordingly, the court affirmed the judgment. View "Diversified Ingredients v. Testa" on Justia Law

Chicago's personal property lease transaction tax ordinance levies a tax on the lease or rental in the city of personal property or the privilege of using in the city personal property that is leased or rented outside the city. The lessee is obliged to pay the tax. In 2011, the department of revenue issued Ruling 11, as guidance to suburban vehicle rental agencies located within three miles of Chicago’s borders. Ruling 11 stated that, in the event of an audit, the department of revenue would hold suburban rental agencies responsible for paying the tax unless there was written proof that the lessee was exempt, based upon the use of the leased vehicle outside the city. Absent such proof, the department would assume that a customer who is a Chicago resident would use the leased vehicle primarily in the city and that a customer who is not a Chicago resident would use the vehicle primarily outside the city. Hertz and Enterprise filed suit. The circuit court enjoined enforcement of the ordinance against plaintiffs with respect to short-term vehicle rental transactions occurring outside the city’s borders. The appellate court reversed. The Illinois Supreme Court found the tax unconstitutional under the state constitution Home Rule Provision. Absent an actual connection to Chicago, Ruling 11, which imposed the tax based on only a lessee’s stated intention or a conclusive presumption of use in Chicago based solely on residency, imposed a tax on transactions that take place wholly outside Chicago borders. View "Hertz Corp. v. City of Chicago" on Justia Law

Tilden received an IRS notice of deficiency covering his tax years 2005, 2010, 2011, and 2012. The last day to seek review (26 U.S.C. 6213(a)) was April 21, 2015. The Tax Court received Tilden’s petition on April 29, 2015, and dismissed it as untimely. Although section 6213(a) requires petitions to be filed within 90 days, 26 U.S.C. 7502(a) makes the date of the postmark dispositive. Tilden’s lawyer’s staff did not put a stamp on the envelope, and the Postal Service did not apply a postmark. Staff purchased postage from Stamps.com, which supplies print‑at-home postage. The purchase was dated April 21, 2015, and a staff member states that she delivered the envelope to the Postal Service on that date. The Seventh Circuit reversed, finding that the IRS properly conceded error. The parties cannot stipulate to jurisdiction, but can stipulate to facts underlying jurisdiction. The court expressed "astonishment" at the law firm's risk-taking. View "Tilden v. Commissioner of Internal Revenue" on Justia Law

Taxpayers argue that they did not earn taxable income and are exempt from paying taxes because they have taken vows of poverty. The Bethal Aram Ministries (BAM) is a church formed by taxpayers that provides maintenance to taxpayers. The court concluded that the tax court's determinations are supported by substantial evidence. In this case, the payments were quid pro quo payments for services in setting up corporations sole and limited liability companies and not contributions to BAM. Furthermore, taxpayers have complete dominion and control over BAM and its accounts. Accordingly, the court affirmed the tax court's decision that payments received by taxpayers are taxable and that they are subject to self-employment tax. View "Gardner v. Commissioner of Internal Revenue" on Justia Law

Swart is a small family-owned corporation, incorporated in Iowa, with its place of business and headquarters in Iowa. At issue is whether the franchise tax applies to Swart, whose sole connection with California is a 0.2 percent ownership interest in a manager-managed California limited liability company investment fund (Cypress LLC). The court concluded that passively holding a 0.2 percent ownership interest, with no right of control over the business affairs of the LLC, does not constitute “doing business” in California within the meaning of section 23101. In this case, Swart was not doing business in California based solely on its minority ownership interest in Cypress LLC. The court explained that the Attorney General’s conclusion that a taxation election could transmute Swart into a general partner for purposes of the franchise tax, and that the business activities of Cypress can therefore be imputed to Swart, is not supported by citation to appropriate legal authority and defies a commonsense understanding of what it means to be “doing business.” Accordingly, the court affirmed the judgment. View "Swart Enterprises v. Franchise Tax Bd." on Justia Law

Under Mass. Gen. Laws ch. 63, corporations that generate business income in the Commonwealth and other states must pay taxes on that income according to an apportionment formula that seeks to tax the corporation’s income generated in Massachusetts. For a “manufacturing corporation,” the statutory formula is based solely on the corporation’s sales. The Appellate Tax Board determined that Genentech, Inc., a Delaware corporation with a principal place of business in California that earns business income in the Commonwealth, qualified as a manufacturing corporation for the tax years 1998 through 2004. On appeal, Genentech appealed that determination, among other things. The Supreme Judicial Court affirmed, holding (1) Genentech qualified in each of the tax years at issue as a “manufacturing corporation” as defined in Mass. Gen. Laws ch. 63, 38(1)(1) and, under section 38(1)(2), was required to apportion its income under the single-factor formula using solely the statute’s sales factor; and (2) the Board properly rejected Genentech’s claim that application of the statute’s single-factor apportionment formula based on sales to the company violated the Commerce Clause of the federal Constitution. View "Genentech, Inc. v. Commissioner of Revenue" on Justia Law

QinetiQ, the successor in interest to DTRI, contends that the stock issued to an executive employee of DTRI was issued in connection with the executive’s employment and was subject to a substantial risk of forfeiture until 2008. QinetiQ argues that it is entitled to a tax deduction for the value of the stock as a trade or business expense in the tax year ending March 31, 2009. The IRS issued a Notice of Deficiency concluding that QinetiQ had not shown its entitlement to the claimed deduction. The court concluded that the IRS complied with all applicable procedural requirements in issuing the Notice of Deficiency to QinetiQ; the tax court did not err in concluding that the stock failed to qualify as a deductible expense for the tax year ending March 31, 2009, because the stock was not issued subject to a substantial risk of forfeiture; and thus the court affirmed the judgment. View "QinetiQ US Holdings, Inc. v. Commissioner of IRS" on Justia Law

Plaintiffs requested from the Commissioner of Revenue Services a tax refund for the taxable years 2002, 2006, and 2007. The Commissioner denied the request. The trial court upheld the decision of the Commissioner. The Supreme Court (1) reversed the trial court’s award of summary judgment with respect to the taxable year 2002, holding that the form of the trial court’s judgment with respect to that claim was improper; but (2) affirmed the judgment of the trial court in all other respects, holding that the remainder of Plaintiffs’ contentions regarding the judgment were unavailing. View "Allen v. Commissioner of Revenue Services" on Justia Law