Justia Tax Law Opinion Summaries

Marcus Katz contributed stock to MK Hillside, a partnership between him and his wholly owned corporation. After the IRS issued a Final Partnership Administrative Adjustment (FPAA) to MK Hillside on January 2, 2008, finding that MK Hillside was a sham, lacked economic substance, and was formed and used principally to avoid taxes, Katz petitioned the tax court contesting the finding and asserting the statute of limitations. The IRS determined that 26 U.S.C. 6501(e)(1)'s six-year statute of limitations applied because Katz’s omission of the $198,000 credit from a collar termination on his 1999 return constituted more than 25% of the gross income reported on the return. The tax court denied summary judgment, holding that a trial would be necessary to determine whether Katz in fact omitted substantial income from his 1999 return. To avoid a trial, the parties agreed to a Stipulation of Facts and a Second Stipulation of Settled Issues. Based on those stipulations, the tax court held that the period for assessing tax on the 1999 MK Hillside partnership items was open as to Katz. The court concluded that, because the tax court had jurisdiction to consider Katz's argument, it necessarily had jurisdiction to reject it, at least for purposes of the partnership proceeding. Accordingly, the court affirmed the judgment. View "MK Hillside Partners v. Commissioner" on Justia Law

The Department of Revenue subjected several corporations owned by North American Truck & Trailer, Inc. (collectively, Taxpayers) to a sales-and-use-tax audit, which uncovered errors regarding Taxpayers’ reporting of use tax. Thereafter, the Department assessed Taxpayers for unpaid use taxes. Taxpayers paid the assessment under protest and requested an administrative hearing. At the hearing, Taxpayers argued that the shop supplies assessed were exempt from use tax and offered exhibits in support of their position. The hearing examiner declined to consider a sales invoice offered by Taxpayers demonstrating a typical transaction that involved the cost of supplies because Taxpayers submitted it more than sixty days after the audit began, in violation of S.D. Codified Laws 10-59-7. The Supreme Court affirmed, holding that the hearing examiner did not err when it (1) affirmed the Department’s refusal to consider the sales invoice; and (2) affirmed the Department’s certificate of assessment of use tax due and owing on transactions where shop supplies, purchased without payment of sales tax, were used and consumed. View "Black Hills Truck & Trailer, Inc." on Justia Law

Petitioner, the assignee of an entity that paid certain sewer connection charges, sought a refund of the charges, asserting that they were improperly charged by the Town of Bel Air. The Town’s Director of Finance denied Petitioner’s refund application. On appeal, the Tax Court granted the Town’s motion to dismiss, concluding (1) it lacked jurisdiction to consider Petitioner’s refund claim because it did not come within the purview of the refund statute, and (2) even if the sewer connection charges were miscalculated or illegally imposed the common law voluntary payment doctrine precluded Petitioner from obtaining a refund. The Supreme Court reversed, holding (1) Petitioner may pursue its refund claim under the refund statute; (2) Petitioner’s claim is not barred by the voluntary payment doctrine; and (3) the Tax Court has jurisdiction to consider the appeal. View "Brutus 630, LLC v. Town of Bel Air" on Justia Law

The Internal Revenue Service notified petitioner-appellant James Cropper of its intent to collect unpaid taxes by levying his property. Cropper requested a collection due process (CDP) hearing with the IRS Office of Appeals. The Office of Appeals determined that the IRS could proceed with the proposed levy. Cropper sought judicial review, and the United States Tax Court sustained the Office of Appeals’ determination. Because the Tenth Circuit agreed with the Tax Court that the Office of Appeals didn’t abuse its discretion in determining that the IRS could proceed with the levy, it affirmed. View "Cropper v. CIR" on Justia Law

After the Commissioner denied Kimberly-Clark's corresponding refund claims that accompanied amended corporate franchise tax returns, Kimberly-Clark appealed to the tax court. Kimberly-Clark argued that its refund claims were allowable because the Legislature’s enactment of the Multistate Tax Commission’s apportionment formula was a contractual obligation that was unconstitutionally impaired when the 1987 Legislature repealed the provisions that authorized the use of that formula. The Minnesota Tax Court concluded that the Legislature’s 1987 repeal of the apportionment formula was constitutional and therefore the Commissioner properly denied Kimberly Clark’s refund claims. Kimberly-Clark petitioned for review. The court concluded that the Legislature made no unmistakable commitment in 1983 when it enacted Multistate Tax Compact, Minn. Stat. 290.171 that was impaired when the Legislature later repealed portions of that statute. Accordingly, the court affirmed the judgment. View "Kimberly-Clark Corp. Commissioner" on Justia Law

Plaintiffs Citibank (South Dakota), N.A. (lender) and Sears, Roebuck and Co. (retailer) appealed a superior court decision affirming the determination of the Vermont Department of Taxes (Department) that the parties, who had partnered to operate a private label credit card program through retailers’ stores, were not entitled to sales tax refunds related to bad debts. The Department denied lender’s refund requests because it was not a registered vendor under Vermont law that remitted the sales tax it sought to recover, and denied retailer’s deductions because it did not incur the bad debt at issue. On appeal, plaintiffs argued that because they acted in combination to facilitate the sales giving rise to the bad debts, they were not barred from obtaining relief. Finding no reversible error, the Vermont Supreme Court affirmed. View "Citibank (South Dakota), N.A. v. Dept. of Taxes" on Justia Law

Southwest Royalties, Inc., an oil and gas exploration company, filed a tax refund claim with the Comptroller, arguing that it was entitled to a tax exemption for some of its equipment related to oil and gas production operations such as casing, tubing, and pumps, together with associated services. The Comptroller denied relief. Southwest subsequently sued the Comptroller and the Attorney General, asserting that the equipment for which it sought refunds was used in separating oil, gas, and associated substances (collectively, hydrocarbons) into their different components. The trial court rendered judgment for the State, concluding that Southwest failed to meet its burden of proving that the exemption applied. The Supreme Court affirmed, holding that Southwest was not entitled to an exemption from paying sales taxes on purchases of the equipment because it did not prove that the equipment for which it sought a tax exemption was used in “actual manufacturing, processing, or fabricating” of hydrocarbons within the meaning of Tex. Tax Code Ann. 151.318(2), (5), or (10). View "Southwest Royalties, Inc. v. Hegar" on Justia Law

The Bickarts prepared and filed an income tax return containing false income and withholding amounts, supported by fabricated 1099‐OID forms, appearing to come from major financial institutions. The IRS paid a claimed refund of $115,412. Their legitimate refund would have been $263. The IRS discovered the fraud and sent a bill for $217,923. For years, the Bickarts engaged in obstructive conduct, sending a 1040‐V payment coupon and continuing to insist that the bill had been paid. They made baseless accusations against IRS agents. They were convicted of conspiring to file and filing a false claim to defraud the government, 18 U.S.C. 286 and 287. The Bickarts represented themselves at trial, asserting “sovereign citizen” claims and making nonsensical accusations. The PSR applied a two‐level enhancement for sophisticated means based on the fictitious Forms 1099‐OID and a two‐level enhancement for obstruction of justice, resulting in a guidelines imprisonment range of 33-41 months. Neither objected to the calculations. The court sentenced each defendant to 24 months in prison. Defendants objected to supervised release conditions requiring them to notify third parties of risks related to their criminal history when directed by the probation office. The court modified it to require the probation office to seek court approval. They also objected to the condition permitting a probation officer to visit them at home or at work at any reasonable time. The court overruled the objection. The Seventh Circuit vacated the third‐party notification condition, but otherwise affirmed the remaining conditions of supervised release and sentence. View "United States v. Bickart" on Justia Law

James and Tina Renacci filed a joint Ohio tax return for tax year 2000 without reporting and paying Ohio individual income tax on amounts earned by a trust (Trust) that owned shares of three Subchapter S corporations. In 2003, the tax commissioner assessed the Renaccis in relation to the unreported S-corporation income. The Renaccis paid all amounts demanded by the state and then filed a refund claim for the double-interest penalty amount. The tax commissioner denied the refund claim. The Board of Tax Appeals affirmed the denial of penalty remission. The Supreme Court reversed, holding that the tax commissioner, under the circumstances of this case, abused his discretion in denying the refund request. Remanded with instructions that the penalty be refunded. View "Renacci v. Testa" on Justia Law

Epic Aviation, LLC, a vendor of jet fuel, sold jet fuel to AirNet Systems, Inc., collected sales tax on it, and remitted the tax to the state. Epic, on behalf of AirNet, sought a refund of sales tax paid by AirNet on its purchases of jet fuel from Epic from January 1, 2006 through April 30, 2009. The tax commissioner denied the claim for refund. The Board of Tax Appeals (BTA) affirmed. Epic appealed, arguing that AirNet’s jet fuel purchases were exempt from sales tax because AirNet purchased the fuel intending to use the fuel “directly in the rendition of a public utility service” under Ohio Rev. Code 5739.02(B)(42)(a). The tax commissioner denied the exemption, finding that the business of AirNet, which does not hold a certificate of public convenience and necessity from the federal government, was not sufficiently regulated to qualify as a “public utility service.” The Supreme Court vacated the BTA’s decision and remanded, holding that Epic should have an opportunity to present evidence to establish the portion of the jet fuel purchased by AirNet that is exempt from taxation under the common-carrier standard as clarified in this opinion. View "Epic Aviation, LLC v. Testa" on Justia Law