Justia Tax Law Opinion Summaries

This case concerns an IRS regulation that imposes a “penalty” on U.S. banks that fail to report interest paid to certain foreign account-holders. Two Bankers Associations challenged the legality of the regulation. At issue was whether a challenge to a tax-related statutory or regulatory requirement that is enforced by a “penalty” – as opposed to a challenge to a statute or regulation that imposes a tax – is covered by the Anti-Injunction Act, 26 U.S.C. 7421. The court concluded that the Tax Code defines some penalties as taxes for purposes of the Anti-Injunction Act. In those cases, such as the one here, the Anti-Injunction Act ordinarily applies because the suit, if successful, would invalidate the regulation and thereby directly prevent collection of the tax. The penalty at issue here is located in Chapter 68, Subchapter B of the Tax Code. The Tax Code provides that penalties in Chapter 68, Subchapter B are treated as taxes under the Anti-Injunction Act. Accordingly, the Anti-Injunction Act bars this suit as premature. The court vacated the district court's judgment and remanded with directions to dismiss the case. View "Florida Bankers Ass'n v. US Dep't of the Treasury" on Justia Law

The IRS Appeals Office denied appellant a Collection Due Process hearing based on its unexplained determination that all the reasons he gave for requesting a hearing were frivolous. Further, the Appeals office contends that its frivolousness determination is not subject to judicial review. However, the tax court held that it has jurisdiction to conduct a review limited to whether the IRS correctly treated appellant’s arguments as frivolous. The court affirmed the tax court’s conclusion regarding jurisdiction; the court also affirmed the tax court’s assessment that the IRS’s boilerplate letter rejecting appellant’s arguments as frivolous was inadequate; and, after remand, the Appeals Office held a Collection Due Process hearing, and the tax court correctly decided that the Office did not abuse its discretion in concluding that the IRS could proceed with collection actions. Accordingly, the court affirmed the tax court’s decision in its entirety. View "Ryskamp v. Commissioner" on Justia Law

In 1996, a Belgian subsidiary of Albemarle issued 20-year debentures to Albemarle. Interest payments were made on the debentures from 1997-2001. The Belgian subsidiary did not pay Belgian withholding taxes on the interest payments, believing the payments to be tax-exempt. In 2001, Belgian tax authorities issued a notice of adjustment to Albemarle for the tax years 1996-1998, stating that the interest payments made between 1997 and 2001 were subject to Belgian withholding tax at the statutory rate of 25%. Albemarle submitted a protest. In 2002, Albemarle agreed to pay withholding tax at the rate of 15% on all interest paid from 1997 through 2001 and satisfied the total amount of the taxes due. In 2009, Albemarle filed an amended consolidated U.S. income tax return for the 2002 tax year, in which it claimed refunds of $1,416,740 in foreign tax credits attributable to the withholding taxes it had paid under the agreement with the Belgian tax authorities. The IRS allowed Albemarle’s refund claims for the years 1999, 2000, and 2001, but disallowed claims for 1997 and 1998 as not filed within the 10-year limitations period provided in 26 U.S.C. 6511(d)(3)(A). The Claims Court agreed with the government. The Federal Circuit affirmed. View "Albemarle Corp. v. United States" on Justia Law

Great Oaks, a water retailer, challenged a groundwater extraction fee imposed on water it draws from wells on its property. The power to impose such a fee is statutorily vested in the Santa Clara Valley Water Management District. The trial court awarded a refund of charges paid by Great Oaks, finding that the charge violated the provisions of both the District Act and Article XIII D of the California Constitution, which imposes procedural and substantive constraints on fees and charges imposed by local public entities. The court of appeal reversed, holding that the fee is a property-related charge for purposes of Article 13D, subject to some constraints, but is also a charge for water service, exempt from the requirement of voter ratification. A pre-suit claim submitted by Great Oaks did not preserve any monetary remedy against the District for violations of Article 13D and, because the matter was treated as a simple action for damages when it should have been treated as a petition for a writ of mandate, the trial court failed to apply a properly deferential standard of review to the question whether the District’s setting of the fee, or its use of the resulting proceeds, complied with the District Act. View "Great Oaks Water Co. v. Santa Clara Valley Water Dist." on Justia Law

Appellees were Online Travel Companies (OTCs) that provide online travel information and secure reservations for travelers for car rental and lodging services in Montana. The Montana Department of Revenue filed suit against the OTCs arguing that the OTCs were required to collect and remit taxes on OTC fees under both the Lodging Facility Use Tax and Sales Tax. The district court granted summary judgment in favor of the OTCs. The Supreme Court affirmed in part and reversed in part, holding that the district court (1) correctly found that the Lodging Facility Use Tax does not apply to OTC fees; but (2) erred in ruling that the Sales Tax does not apply to OTC fees. View "Mont. Dep’t of Revenue v. Priceline.com, Inc." on Justia Law

After the Dakota County Assessor estimated the market value of Westview Mall, owned by KCP Hastings, LLC, KCP challenged the estimated assessments. After a trial, the tax court adopted market valuations of the property that exceeded the County’s estimated assessments. The Supreme Court affirmed in part, vacated in part, and remanded, holding that the tax court (1) did not clearly err by using the mall’s gross building area rather than its gross leasable area in its calculations of market value; (2) clearly erred when it rejected KCP’s discounted-cash-flow analysis, which KCP’s appraiser used to arrive at his income-approach valuation; and (3) abused its discretion by determining the value of the subject property relying solely on the sales-comparison approach. View "KCP Hastings, LLC v. County of Dakota" on Justia Law

The property at issue in this appeal was the ethanol-production facility owned by Guardian Energy, LLC. After the county assessor estimated the market value of the property, Guardian Energy challenged the assessments by filing petitions with the tax court. The tax court determined that the assessed value of the property was significantly higher than the values proposed by either party. Guardian Energy sought review. The Supreme Court (1) affirmed the tax court’s determination that twenty-seven tanks used in the ethanol-production process were taxable real property; but (2) vacated the tax court’s valuation of the ethanol plant, holding that the tax court failed adequately to explain its calculation of external obsolescence, and therefore, the court’s valuation of the facility was not reasonably supported by the record as a whole. View "Guardian Energy, LLC v. County of Waseca" on Justia Law

Taxpayers took out a $400,000 loan secured by an undeveloped plot of land intending to use the funds to develop the land. Taxpayers donated a conservation easement on parts of the plot that would not be developed. Despite warranties in the easement agreement to the contrary, the land was still subject to the mortgage. The mortgage had not been subordinated to the easement. The Tax Court held that Taxpayers were deficient in taxable years 2007 and 2008, affirming the Commissioner’s disallowance of the charitable deduction for those years because of Taxpayers’ failure to ensure the subordination of the mortgage held by U.S. Bank at the time of the gift. The court held that, in order for the donation of a conservation easement to be protected “in perpetuity,” any prior mortgage on the land must be subordinated at the time of the gift. Accordingly, the court affirmed the judgment. View "Minnick v. Commissioner" on Justia Law

Petitioner, a mutual fund, challenged the Commission's denial of an exemption from rules governing the calculation and reporting of petitioner's deferred tax liability. The court concluded that petitioner’s attacks on the Commission’s “hypothetical speculation” affords no basis for setting aside the Commission’s reasonable conclusion that petitioner’s proposal to provide for only a small fraction of its full potential tax liability may result in inequitable treatment of redeeming and non-redeeming shareholders, contradicting a primary purpose of the Investment Company Act of 1940, 15 U.S.C. 80a-22(a). The court rejected petitioner's remaining claims. Accordingly, petitioner's arguments fail to carry the high burden required to overturn the Commission’s denial of an exemption and, therefore, the court denied the petition for review. View "Copley Fund, Inc. v. SEC" on Justia Law

In an equalization proceeding before the Utah State Tax Commission, Decker Lake Ventures, LLC sought a reduction of the assessed valuation of its property under Utah Code 59-2-1006. Under this statute, the Commission is directed to “adjust property valuations to reflect a value equalized with the assessed value of other comparable properties” upon a determination that “the property that is the subject of the appeal deviates in value plus or minus 5% from the assessed value of comparable properties.” The Commission rejected Decker Lake’s equalization claim. The Supreme Court affirmed, holding that the Commission did not commit reversible error in its determination of comparability or in its factual findings. View "Decker Lake Ventures v. Utah State Tax Comm'n" on Justia Law