Justia Tax Law Opinion Summaries

The Patient Protection and Affordable Care Act (42 U.S.C 18001) includes “guaranteed issue” and “community rating” requirements, which bar insurers from denying coverage or charging higher premiums based on health; requires individuals to maintain health insurance coverage or make a payment to the IRS, unless the cost of buying insurance would exceed eight percent of that individual’s income; and seeks to make insurance more affordable by giving refundable tax credits to individuals with household incomes between 100 per cent and 400 percent of the federal poverty line. The Act requires creation of an “Exchange” in each state— a marketplace to compare and purchase insurance plans; the federal government will establish “such Exchange” if the state does not. The Act provides that tax credits “shall be allowed” for any “applicable taxpayer,” only if the taxpayer has enrolled in an insurance plan through “an Exchange established by the State under [42 U.S.C. 18031],” An IRS regulation interprets that language as making credits available regardless of whether the exchange is established by a state or the federal government. Plaintiffs live in Virginia, which has a federal exchange. They argued Virginia’s Exchange does not qualify as “an Exchange established by the State,” so they should not receive any tax credits. That would make the cost of buying insurance more than eight percent of their income, exempting them from the coverage requirement. The district court dismissed their suit. The Fourth Circuit and Supreme Court affirmed. Tax credits are available to individuals in states that have a federal exchange. Given that the text is ambiguous, the Court looked to the broader structure of the Act and concluded that plaintiffs’ interpretation would destabilize the individual insurance market in any state with a federal exchange. It is implausible that Congress meant the Act to operate in that manner. Congress made the guaranteed issue and community rating requirements applicable in every state, but those requirements only work when combined with the coverage requirement and tax credits. View "King v. Burwell" on Justia Law

Taxpayers petitioned the Tax Court for a redetermination of $18,030 in deficiencies and penalties for tax years 2009 through 2011. On the trial date, the IRs Commissioner submitted a “Stipulation of Settled Issues” signed by the parties. The document states that it “reflects” the parties’ “agreement as to the disposition of adjustments,” but contained no mention of agreement concerning the fact or amount of a deficiency for any of the relevant tax years. At the Commissioner’s request, the Tax Court granted the parties 30 days to file “decision documents” in lieu of trial. The Commissioner calculated a total deficiency of $12,252 and a penalty of $0. When the couple refused to agree to this amount, the Commissioner asked the Tax Court to enter a decision adopting the Commissioner’s figures. The taxpayers sought more time to produce an agreement, but the Tax Court granted the Commissioner’s motion on the ground that “the parties’ computations for decision and proposed decisions consistent with their settlement agreement” were overdue. The Seventh Circuit vacated. In light of the parties’ disagreement over the taxpayers’ liability, the Tax Court erred by entering a judgment without holding a trial. View "Hussain v. Comm'r of Internal Revenue" on Justia Law

Plaintiff, the Town of Groton, filed a tax appeal contesting the validity of a sales and use tax assessment issued by Defendant, the Commissioner of Revenue Services, in the amount of $240,653. The trial court dismissed the appeal. Plaintiff appealed, contending that the trial court improperly concluded that the fees collected for refuse removal services provided to industrial, commercial, or income producing real properties were subject to the sales tax. The Supreme Court reversed, holding that the trial court improperly determined that consideration existed to support Defendant’s assessment of Plaintiff for sales tax in connection with its revenue neutral program for the collection of refuse generated by commercial, industrial, or income producing real properties. View "Groton v. Comm’r of Revenue Servs." on Justia Law

Z Street filed suit against the Commissioner, alleging that the “Israel Special Policy” violates the First Amendment. Z Street alleges that the agency has an “Israel Special Policy” under which applications from organizations holding “political views inconsistent with those espoused by the Obama administration” receive increased “scrutin[y]” that results in such applications “tak[ing] longer to process than those made by organizations without that characteristic.” The court agreed with the district court that Z Street seeks not to restrain “the assessment or collection” of a tax, but rather to obtain relief from unconstitutional delay, the effects of which it is now suffering. Accordingly, the court affirmed the district court's denial of the Commissioner's motion to dismiss. View "Z Street v. Koskinen" on Justia Law

In this appeal, both parties agree that the tax court lacked jurisdiction to consider the petition filed by taxpayers challenging the seizure of their funds by the IRS. At issue was why, and the reason the tax court lacked jurisdiction. The court concluded that the tax court’s December 2013 denial of both parties’ motions and its terse order undercut any contention that it resolved precisely why jurisdiction was lacking in this case. Therefore, the court vacated the December order and remanded to the tax court to give that court an opportunity to state its reasons for dismissing the petition. Because the costs claim will be affected by the grounds of the tax court’s jurisdictional ruling, the court vacated the tax court’s denial of taxpayers’ motion for costs and leave it to the tax court to decide taxpayers’ motion anew, in light of the jurisdictional rationale it adopts; because the tax court’s December order did not address taxpayers’ alternative ground for jurisdiction, the tax court must first determine, on remand, whether the parties have preserved their arguments concerning this issue; and the court lacked jurisdiction to consider a new argument taxpayers attempt to raise for the first time on appeal regarding a collection due process hearing. View "Edwards v. Commissioner" on Justia Law

In 2011, the IRS required tax preparers who were neither attorneys nor CPAs to pass a certification exam and obtain an identification number. H&R, a nation-wide tax service, passed anticipated costs to its customers by charging a “Compliance Fee.” H&R explained at its offices and on its website that the fee would cover only the costs to comply with the new laws. In 2011, the fee was $2; in 2012, the fee was $4. Perras sued on behalf of himself and a putative class. Perras alleged that the amount collected exceeded actual compliance costs. Perras sued under the Missouri Merchandising Practices Act. The district court compelled arbitration of the 2011 claims. Later, the court declined to certify the class, agreeing that the proposed class met the requirements under Federal Rule of Civil Procedure 23(a) of “numerosity, commonality, typicality, and fair and adequate representation,” but Rule 23(b)(3), requires that “the questions of law or fact common to class members predominate over any questions affecting only individual members.” The Eighth Circuit affirmed, reasoning that the Supreme Court of Missouri would likely conclude that the MMPA does not cover the out-of-state transactions. The law applicable to each class member would be the consumer-protection statute of that member’s state; questions of law common to the class members do not predominate over individual questions. View "Perras v. H&R Block" on Justia Law

Airport Tech Partners, LLP and Stentor Company, LLC (collectively, Airport Tech) brought a declaratory judgment action against the State, arguing that section 137.115.1 violates the uniformity clause of the Missouri Constitution. Airport Tech claimed it had taxpayer standing to challenge the statute because a lower assessment of airport property owned by Kansas City likely would result in a high tax burden for Airport Tech. The trial court concluded that Airport Tech lacked standing to seek a declaratory judgment because it presented only speculation that the statute relied on affected the level of the airport property’s assessment. The Supreme Court affirmed, holding that the trial court correctly concluded that Airport Tech simply sought to attack the assessment of another’s property as a way to lower its own taxes. View "Airport Tech Partners, LLP v. State" on Justia Law

In 2005, Henderson, Kentucky required, “every person or business entity engaged in any business, trade, occupation, or profession” within city limits to pay 1% of its previous year’s net profits for the privilege of doing business there. The net-profits calculation depends on information reported on IRS forms. Because the 2005 law and federal tax law recognize fiscal year filers, while a previous municipal tax was based on the calendar year, the city decided to transition by taxing fiscal-year taxpayers by reference to their 2006 returns alone, essentially forgiving some tax liability. Phillips, a certified public accountant, assailed the tax before the city council and while advising his clients. Phillips did not pay his $500 bill and was convicted of a misdemeanor for failure to file. A state appellate court threw out the conviction. Phillips sued in federal court for violations of his rights to procedural due process and equal protection. The district court rejected both claims. The Sixth Circuit affirmed, noting that Phillips suffered no loss of property; Phillips never paid the tax. The city has not tried to collect by civil action, nor has it revoked Phillips’ license. The Constitution does not prohibit all differential enforcement of municipal laws. Administrative convenience alone can justify a tax-related distinction. View "Phillips v. McCollom" on Justia Law

In 2004, AT&T Corp. filed refund claims with the Finance and Administration Cabinet arguing that, under Ky. Rev. Stat. 139.505, AT&T was entitled to refunds for tax years 2002 and 2003. The Cabinet granted a partial refund for AT&T’s 2002 claim. In 2008, AT&T filed refund claims for tax years 2004 through 2008. In 2011, AT&T filed a declaration of rights action bringing administrative and as-applied constitutional challenges to the amendments to section 139.505. The circuit court dismissed the case, determining that AT&T’s challenges must be adjudicated by the Kentucky Board of Tax Appeals (KBTA) before the court would address AT&T’s facial constitutional challenges. The court of appeals reversed, concluding that the facial constitutional issue was one that the KBTA could not decide, but that the other claims were properly dismissed. The Supreme Court reversed the court of appeals’ decision and reinstated the trial court’s order of dismissal, holding that there were several administrative issues that must be resolved prior to addressing the constitutional claims. View "Commonwealth v. AT&T Corp." on Justia Law

Certain counties filed a declaratory action against online travel companies (OTCs) arguing, inter alia, that the Tourist Development Tax (TDT) applies to the difference between the total monetary amounts the OTCs’ customers pay to them and the lesser monetary amount the OTCs remit to the hotels (a difference known as the “markup charges.”) The circuit court granted summary judgment for the OTCs, concluding (1) the TDT does not clearly impose any tax on the amount the OTCs charge their customers by way of markup charges; and (2) the OTCs, not the customers, are the entities who exercise the privilege that is taxable under the TDT. The First District Court of Appeal affirmed, holding that the privilege being exercised for purposes of the TDT is renting rooms to tourists, not the other way around. The Supreme Court approved the First District’s Decision by answering the certified question to clarify that the “local option tourist development act” imposes a tax only on the amount the property owner receives for the rental of transient accommodations and not on the total amount of consideration an online travel company receives from tourists who reserve accommodations using the online travel company’s website. View "Alachua County v. Expedia, Inc." on Justia Law