Justia Tax Law Opinion Summaries

A Wisconsin-based corporation, Uline, Inc., sells industrial and packaging products and employs sales representatives who visit customers in Minnesota. Uline did not pay Minnesota income or franchise taxes for 2014 and 2015, claiming exemption under 15 U.S.C. § 381, which protects certain out-of-state business activities from state taxation. The Minnesota Commissioner of Revenue audited Uline and assessed taxes for those years, arguing that Uline's activities in Minnesota went beyond mere solicitation of orders.The Minnesota Tax Court upheld the tax assessment, finding that Uline's sales representatives engaged in activities beyond solicitation, specifically the preparation of "Market News Notes," which included detailed market research and competitor information. Uline appealed, arguing that these activities were either protected solicitation or de minimis and thus not subject to state taxation.The Minnesota Supreme Court reviewed the case to determine whether Uline's activities created a sufficient nexus with Minnesota to justify the imposition of state taxes. The court found that the preparation of Market News Notes by Uline's sales team went beyond the solicitation of orders because it involved detailed market research that served independent business functions. The court also determined that these activities were not de minimis, as they were regular and systematic, with over 1,600 Market News Notes prepared during the two years in question.The Minnesota Supreme Court affirmed the tax court's decision, holding that Uline's activities in Minnesota were not protected from state income or franchise taxation under 15 U.S.C. § 381 and were not de minimis. Therefore, Uline was subject to Minnesota state taxes for the years 2014 and 2015. View "Uline, Inc. vs. Commissioner of Revenue" on Justia Law

The plaintiffs, who regularly engage in cryptocurrency transactions, challenged amendments to 26 U.S.C. § 6050I, which now require reporting certain cryptocurrency transactions to the federal government. They argued that the law violates their constitutional rights under the Fourth, First, and Fifth Amendments, and exceeds Congress's enumerated powers. The plaintiffs claimed that the law's requirements would force them to disclose private information, incur compliance costs, and potentially expose them to criminal penalties.The United States District Court for the Eastern District of Kentucky dismissed the case, finding that it lacked jurisdiction to consider the merits of the plaintiffs' claims. The court ruled that the claims were either not ripe for adjudication or that the plaintiffs lacked standing. Specifically, the court found that the Fourth Amendment claim was not ripe because the law was not yet effective and the Department of Treasury was still developing rules. The First Amendment claim was dismissed for lack of standing, as the court deemed the plaintiffs' injuries too speculative. The court also found the Fifth Amendment vagueness claim unripe due to pending regulatory action, and the enumerated-powers claim unripe for similar reasons. The Fifth Amendment self-incrimination claim was dismissed as not ripe because the plaintiffs had not yet asserted the privilege.The United States Court of Appeals for the Sixth Circuit reviewed the case and found that the district court erred in dismissing the enumerated-powers, Fourth Amendment, and First Amendment claims. The appellate court held that these claims were ripe for review and that the plaintiffs had standing. The court noted that the plaintiffs, as direct objects of the law, would indeed be subject to the reporting requirements and incur compliance costs, thus suffering an injury in fact. The court affirmed the district court's dismissal of the Fifth Amendment vagueness and self-incrimination claims as not ripe. The case was remanded for further proceedings consistent with the appellate court's opinion. View "Carman v. Yellen" on Justia Law

A nonprofit entity, Sports Medicine Research and Testing Laboratory (Sports Medicine), sought a property tax exemption for its South Jordan facility, claiming it was used exclusively for charitable purposes. Sports Medicine performs testing for both professional sports organizations at market rates and for government agencies and charitable organizations at discounted or no cost. It argued that the revenue from market-rate testing supports its charitable mission and that its vacant property space is intended for future charitable use.The Salt Lake County Board of Equalization denied the exemption, stating the property was not used exclusively for charitable purposes. Sports Medicine appealed to the Utah State Tax Commission, which affirmed the Board's decision. Sports Medicine then sought judicial review from the Utah Supreme Court.The Utah Supreme Court held that the property did not qualify for a tax exemption. The court reasoned that while Sports Medicine's discounted testing for charitable organizations could be considered a charitable use, its market-rate testing for professional sports organizations was not. The court emphasized that generating profit, even if used to support a charitable mission, does not constitute a charitable use of property. Additionally, the court found that the vacant portion of the property, intended for future charitable use, did not meet the requirement for current exclusive charitable use. Consequently, the court upheld the Tax Commission's denial of the property tax exemption. View "Sports Medicine Research v. Tax Commission" on Justia Law

The plaintiffs, Susan and Moses Libitzky, filed their 2011 tax return late in January 2016 and sought a refund for an overpayment of $692,690 in taxes from previous years. They had made substantial tax payments and received extensions but failed to file their returns on time due to their accountant's negligence. The IRS denied their refund request, asserting it was not filed within the statutory limitation period. The Libitzkys argued that their informal communications with the IRS in 2015 should count as an informal claim for a refund, which would stop the running of the statute of limitations.The United States District Court for the Northern District of California dismissed the Libitzkys' lawsuit, finding that their communications with the IRS did not amount to an informal claim for a refund. The court assumed a three-year limitation period applied but did not directly address whether a formal claim had been made in January 2016.The United States Court of Appeals for the Ninth Circuit affirmed the district court’s dismissal but on different grounds. The Ninth Circuit held that the Libitzkys' formal refund claim, filed in January 2016, was timely under 26 U.S.C. § 6511(a) because it was made within three years of filing the return. However, the refund amount was limited by the look-back period under § 6511(b)(2), which restricts recovery to taxes paid within three years plus any extension before the refund claim was filed. Since the overpayment was deemed made in April 2012, outside the look-back period, the Libitzkys could not recover their overpayment. The court also held that the informal claim doctrine did not apply because the informal claim was untimely, as it was made before the 2011 return was filed, and thus the two-year limitation period applied. The court affirmed the district court’s dismissal for lack of jurisdiction. View "LIBITZKY V. USA" on Justia Law

The case involves the valuation of two commercial properties in a Woodbury shopping center for tax purposes. The taxpayer, Tamarack Village Shopping Center, LP, challenged Washington County’s initial assessments of the properties, arguing that the tax court should have used an effective rent calculation to account for tenant improvement allowances and deducted lease-up costs due to an above-market vacancy rate.The tax court heard testimony from the taxpayer’s real property asset manager, the taxpayer’s expert appraiser, and the County’s expert appraiser. The tax court largely accepted the County’s appraiser’s opinions and rejected the taxpayer’s appraiser’s opinions. The tax court’s final value conclusions increased the properties’ assessed market values over the county assessor’s initial valuations. The taxpayer appealed, contending that the tax court erred in its analysis by not using an effective rent calculation and by not deducting lease-up costs.The Minnesota Supreme Court reviewed the case. The court held that the tax court did not err in declining to use an effective rent calculation because the taxpayer’s tenant improvement allowances were typical of the market. The court also found that the tax court did not clearly err in declining to deduct lease-up costs from the property’s indicated value to account for its above-market vacancy rate, as the taxpayer failed to show that such a deduction was required. The court affirmed the tax court’s decision, upholding the increased assessed market values of the properties. View "Tamarack Village Shopping Center, LP vs. County of Washington" on Justia Law

The case involves a dispute between SPS Corp I, Fundo de Investimento em Direitos Creditórios Não Padronizados (SPS), and General Motors Co. (GM). GM Brazil, a subsidiary of GM, sued the Brazilian government to recover tax overpayments made by car dealerships. After winning the right to recover, GM Brazil filed a claim with Brazil’s tax agency, Receita Federal do Brasil (RFB), to determine the exact amount. Meanwhile, SPS, as the assignee of thirty-five dealerships, sought to recover the tax overpayments from GM Brazil in Brazilian courts but faced adverse decisions regarding standing and preliminary discovery.The District Court for the District of Delaware reviewed SPS’s application for discovery against GM under 28 U.S.C. § 1782, which allows for discovery in aid of foreign litigation. The District Court denied the request, citing the factors from the Supreme Court’s decision in Intel Corp. v. Advanced Micro Devices, Inc. The court found that the discovery sought was within the jurisdictional reach of Brazilian courts, which had already denied similar requests by SPS. The court also noted that allowing the discovery would undermine the decisions of the Brazilian courts and lead to inefficiency.The United States Court of Appeals for the Third Circuit reviewed the District Court’s decision. The Third Circuit affirmed the lower court’s ruling, agreeing that the Intel factors weighed against granting SPS’s discovery request. The court emphasized that the Brazilian courts had jurisdiction over the requested documents and had already denied SPS’s requests. The Third Circuit found no abuse of discretion in the District Court’s decision to respect the Brazilian courts’ rulings and to avoid circumventing foreign proof-gathering restrictions. View "SPS Corp I v. General Motors Co." on Justia Law

Joseph Boswell, Sr. was convicted by a jury of bankruptcy fraud and tax evasion. Boswell operated a business servicing pizza ovens and stopped reporting income and paying taxes around 1995. He filed for bankruptcy in 2011, claiming significant back taxes owed. The government alleged that Boswell used various corporate entities, nominally owned by family members, to conceal assets from the IRS and creditors. During his bankruptcy, Boswell reported minimal assets and income, despite evidence suggesting he controlled significant funds through these entities.The United States District Court for the Western District of Louisiana oversaw the initial trial. Boswell moved to dismiss the bankruptcy fraud charge, arguing it was untimely and that the indictment was improperly sealed. The district court denied this motion, finding the government had a legitimate reason for sealing the indictment. Boswell also requested a bill of particulars, which the court denied, and he was ultimately convicted on both counts. The district court sentenced him to sixty months in prison and ordered restitution to the IRS.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court found that the government failed to demonstrate a legitimate prosecutorial purpose for sealing the indictment, which meant the statute of limitations was not tolled, rendering the bankruptcy fraud charge untimely. Consequently, the court reversed Boswell's conviction on the bankruptcy fraud charge. However, the court affirmed the tax evasion conviction, finding sufficient evidence to support the jury's verdict. The court also upheld the district court's jurisdiction to impose restitution while the appeal was pending and found no cumulative errors warranting a new trial for the tax evasion charge. View "USA v. Boswell" on Justia Law

In 2008, Indu Rawat, a nonresident alien, sold her 29.2% partnership interest in Innovation Ventures, LLC, a U.S. company, for $438 million. Of this amount, $6.5 million was attributable to a gain on the company's inventory. The key issue was whether this inventory gain constituted U.S.-source income subject to U.S. taxes.The Commissioner of Internal Revenue determined that the $6.5 million inventory gain was U.S.-source income and thus taxable, notifying Rawat that she owed approximately $2.3 million in taxes. Rawat paid the amount but petitioned the Tax Court for a refund, arguing that the inventory gain was foreign-source income and therefore not subject to U.S. taxes. The Tax Court sided with the Commissioner, holding that under § 751(a) of the Internal Revenue Code, Rawat must be taxed as though she had sold the inventory directly, making the gain U.S.-source income.The United States Court of Appeals for the District of Columbia Circuit reviewed the case. The court concluded that § 751(a) does not treat inventory gain as income from the sale of inventory but merely subjects it to ordinary income taxation if it is otherwise taxable. Therefore, the inventory gain Rawat realized from selling her partnership interest is foreign-source income, not subject to U.S. taxes. The court reversed the Tax Court's decision, holding that Rawat's inventory gain was not U.S.-source income and thus not taxable. View "Rawat v. Commissioner of Internal Revenue" on Justia Law

Mesquite Power, LLC owns the Mesquite Power Plant, which operates under a Power Purchase Agreement (PPA) guaranteeing specific electrical capacity to buyers in exchange for fixed payments. For the 2019 tax year, the Arizona Department of Revenue (ADOR) valued the plant at $196,870,000 using a cost-based approach as mandated by A.R.S. § 42-14156. Mesquite challenged this valuation in tax court, arguing that it exceeded the market value of the property, which they claimed was $105,000,000 based on the income approach, excluding income from the PPA.The Arizona Tax Court ruled partially in favor of Mesquite, determining that the PPA was a non-taxable, intangible asset and should not be included in the property valuation. However, the court allowed for the possibility that cash flows from the PPA could be considered in the valuation. At trial, Mesquite's expert valued the property at $105,000,000 using the income approach without the PPA, while ADOR's expert valued it at $432,000,000, including the PPA income. The tax court sided with Mesquite, setting the value at $105,000,000. ADOR appealed.The Arizona Court of Appeals reversed the tax court's decision, holding that the PPA must be considered in the property valuation as it enhances the value of the plant. The court emphasized that any competent appraisal must reflect the property's current usage, which includes the PPA.The Arizona Supreme Court reviewed the case and concluded that income from the PPA may be considered under the income approach if it is relevant to the property's income derivable as a power plant. The court also clarified that A.R.S. § 42-11054(C)(1) does not mandate the consideration of the PPA under the "current usage" requirement. The Supreme Court reversed the tax court's judgment and remanded the case for further proceedings, allowing both parties to offer new valuations consistent with this opinion. The Court of Appeals' opinion was vacated. View "MESQUITE v. ADOR" on Justia Law

The case involves a dispute between Pima County and the State of Arizona regarding the reimbursement of desegregation expenses. Following amendments to Arizona Revised Statutes (A.R.S.) § 15-910 in 2018, the State ceased reimbursing Pima County for desegregation expenses that exceeded the Arizona Constitution’s 1% limit on residential property taxes. The key issue was whether these expenses, previously classified as "primary property taxes," should still be reimbursed by the State under the new statutory framework.The Arizona Tax Court initially ruled in favor of Pima County, holding that the State must reimburse the desegregation expenses as additional state aid for education. The court found the State's interpretation of the amended statute unworkable and inconsistent with the constitutional mandate. The State appealed this decision.The Arizona Court of Appeals reversed the Tax Court's decision, concluding that the legislature had the authority to amend the statutory scheme and reclassify the desegregation expenses as secondary property taxes. The court reasoned that the new classification did not violate the Arizona Constitution, as the legislature's amendments were within its purview to alter statutory tax classifications.The Arizona Supreme Court reviewed the case and affirmed the Court of Appeals' decision. The Court held that the 2018 amendments to A.R.S. § 15-910 effectively reclassified desegregation expenses as secondary property taxes, which are not subject to reimbursement under A.R.S. § 15-972(E). The Court concluded that the State is not required to reimburse Pima County for these expenses, as the new classification aligns with the legislative intent and does not violate the constitutional 1% limit on residential property taxes. The case was remanded to the Tax Court for the entry of judgment in favor of the State. View "PIMA COUNTY v. STATE OF ARIZONA" on Justia Law