Justia Tax Law Opinion Summaries

Validus, a foreign corporation, filed suit seeking a refund of excise taxes imposed under 26 U.S.C. 4371, which taxes certain types of "reinsurance." The government contends that “the best reading of the statute” establishes its applicability to reinsurance purchased by a reinsurer because such policies (known as “retrocessions”) are “a type of reinsurance,” and also that interpretation carries out Congress’s intent “to level the playing field” between domestic (U.S.) insurance companies subject to U.S. income taxes and foreign insurance companies that are not so burdened. Validus responds, however, that the plain text, considered in the context of reinsurance, and the statutory structure make clear that the excise tax does not apply to retrocessions, and further, the presumption against extraterritoriality resolves any doubt that the tax is inapplicable to Validus’s purchases of reinsurance from a foreign reinsurer. The court concluded that the text of the statute is ambiguous with respect to its application to wholly foreign retrocessions, and the ambiguity is resolved upon applying the presumption against extraterritoriality because there is no clear indication by Congress that it intended the excise tax to apply to premiums on wholly foreign retrocessions. Therefore, the court affirmed the district court's grant of summary judgment on Validus's refund claims. View "Validus Reinsurance v. United States" on Justia Law

Maryland has a “state” income tax, Md. Tax-Gen. Code 10–105(a), and a “county” income tax, sections 10–103, 10–106. Residents who pay income tax to another jurisdiction for income earned in that other jurisdiction get a credit against the state tax but not the county tax. Nonresidents who earn income from Maryland sources must pay the state income tax; nonresidents not subject to the county tax must pay a “special nonresident tax.” Residents who earned pass-through income from a Subchapter S corporation that earned income in several states claimed an income tax credit on their Maryland tax return for taxes paid to other states. The Comptroller allowed a credit against state income tax but not against county income tax and assessed a tax deficiency. The Court of Appeals of Maryland held that the tax unconstitutionally discriminated against interstate commerce. The Supreme Court affirmed: Maryland’s personal income tax scheme violates the dormant Commerce Clause. The Court noted previous decisions invalidating state tax schemes that might lead to double taxation of out-of-state income and that discriminated in favor of intrastate over interstate economic activity. That conclusion is not affected by the fact that these cases involved a tax on gross receipts rather than net income, and a tax on corporations rather than individuals. Maryland’s income tax scheme fails the internal consistency test; if every state adopted its tax structure, interstate commerce would be taxed at a higher rate than intrastate commerce. The scheme is inherently discriminatory and operates as a tariff. The Court rejected an argument that, by offering residents who earn income in interstate commerce a credit against the state portion of the tax, Maryland receives less tax revenue from residents who earn interstate, rather than intrastate, commerce income; the total tax burden on interstate commerce is higher. View "Comptroller of Treasury of Md. v. Wynne" on Justia Law

In 2012, the Iowa City Board of Review reclassified eighteen properties from commercial to residential for property tax purposes because the properties had recently been organized as multiple housing cooperatives. Two Iowa corporations organized the cooperatives under chapter 499A of the Iowa Code. The City of Iowa City appealed, arguing that the Board’s reclassification was improper because two natural persons, not two corporations, must organize multiple housing cooperatives under the Code. The City also argued that the organizers did not properly organize the cooperatives because each cooperative had more apartment units than members and section 499A.11 requires a one-to-one ratio. The district court granted summary judgment in favor of the Board and the intervening housing cooperatives. The Supreme Court affirmed, holding (1) two Iowa corporations may organize a multiple housing cooperative under chapter 499A; and (2) the Code does not require a one-apartment-unit-per-member ownership ratio for a multiple housing cooperative to be properly organized. View "City of Iowa City v. Iowa City Bd. of Review" on Justia Law

Dolphin Residential Cooperative, Inc. owned an apartment complex in Iowa City that consisted of twenty-two buildings comprising four hundred residential units. The Iowa City assessor classified the multiunit apartment buildings as commercial property for tax assessment purposes. Dolphin challenged this classification, arguing that because it was a multiple housing cooperative, organized under chapter 499A of the Iowa Code, the property should have been classified as residential property. The Iowa City Board of Review denied Dolphin’s request to reclassify the property, determining that because Dolphin was not properly organized under chapter 499A, Dolphin failed the organizational test for residential cooperatives adopted by the Supreme Court in Krupp Place 1 Coop, Inc. v. Board of Review. On appeal, the district court granted summary judgment in favor of Dolphin, concluding that Dolphin met the organizational test set forth in Krupp and ordering the Board to reclassify the subject property as residential property for tax assessment purposes. The Supreme Court reversed, holding that Dolphin was not properly established under section 499A.1(1), and therefore, the district court erred when it granted summary judgment to Dolphin and denied summary judgment to the Board. View "Dolphin Residential Coop., Inc. v. Iowa City Bd. of Review" on Justia Law

Plaintiff filed a putative class action suit against J.C. Christensen, alleging that J.C. Christensen violated the Fair Debt Collections Practices Act (FDCPA), 15 U.S.C. 1692, by offering to settle his debt for less than the full amount without warning him that his total savings might be reduced by an increase in his tax liability. The district court dismissed the suit. The court held that a debt collector need not warn of possible tax consequences when making a settlement offer for less than the full amount owed to comply with the FDCPA. Accordingly, the court affirmed the judgment of the district court. View "Altman v. J.C. Christensen & Assoc." on Justia Law

The City of Cincinnati owned several golf courses that were operated under a management contract by a private, for-profit contractor. Paul Macke, a private golf-course operator who owned taxable real property, challenged the ongoing exemption of the golf courses as public property used exclusively for a public purpose in complaints filed in 2009 and 2010. In each case, the tax commissioner granted the complaint and denied exemption. The City appealed. The Board of Tax Appeals (BTA) consolidated the cases and reversed the tax commissioner’s denial of exemptions. The tax commissioner appealed. The Supreme Court affirmed, holding that the BTA acted reasonably and lawfully by determining that the City did not forfeit its exemption under Ohio Rev. code 5709.08(A) when it hired a private management company to manage its golf courses. View "City of Cincinnati v. Testa" on Justia Law

In 2002, BB&T, a North Carolina financial holding company, entered into a transaction with Barclays, which is headquartered in the United Kingdom. The Structured Trust Advantaged Repackaged Securities transaction (STARS) was in effect for five years. The original version of STARS was marketed to enhance investment yield for cash-rich U.S. corporations by taking advantage of differences between the U.S. and the U.K tax systems by having a U.K. trustee and paying U.K. taxes. The U.S. participant would realize an economic benefit by claiming foreign tax credits for U.K. taxes paid by the trust. Combining the STARS structure with a loan component attracted banks and was marketed as a “low cost financing” program. When the IRS reviewed BB&T’s tax treatment of STARS, it disapproved benefits that BB&T had claimed based on the transaction: foreign tax credits ($498,161,951.00); interest deductions ($74,551,947.40); and certain transaction cost deductions ($2,630,125.05). It imposed taxes on certain payments from Barclays ($84,033,228.20) and imposed $112,766,901.80 in penalties. The Claims Court denied BB&T’s claim for a refund. The Federal Circuit affirmed in part and remanded, upholding imposition accuracy-related penalties on BB&T. The amount of the penalties requires reassessment, as BB&T is entitled to deductions for interest it paid on the STARS Loan. View "Salem Fin., Inc. v. United States" on Justia Law

After Defendant, the owner of real property in the Town of Canton, abandoned the subject property, the Town filed a petition seeking the appointment of a receiver of rents. The trial court, finding that Defendant owed the Town taxes, granted the petition and authorized the receiver to collect all rents or use and occupancy payments. The court subsequently modified its order to allow the receiver to evict the tenant and to bring an action against the tenant for all rents due. The tenant moved to remove the receiver, asserting that the receiver had exceeded its authority under Conn. Gen. Stat. 12-163a by serving it with a notice to quit and by bring an action to collect back taxes and prior rents. The court denied the motion for removal. The Appellate Court (1) reversed insofar as the trial court granted the receiver’s motion to modify the receivership orders, but (2) affirmed insofar as it denied the tenant’s motion to remove the receiver. The Supreme Court (1) reversed as to the reversal of the trial court’s judgment granting the receiver’s motion for modification, holding that section 12-163a does authorize a receiver to use legal process to collect rent due prior to the date of the receiver’s appointment; and (2) otherwise affirmed. View "Canton v. Cadle Props. of Conn., Inc." on Justia Law

Jay Sewards, a former employee of the Sheriff's Department, was entitled to receive a disability pension equal to one-half his previous salary. Because Sewards completed 34 years of service, he received an additional amount to bring his pension up to what he would have received as a service pension. At issue was whether the additional amount is taxable under the Internal Revenue Code. The Tax Court rejected Sewards' argument that the entire amount of the retirement allowance may be excluded from taxation because it is a worker's compensation program pursuant to 26 U.S.C. 104(a)(1). The court affirmed the Tax Court's conclusion that the portion of Sewards’s retirement allowance exceeding what he would have received solely based on disability is subject to taxation. In this case, Sewards had completed 34 years of service and received additional amounts so that his service-connected disability pension was the same as what he would have received as a service pension. Those additional amounts were paid not based on his injuries, but based on his years of service, and thus were not excludable. View "Sewards v. CIR" on Justia Law

In 2013, the City of Cape Coral issued a special assessment to provide fire protection services. The City passed an ordinance levying a special assessment against all real property in the City, both developed and undeveloped. The City then filed a complaint to validate the debt. Eight property owners appeared in opposition to the special assessment. After a show cause hearing, the trial court entered its final judgment of validation. The Supreme Court affirmed the order of validation, holding that the City properly exercised its authority to issue a special assessment to fund fire protection services and that the assessment did not violate existing law. View "Morris v. City of Cape Coral" on Justia Law