Justia Tax Law Opinion Summaries

Appellant in this case was a subcontractor that purchased steel beams and other steel components that were used to fulfill Appellant's contracts to construct steel frames for large-scale commercial buildings and structures. Appellant filed a petition with the Director of Revenue for sales and tax refunds under Mo. Rev. Stat. 144.054.2, which exempts “materials used or consumed in the manufacturing, processing, compounding, mining, or producing of any product” from sales tax. The Director concluding that Appellant did not meet the requirements for a tax exemption under section 144.054.2. The Administrative Hearing Commission affirmed. The Supreme Court affirmed, holding that because Appellant was using steel beams, plates, angles, and other components to fulfill its construction contracts, an activity not exempt under the plain and ordinary language of section 144.054.2, it failed to meet the statutory criteria for a sales and use tax exemption. View "Ben Hur Steel Worx, LLC v. Dir. of Revenue" on Justia Law

The Fresno County Assessor audited the partnership regarding personal property for tax years 1994-2001, which resulted in assessment of additional taxes for farm equipment. In 2007, the partnership attempted to apply for changed assessment to cancel the assessment under Revenue and Taxation Code section 4986 on the ground that it did not own that personal property. The Assessment Appeals Board returned the applications as untimely. In 2010, the partnership sought a declaratory judgment that the subject properties did not exist and the assessments should be cancelled. The trial court dismissed on the ground that it was seeking to enjoin the collection of property taxes in violation of the California Constitution. The court concluded that the partnership was required to first pay the tax and then seek a refund. By checks in 2011-2012, the partnership paid the disputed taxes in full, with penalties and interest. The partnership’s refund claims were rejected, so it filed suit. The trial court concluded that the partnership was required to seek reduction of the assessment and that the action was barred for failure to do so. The court of appeal reversed, noting the partnership’s argument that it did not own the assessed property on the applicable dates, so that the assessments were “nullities.” View "Williams & Fickett v. Cnty. of Fresno" on Justia Law

The City of Fredericksburg brought suit against CVAS 2, LLC, which owns real estate within the City’s geographic area, seeking to have CVAS 2’s real estate sold in order to collect the LLC’s outstanding payments for delinquent real estate taxes and special assessments. The circuit court entered a decree of sale ordering that CVAS 2’s real estate be sold in gross to pay the delinquent taxes, penalties and special assessments. The Supreme Court reversed, holding that the City did not strictly comply with Va. Code 15.2-5158 and 58.1-3965(A) allowing for it to bring suit under the circumstances, and therefore, the circuit court lacked authority to order the sale of CVAS 2’s real estate. View "CVAS 2, LLC v. City of Fredericksburg" on Justia Law

In 2010, the Commissioner of Revenue of Arlington County (“County”) audited Nielsen for several of the previous tax years. Determining that Nielsen failed to pay sufficient tax on its business license, the County issued an additional tax assessment on Nielsen for the 2007 tax year. Nielsen appealed. The Virginia Tax Commissioner (“Commissioner”) concluded that the County had used an incorrect methodology in the 2007 tax year assessment and instead permitted a payroll percentage methodology to be used to calculate the deduction to the county tax on Nielsen’s business license. The County and the Commissioner appealed. The circuit court reversed the Commissioner’s decision and reinstated the County’s assessment, concluding that the Commissioner’s methodology for calculating the relevant tax deduction was contrary to law and arbitrary and capricious in its application. The Supreme Court reversed, holding that the Commissioner’s ruling was not contrary to law or arbitrary and capricious in application. Remanded. View "Nielsen County v. Bd. of Arlington County" on Justia Law

Petitioner Ramona Mitchell appealed a Tax Court decision to deny a charitable contribution deduction for a donation of a conservation easement on real property that was, at the time of the donation, subject to an unsubordinated mortgage. Specifically, she challenged the Tax Court’s conclusion that the donation failed to comply with the Internal Revenue Code (and its implementing regulations). Finding no reversible error, the Tenth Circuit affirmed the Tax Court. View "Mitchell v. Comm'r of Internal Rev." on Justia Law

The City of Spokane filed suit against Fannie, Freddie, and FHFA, arguing that Fannie and Freddie are not statutorily exempt from paying real property transfer taxes. The court concluded that it is clear that the statutory carve-outs allowing for the taxation of real property as "other real property is taxed" encompass only property taxes, not excise taxes. Therefore, Fannie and Freddie are statutorily exempt from paying the transfer taxes in Washington. The court held that the entities' exemption statutes do not exceed Congress's constitutional authority. Because Congress has power under the Commerce Clause to regulate the secondary mortgage market, it has power under the Necessary and Proper Clause not only to create Fannie and Freddie but also to ensure their preservation by exempting them from state and local taxes. Finally, the exemptions neither commandeer state and local officials nor transgress general principles of federalism. Therefore, the court rejected Spokane's Tenth Amendment arguments. Accordingly, the court held that Congress exempted Fannie and Freddie from state and local taxation of real property transfers and that it had constitutional authority to do so. The court affirmed the judgment. View "City of Spokane v. Fed. Nat'l Mortgage Ass'n" on Justia Law

Consolidated appeals before the Tenth Circuit in this case shared a common issue, a matter of first impression: whether an untimely 1040 Form, filed after the Internal Revenue Service (IRS) has assessed the tax liability, is a tax return for purposes of the exceptions to discharge in section 523(a)(1)(B)(i) of the Bankruptcy Code. Edson and Liana Mallo did not file timely federal income tax returns for 2000 and 2001. As a result, the IRS issued statutory notices of deficiency. The Mallos did not challenge those determinations. The IRS began collection efforts in 2006. In 2007, the Mallos filed a joint Form 1040 for tax year 2000 and another joint Form 1040 for tax year 2001. Based on this information, the IRS assessed additional joint tax liability against them. In 2010, the Mallos filed a Chapter 13 bankruptcy petition for adjustment of debts with the United States Bankruptcy Court for the District of Colorado. Their case was converted to a liquidation proceeding under Chapter 7 in early 2011. After the bankruptcy court issued a general order discharging the Mallos’ debts, the Mallos filed an adversary proceeding against the IRS, seeking a determination that their income tax liabilities for 2000 and 2001 had been discharged. The IRS answered, denying the debts had been discharged. The parties agreed there were no issues of material fact in dispute and filed cross motions for summary judgment on the legal question whether the Mallos’ tax debt was excepted from discharge under section 523(a)(1)(B) of the Bankruptcy Code. In another case, Peter Martin did not file timely returns for tax years 2000 and 2001. The IRS issued statutory notices of deficiency, which Mr. Martin did not challenge. In 2004, the IRS began collection efforts. In May 2005, Mr. Martin filed a Form 1040 for 2000 and a Form 1040 for 2001. Based on his submissions, the IRS partially abated Mr. Martin’s 2000 and 2001 tax liabilities. The legal question was the same in Mr. Martin’s bankruptcy, but he obtained a more favorable result. Mr. Martin filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the District of Colorado and received a general discharge order. Like the Mallos, Mr. Martin then filed an adversary proceeding against the IRS, seeking a determination that his 2000 and 2001 tax debts had been discharged. The parties filed cross motions for summary judgment, making substantially the same arguments as advanced in the Mallos’ case. Contrary to the decision in the Mallos’ bankruptcy proceeding, the judge in Mr. Martin’s case determined the tardy Form 1040s were tax returns and therefore Mr. Martin’s tax debt was not excepted from the order of discharge. The IRS appealed. After review, the Tenth Circuit concluded that the untimely forms were not tax returns under the statute, and the Court affirmed the district court’s decisions excluding the debtors’ tax liability from the general discharge orders of the bankruptcy courts. View "Mallo v. IRS" on Justia Law

Both CarMax Auto Superstores West Coast, Inc., and the South Carolina Department of Revenue (appealed the court of appeals' decision, reversing and remanding a decision of the Administrative Law Court (ALC) upholding the Department's use of an alternative apportionment formula to calculate CarMax West's income tax for tax years 2002-2007. When a party seeks to deviate from a statutory formula, the proponent of the alternate formula bears the burden of proving by a preponderance of the evidence that: (1) the statutory formula does not fairly represent the taxpayer's business activity in South Carolina and (2) its alternative accounting method is reasonable. The Supreme Court affirmed (as modified), and declined to remand at both parties' request. The Supreme Court affirmed the court of appeals' finding that the ALC erred in placing the burden of proof on CarMax West. Furthermore, while there was substantial evidence in the record to support the ALC's finding that the Department's alternative accounting method was reasonable, the Department failed to prove the threshold issue that the statutory formula did not fairly represent CarMax West's business activity within South Carolina. View "Carmax Auto v. South Carolina Dept. of Rev." on Justia Law

Minneapolis imposes an annual vacant building registration fee on owners of vacant buildings “to recover all costs incurred by the city for monitoring and regulating vacant buildings, including nuisance abatement, enforcement and administrative costs.” If unpaid, the city can levy and collect the fee as a special assessment against the property. DRB owns a vacant building in Minneapolis and for several years failed to pay that registration fee. In 2011, DRB received notice the city intended to assess $6,550 for DRB’s unpaid 2010 fee. After a hearing attended by DRB, an administrative hearing officer levied the fee. This process repeated in 2012 and a fee of $6,746 was levied. DRB did not appeal either assessment, but brought a separate suit, on behalf of itself and similarly situated landowners. A magistrate judge recommended judgment in favor of the city, concluding the city had provided DRB with proper notice of the assessments and DRB did not bring its challenges to the assessments within the statutory 30-day appeal period. The Eighth Circuit affirmed the district court’s adoption of the recommendation. View "DRB #24, LLC v. City of Minneapolis" on Justia Law

The IRS challenged the Tax Court's decision that the Salus Mundi Foundation was not liable under 26 U.S.C. 6901 for the unpaid tax liability arising from the sale of appreciated assets held by Double-D Ranch, Inc. The court concluded that the two requirements of section 6901 - transferee status under federal law and substantive liability under state law - are separate and independent inquiries. Consequently, the IRS cannot rely on federal law to recharacterize the series of transactions for purposes of the state law inquiry. The court adopted the Second Circuit's reasoning in Diebold Foundation, Inc. v. Comm'r on the state law inquiry and concluded that the Double-D shareholders had constructive knowledge of the fraudulent tax avoidance scheme at issue. Therefore, the court collapsed the series of transactions and concluded that the shareholders made a fraudulent conveyance under the New York Uniform Fraudulent Conveyance Act and that the state law liability prong of section 6901 was satisfied. The court remanded to the district court for further determinations. View "Salus Mundi Foundation v. CIR" on Justia Law