Justia Tax Law Opinion Summaries

Prospect Crozer, LLC owned and developed 57.7 acres of real property in Upland Borough, Delaware County, assessed at $80,166,493 for tax years 2017-2019. Prospect appealed the assessment, but the Delaware County Board of Assessment Appeals denied it. Prospect then appealed to the Delaware County Court of Common Pleas, where the Chester Upland School District intervened. Senior Judge John L. Braxton, assigned by the Pennsylvania Supreme Court, presided over the de novo tax assessment proceedings. During this time, Judge Braxton was appointed to the Philadelphia Board of Revision of Taxes and received his first payment from the Board on June 16, 2019. He continued to preside over the tax appeals and issued orders in October 2019.The Delaware County Court of Common Pleas conducted a hearing to determine the timeline of Judge Braxton's dual service and found that he began receiving compensation from the Board on June 16, 2019. The Commonwealth Court then vacated the orders issued by Judge Braxton, concluding that his simultaneous service on the Board and as a judge violated Article V, Section 17(a) of the Pennsylvania Constitution, which prohibits judges from holding an office or position of profit in the government. The court held that this violation resulted in the automatic forfeiture of his judicial office, rendering the orders legal nullities.The Supreme Court of Pennsylvania reviewed the case and agreed that Judge Braxton violated Section 17(a) by holding a position of profit with a municipal corporation while serving as a judge. However, the court rejected the Commonwealth Court's conclusion that this violation resulted in the automatic forfeiture of his judicial office. Instead, the Supreme Court held that the violation created a constitutionally impermissible conflict of duties, requiring the vacatur of the orders entered in the tax appeals. The case was remanded to the Delaware County Court of Common Pleas for reassignment to a new judge. View "In re: Appeal of Prospect Crozer LLC From the Decision of the Board of Assessment Appeals of Delaware County, PA" on Justia Law

Philip Morris USA, Inc. (Philip Morris) disputed with the North Carolina Department of Revenue (Department) over tax credits for manufacturing cigarettes for exportation (Export Credits). The issue was whether the "credit allowed" in N.C.G.S. § 105-130.45(b) (2003) limited the Export Credits such that they could not be carried forward to future years.The Department audited Philip Morris' tax returns for 2012-2014 and disallowed the Export Credits claimed, arguing that the statute capped the credits generated each year at six million dollars, thus no credits were available to carry forward. Philip Morris objected and requested a review, but the Department upheld the disallowance. Philip Morris then petitioned the Office of Administrative Hearings, where the administrative law judge granted summary judgment in favor of the Department. Philip Morris appealed to the Superior Court, which affirmed the ALJ's decision, stating that the statute limited credit generation to six million dollars per year.The Supreme Court of North Carolina reviewed the case and found the statute ambiguous. The Court held that the term "credit allowed" in subsection (b) should be interpreted as "credit generated," allowing any generated Export Credit in excess of the annual cap to be carried forward for the next ten years. The Court reversed the trial court's summary judgment in favor of the Department and remanded the case for further proceedings consistent with this opinion. View "Philip Morris USA, Inc. v. Department of Revenue" on Justia Law

Centene Corporation’s subsidiaries, Envolve Pharmacy Solutions and Coordinated Care, administer health insurance benefits in Washington under a state contract. Coordinated Care collects premiums from consumers and forwards payments to Envolve for administering the benefits. Coordinated Care pays a premiums tax instead of a business and occupation (B&O) tax. The issue is whether Coordinated Care’s payment of the premiums tax exempts Envolve from paying the B&O tax under RCW 82.04.320.The Department of Revenue historically exempted secondary corporate affiliates from the B&O tax if the primary affiliate paid the premiums tax. Envolve sought a refund based on this precedent, but the Department denied it, audited Envolve, and assessed over $3 million in back taxes, arguing that Envolve’s services were not all functionally related to insurance business.Envolve appealed to the Board of Tax Appeals, which partially upheld the Department’s decision, finding some of Envolve’s services were not functionally related to insurance. The King County Superior Court reversed, ruling that Envolve’s activities were exempt under RCW 82.04.320. The Court of Appeals affirmed, holding that Envolve’s services were functionally related to insurance business and thus exempt from B&O tax.The Supreme Court of Washington affirmed the Court of Appeals, holding that RCW 82.04.320 exempts Envolve from B&O taxation because Coordinated Care paid the premiums tax on Envolve’s work related to insurance business. The court emphasized that the statute’s plain language exempts any person engaged in insurance business upon which a premiums tax is paid, without specifying who must pay the tax. The case was remanded for further proceedings consistent with this opinion. View "Envolve Pharmacy Solutions, Inc. v. Dep't of Revenue" on Justia Law

Murphy Oil USA (Murphy) and the Arkansas Department of Finance and Administration (DFA) disputed the categorization of interest expenses related to a corporate spin-off. Murphy, a retail motor-fuel and convenience-store operator, spun off from its parent company in 2013, resulting in interest expenses from issuing senior notes and borrowing funds. Initially, Murphy apportioned these expenses among all states where it conducted business. In 2018, Murphy amended its Arkansas tax returns for 2014 and 2015 to allocate all interest expenses to Arkansas, seeking a tax refund of nearly $4 million.The Union County Circuit Court granted summary judgment in favor of Murphy, allowing the amended tax returns and the allocation of 100% of the interest expenses to Arkansas. DFA appealed, arguing that the interest expenses were business-income expenses under the Uniform Division of Income for Tax Purposes Act (UDITPA) and should be apportioned among all states, that a state statute made the expenses non-deductible if allocable to Arkansas, and that it was unfair to allow Murphy a tax refund in Arkansas without amending returns in other states.The Supreme Court of Arkansas affirmed the circuit court's decision. The court held that Murphy's spin-off was an extraordinary, nonrecurring event, classifying the interest expenses as nonbusiness income under UDITPA, thus allocable entirely to Arkansas. The court also found that Arkansas Code Annotated section 26-51-431(c) did not prohibit the deduction of these expenses, as the statute was intended to prevent deductions for expenses related to tax-exempt income, which was not applicable in this case. Finally, the court rejected DFA's fairness argument, stating that it was not the court's role to adjust Arkansas tax returns based on potential unfairness to other states. View "Hudson v. Murphy Oil USA, Inc." on Justia Law

Plaintiffs Lonnie Hollis and Mason’s World Bar & Grill, LLC, filed a putative class action against the City of LaGrange, alleging that the City imposed excessive mandatory charges for utilities services, which they argued constituted an unauthorized tax under the Georgia Constitution. The plaintiffs claimed that the charges generated profits exceeding the actual cost of providing the services and were used to raise general revenues for the City, effectively making them illegal taxes. They sought a refund of these alleged illegal taxes, a declaration that the charges were illegal, and an injunction to prevent the City from continuing to impose such charges.The trial court granted the City’s motion for judgment on the pleadings, ruling that the Georgia Constitution prohibited the court from regulating the utilities charges. The court concluded that because the Georgia Constitution prevents the General Assembly from regulating or fixing charges of public utilities owned or operated by municipalities, the court similarly lacked the authority to review the plaintiffs’ claims.The Supreme Court of Georgia reviewed the case and concluded that the trial court erred in its interpretation. The Supreme Court held that the constitutional provision in question, which restricts the General Assembly from regulating or fixing municipal utility charges, does not apply to the judicial branch. The plaintiffs’ claims required the court to exercise its judicial authority to determine whether the charges constituted illegal taxes, not to regulate or fix the charges. Therefore, the trial court’s ruling was vacated, and the case was remanded for further proceedings consistent with the Supreme Court’s opinion. The Supreme Court emphasized that the trial court must address the City’s motion for judgment on the pleadings without misinterpreting the constitutional limitations on its authority. View "Hollis v. City of LaGrange" on Justia Law

Total Renal Care, Inc. (TRC) provides dialysis services to patients in Ohio. TRC filed quarterly commercial-activity tax (CAT) returns and made corresponding payments for the period from April 1, 2012, to December 31, 2014. Later, TRC sought refunds, arguing that some of its gross receipts should be sitused outside Ohio because certain supporting services, such as laboratory and administrative functions, were performed outside the state.The Tax Commissioner denied TRC's refund claims, and the Board of Tax Appeals affirmed this decision. The Board determined that TRC's laboratory and administrative services were part of the healthcare services provided in Ohio. It concluded that the gross receipts from these services should be sitused to Ohio because the benefit of the services was received in Ohio.The Supreme Court of Ohio reviewed the case and affirmed the Board of Tax Appeals' decision. The court held that under R.C. 5751.033(I), gross receipts from services should be sitused to the location where the purchaser receives the benefit of the service. Since TRC's dialysis services were provided entirely in Ohio, the gross receipts from these services were correctly sitused to Ohio. The court found no conflict between the statute and the administrative rule, which also emphasizes the location where the purchaser benefits from the service. Therefore, TRC's gross receipts for the relevant period should be sitused to Ohio, and the Board's decision was neither unreasonable nor unlawful. View "Total Renal Care, Inc. v. Harris" on Justia Law

Joseph Anthony Borino, as part of a plea agreement, pleaded guilty to misprision of a felony (wire fraud) on July 8, 2021. He was sentenced to one year and one day of imprisonment on November 1, 2022. On March 30, 2023, the district court ordered restitution of $21,223,036.37 under the Mandatory Victims Restitution Act (MVRA), to be paid jointly and severally with Denis Joachim, Borino’s employer and co-conspirator.The district court proceedings began with the indictment of Denis and Donna Joachim in August 2018, followed by Borino’s separate indictment in November 2019. Borino was charged with conspiracy to defraud the IRS, making false statements, and wire fraud. He later pleaded guilty to misprision of a felony in June 2021. The district court adopted the Pre-Sentence Investigation Report (PSR) which attributed the entire loss of $25,543,340.78 to Borino, and scheduled a separate restitution hearing. At the restitution hearing, the court calculated the restitution amount based on the fees paid by the victims during the period of Borino’s offense, minus the claims paid by TTFG.The United States Court of Appeals for the Fifth Circuit reviewed Borino’s appeal, where he challenged the restitution order on three grounds: the applicability of the MVRA to his offense, the proof of actual pecuniary loss to the victims, and the causation of the losses. The Fifth Circuit affirmed the district court’s order, holding that the MVRA applied to Borino’s misprision offense because it involved concealment of wire fraud, a crime committed by fraud or deceit. The court found that the government had sufficiently proven the victims’ actual losses and that Borino’s continuous concealment of the fraud directly and proximately caused the victims’ losses. The court concluded that the district court did not err in ordering restitution of $21,223,036.37. View "United States v. Borino" on Justia Law

Blake Adams failed to file federal income tax returns for the years 2007 and 2009-2015. The IRS calculated that he owed over $1.2 million in back taxes, interest, and penalties. Due to the significant amount of unpaid taxes, the IRS certified Adams's tax debt as seriously delinquent to the State Department, which could then deny, revoke, or limit his passport. Adams received notice of this certification and subsequently sued the IRS in Tax Court, claiming procedural errors in the assessment of his tax debt.The Tax Court found that Adams had forfeited his opportunities to contest his underlying tax liability through the procedures provided by the Tax Code. Specifically, Adams did not file a petition in Tax Court within the 90-day period after receiving deficiency notices, nor did he request any collection due process hearings after receiving notices of lien and intent to levy. The Tax Court granted summary judgment in favor of the government, concluding that Adams's challenge under section 7345 was foreclosed.The United States Court of Appeals for the District of Columbia Circuit reviewed the case. The court affirmed the Tax Court's decision, holding that the certification of Adams's seriously delinquent tax debt was not erroneous. The court found that all elements defining a seriously delinquent tax debt under section 7345(b)(1) were satisfied: the tax debt was assessed, exceeded the statutory threshold, and Adams's administrative rights had lapsed. The court also noted that Adams's attempt to challenge the underlying tax liability was untimely, as he had not utilized the available administrative procedures when initially notified. Thus, the court upheld the certification and denied Adams's motion to transfer venue to the Eleventh Circuit. View "Adams v. Commissioner of Internal Revenue Service" on Justia Law

Several homeowners sued an irrigation district, claiming that the district's refusal to remove over twenty-year-old charges from the tax rolls was an ultra vires act, violating the Tax Code's twenty-year limitations period. The district argued that the charges were Water Code assessments, not taxes, and thus not subject to the limitations period.The trial court granted the district officials' jurisdictional plea without permitting discovery, dismissing the homeowners' claims for lack of jurisdiction. The Court of Appeals for the Thirteenth District of Texas affirmed in part, concluding that the pleadings did not support an ultra vires claim under the Tax Code because the homeowners had not sought a refund from the tax assessor and the district had clarified that the charges were assessments under the Water Code.The Supreme Court of Texas reviewed the case and determined that the homeowners had sufficiently pleaded facts to demonstrate the trial court's jurisdiction over their ultra vires claim. The court held that the homeowners' pleadings, viewed liberally, alleged that the charges were taxes, had been delinquent for more than twenty years, and that no related litigation was pending at the time of the request to remove the charges. The court concluded that these allegations were sufficient to establish subject matter jurisdiction and did not implicate the district's governmental immunity.The Supreme Court of Texas reversed the Court of Appeals' judgment regarding the Tax Code ultra vires claim and remanded the case to the trial court for further proceedings consistent with its opinion. View "Herrera v. Mata" on Justia Law

George Martens filed a complaint in the Third District Court of Appeals for a writ of mandamus against various judges and courts in Hancock County, alleging that they lacked jurisdiction to decide certain tax cases. Martens did not allege that he was a party to any tax case pending before those courts when he filed this action. The judges and courts filed a motion to dismiss, arguing that Martens lacked standing and had not stated a cognizable mandamus claim.The Third District Court of Appeals dismissed the case, concluding that Martens lacked standing to bring the complaint and had failed to state a claim for mandamus relief. Martens appealed to the Supreme Court of Ohio, arguing that he did not need to meet the traditional standing requirement based on the public-right doctrine recognized in State ex rel. Ohio Academy of Trial Lawyers v. Sheward. Alternatively, he claimed taxpayer standing.The Supreme Court of Ohio rejected Martens's reliance on Sheward, overruling the public-right doctrine established in that case. The court held that Sheward was contrary to the deeply rooted standing requirement and the Ohio Constitution. The court also found that Martens could not establish taxpayer standing, as he had not shown any special interest in the public funds at issue or cited statutory authority authorizing him to bring a taxpayer suit. Consequently, the Supreme Court of Ohio affirmed the Third District's dismissal of Martens's complaint for lack of standing. View "State ex rel. Martens v. Findlay Municipal Court" on Justia Law