Justia Tax Law Opinion Summaries

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Under the federal tax offset program, the Secretary of the Treasury has the discretion to set-off "any" tax overpayment against a taxpayer's preexisting tax liabilities, and the bankruptcy code provides that exempt property cannot be used to satisfy "any" of the bankruptcy debtor's prepetition debts. At issue was which of these statutory directives controls when a bankruptcy debtor claims, as exempt property, a tax overpayment that the government seeks to set-off under the offset program. The Fourth Circuit agreed that debtors' interest in their tax overpayment became part of the bankruptcy estate. However, based on the plain language of the various statutes, particularly the plain language of 11 U.S.C. 553(a), the court held that the government's right to offset the debtors' tax overpayment under 26 U.S.C. 6402(a) cannot be subordinated or otherwise affected by debtors' attempts to claim the overpayment as exempt property. Accordingly, the court vacated the district court's judgment, remanding for further proceedings. View "Copley v. United States" on Justia Law

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The Supreme Court held that Sussex County, Kent County, and New Castle County use assessment methodologies when preparing their assessment rolls used by school districts in levying local taxes that fail to comply with three legal requirements. Plaintiffs were the NAACP Delaware State Conference of Branches (the NAACP-DE), the Delawareans for Educational Opportunity (the DEO) and the City of Wilmington. The NAACP-DE and the DEO argued that Delaware's public schools failed to provide an adequate education for students from low-income households, students whose first language is not English, and students with disabilities. When school districts levy local taxes, they are required to use the assessment rolls prepared by Delaware's three counties. The NAACP-DE and the DEO argued that when preparing their assessment rolls, the counties failed to comply with 9 Del. C. 8306(a) (the True Value Statute) and Del. Const. art. VIII, 1 (the Uniformity Clause). The City of Wilmington argued that New Castle County also violated its obligations under 22 Del. C. 1101-1104 (the Assessment Roll Statutes). The Supreme Court held (1) Plaintiffs had standing to assert their claims; and (2) all three counties used assessment methodologies that violate the True Value Statute and the Uniformity Clause and that New Castle County violated its obligations under the Assessment Roll Statutes. View "In re Delaware Public Schools Litigation" on Justia Law

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A taxpayer cannot avoid Article XIII, section 32 of the California Constitution's "pay first" rule by alleging, in a claim for declaratory relief invoking Government Code section 11350, that the tax regulation giving rise to his unpaid tax assessment is invalid. The Court of Appeal held that this is the result dictated by the canons of statutory construction; the purpose underlying section 11350 does not justify exempting declaratory relief otherwise subject to section 32's "pay first" rule from its auspices; and the California Supreme Court has already strongly suggested that section 11350 must not be read as an exemption from section 32's "pay first" rule. To the extent language in Pacific Motor Transport Co. v. State Bd. of Equalization (1972) 28 Cal.App.3d 230 can be read to suggest a contrary answer, the court respectfully disagreed with Pacific Motor. Accordingly, the court granted the writ petition challenging the trial court's order overruling the demurrer in this case, and directed the trial court to enter a new and different order sustaining the demurrer without leave to amend. View "California Department of Tax and Fee Administration v. Superior Court" on Justia Law

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In 2007, the Mississippi Department of Revenue (the Department) notified Caesars Entertainment, Inc. (Caesars), that an examination concerning its past tax returns, including its 2005 tax return, had been initiated and that the statutes of limitation in Mississippi Code Sections 27-7-49 and 27-13-49 were arrested. The Department concluded its examination on in early 2013, finding no overpayment or underpayment by Caesars. In February 2014, the Mississippi Supreme Court issued a decision that concerned a casino’s ability to use gaming license credits to offset its income tax liability. In response, Caesars filed an amended tax return seeking a refund for the period January 1 to June 13, 2005. The Department denied Caesars’ refund claim on the basis that the time to ask for a refund had expired. Both the Board of Review and Board of Tax Appeals affirmed the Department’s denial. Under Mississippi Code Section 27-77-7 (Rev. 2017), Caesars appealed the Department’s denial to the Chancery Court of the First Judicial District of Hinds County. Both parties moved for summary judgment. The chancellor granted the Department’s motion for summary judgment, finding that Caesars’ refund claim was untimely. On appeal to the Mississippi Supreme Court, Caesars argued Section 27-7-49(2) (Rev. 2017) extended the statute of limitations found in Section 27-7-313 (Rev. 2017), which gave a taxpayer additional time to file a refund claim after an audit and gave the Department additional time to determine a taxpayer’s correct tax liability and to issue a refund regardless of when a refund claim was submitted. The Department argued Section 27-7-49(2) applied only to the Department and its time frame to examine and issue an assessment. After review, the Supreme Court found Caesars' time to file an amended tax refund claim was not tolled or extended, and that the Department had three years to examine a taxpayer's tax liability, absent exceptions under Section 27-7-49. Therefore, the Court affirmed the chancellor's grant of summary judgment to the Department. View "Caesars Entertainment, Inc. v. Mississippi Department of Revenue" on Justia Law

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The Supreme Court affirmed the decision of the circuit court affirming the assessed value of Appellants' agricultural land by the Meade County Commission sitting as a board of equalization (the Board), holding that the circuit court did not err. Before the Board, Appellants argued that the director of equalization incorrectly applied statutory provisions to determine their land's production value. The Board further adjusted the assessment from an average of $519 per acre down to an average of $512 per acre. Appellants appealed the Board's decision to circuit court. After a trial de novo, the circuit court affirmed the Board's tax assessment of the property. The Supreme Court affirmed, holding that the circuit court did not err when it determined that (1) the Board complied with the statutory provisions for evaluating agricultural land in their assessment of Appellants' property; and (2) the Board's tax assessment of the property did not violate provisions of the South Dakota Constitution that require uniform taxation at no more than its actual value. View "Trask v. Meade County Commission" on Justia Law

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The Supreme Court held that Lockheed Martin Corporation's receipts from the sales of F-16 fighter jets to the U.S. government were improperly sourced to Texas for purposes of calculating its Texas franchise tax, holding that Lockheed Martin demonstrated its entitlement to a refund of franchise taxes. The fighter jets at issue were manufactured in Fort Worth and destined for foreign-government buyers. In accordance with federal law, the foreign buyers contracted with the U.S. government to purchase the jets, and the U.S. government contracted with Lockheed Martin. Lockheed Martin filed for a refund of the portion of its franchise taxes for the tax years 2005 through 2007 attributable to the sales of the F-16 aircraft. The Comptroller denied the claim, and Lockheed Martin brought this suit. The trial court rendered judgment for the Comptroller, and the court of appeals affirmed. The Supreme Court reversed, holding (1) Lockheed Martin's "sale" of each F-16 was to the respective foreign-government "buyer" for whom the aircraft was manufactured, and the government's involvement had no bearing on whether to apportion the receipts from that sale to Texas; and (2) the F-16s were delivered to the "buyers" outside of Texas, and therefore, the receipts from the sales of those aircraft were not properly sourced to Texas. View "Lockheed Martin Corp. v. Hegar" on Justia Law

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Walby was born in Michigan, and, in 2014-2018, lived and worked in Michigan. For the 2014 taxable year, Walby’s employer, Baker, withheld $9,751.60 in federal income taxes. In 2015, Walby claimed exemption from all withholdings and executed an “Affidavit of Citizenship,” which she submitted to the State Department, declaring that she was a sovereign citizen of the state of Michigan and, “because she was not restricted by the 14th Amendment ... she was not a United States citizen thereunder but rather a nonresident alien not subject to income taxes.” In 2016, at the direction of the IRS, Baker resumed withholding. Walby did not file federal tax returns for 2014–2018 but, in 2019, filed claims for refunds of the taxes withheld from her 2014 and 2016–2018 paychecks. The Federal Circuit affirmed the dismissal of Walby’s tax refund lawsuit concerning her 2014 return as untimely. A timely administrative refund claim must be filed within two years of the taxes being paid. The claims for the years 2016–2018 were timely but were properly dismissed as meritless. Walby could not establish a loss of U.S. nationality and even if she were a nonresident alien, Walby qualified as a U.S. resident for tax purposes under I.R.C. 7701 by virtue of her substantial presence. The court rejected a request for sanctions. View "Walby v. United States" on Justia Law

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Inmates in county jails in nine California counties challenged the exorbitant commissions paid by telecommunications companies to the nine counties under contracts giving the telecommunications companies the exclusive right to provide telephone service for the inmates. The inmates contend that the fees are unlawful taxes under Proposition 26. The Court of Appeal affirmed the trial court's decision sustaining a demurrer by the counties without leave to amend, because the inmates do not have standing to contend the commissions are an unconstitutional tax. The court explained that no precedents support the inmates' claim that a consumer who pays charges to a third party vendor—including one that has inflated its prices to recover the cost of a tax it pays to a local government—has standing to seek a refund of those charges from the taxing authority. Finally, the court rejected the inmates' claims under Government Code section 11135 and the Bane Act. View "County Inmate Telephone Service Cases" on Justia Law

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Under 26 U.S.C. 2036(a)(1), a grantor's interest in a grantor-retained annuity trust (GRAT) is a sufficient "string" that requires the property interest to be included in the gross estate. The Ninth Circuit affirmed the district court's grant of summary judgment to the IRS in an action brought by plaintiff, challenging the inclusion of her mother's GRAT in a gross estate for purposes of the estate tax. The panel explained that the annuity flowing from a GRAT falls within the class intended to be treated as substitutes for wills by section 2036(a)(1). In this case, the panel held that the grantor retains enjoyment of a GRAT and thus it is properly included in the gross estate. Finally, even if plaintiff's challenges to 26 C.F.R. § 20.2036-1(c)(2), which includes the formula the IRS uses to calculate the portion of the property includable under section 2036(a) were not waived, the formula would not apply in this case. View "Badgley v. United States" on Justia Law

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After C&W failed to remit employment taxes, the IRS assessed the balance owed against C&W's former's owner. C&W's former owner filed suit alleging that the IRS misallocated funds it had levied from C&W, leaving him personally liable for the outstanding taxes. The Eighth Circuit affirmed the district court's dismissal of the complaint based on lack of subject matter jurisdiction. The court held that because the owner argued that his payment was made in 2006 when the IRS allegedly misallocated levied funds, his attempted administrative claim in 2015 was more than two years after the tax was paid. Therefore, the owner's claim was untimely and the United States retains its sovereign immunity. View "Barse v. United States" on Justia Law