Justia Tax Law Opinion Summaries

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The Supreme Court affirmed the judgment of the tax court concluding that Menard, Inc. was not entitled to an offset on its sales tax liability under Minn. Stat. 297A.81, holding that the tax court correctly concluded that Menard was not eligible for a sales tax offset.Under section 297A.81, a taxpayer can reduce current tax liabilities by the amount of sales taxes attributable to uncollectible debts owed to the taxpayer. Menard claimed a sales tax offset based on uncollectible debts resulting from customer purchases made on Menard's private label credit card offered by Capital One, N.A. The Commissioner of Revenue concluded that Menard was ineligible to claim an offset and assessed additional sales tax. The tax court affirmed, concluding that unpaid debts from customer transactions made on Menard's private label credit card were owed to Capital One, not Menard. The Supreme Court affirmed, holding (1) the unpaid customer transactions were not debts owed to Menard; and (2) Menard was not a guarantor of the cardholders' debts. View "Menard, Inc. v. Commissioner of Revenue" on Justia Law

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The Greens opened a Union Bank of Switzerland (UBS) account around 1980, with their daughter, Kimble, as a joint owner. Kimble directed UBS to maintain the account as a numbered account and to retain all correspondence at the bank. Kimble married an investment analyst who agreed to preserve the secrecy of the account. The couple’s joint federal tax returns did not report any income derived from the UBS account nor disclose the existence of the foreign account. After the couple divorced, Kimble's tax returns were prepared by a CPA, who never asked whether she had a foreign bank account. In 2003-2008, Kimble’s tax forms, signed under penalty of perjury, represented that she did not have a foreign bank account.In 2008, Kimble learned of the Treasury Department’s investigation into UBS for abetting tax fraud; she retained counsel. UBS entered into a deferred prosecution agreement that required UBS to unmask numbered accounts held by U.S. citizens. Kimble was accepted into the Offshore Voluntary Disclosure Program (OVDP) and agreed to pay a $377,309 penalty. Kimble withdrew from the OVDP without paying the penalty.The IRS determined that Kimble’s failure to report the UBS account was willful and assessed a penalty of $697,299, 50% of the account. Kimble paid the penalty but sought a refund. The Federal Circuit affirmed summary judgment against Kimble, finding that she violated 31 U.S.C. 5314 and that her conduct was “willful” under section 5321(a)(5). The IRS did not abuse its discretion in setting a 50% penalty. View "Kimble v. United States" on Justia Law

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The Eleventh Circuit affirmed the tax court's denial of taxpayer's request to sever her liability for unpaid tax liabilities from joint tax returns for the 2008, 2009, and 2010 tax years based on the innocent spouse doctrine. The court concluded that the tax court did not abuse its discretion in balancing the factors for determining equitable relief and concluding that the knowledge or reason-to-know factor weighed strongly against relief. In this case, taxpayer signed the couple's returns, was aware of their shared financial troubles, and knew of their prior problems with the IRS. Furthermore, the tax court did not abuse its discretion by placing too much weight on this factor. View "Sleeth v. Commissioner of Internal Revenue" on Justia Law

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2 Crooked Creek, LLC (2CC) and Russian Ferro Alloys, Inc. (RFA) filed an action against the Cass County Treasurer, seeking to recover monetary damages under the Michigan General Property Tax Act (the GPTA) in connection with defendant’s foreclosure of certain property. In 2010, 2CC purchased property for development, but failed to pay the 2011 real-property taxes and, in 2013, forfeited the property to defendant. From January through May 2013, defendant’s agent, Title Check, LLC, mailed via first-class and certified mail a series of notices to the address listed in the deed. The certified mail was returned as “Unclaimed—Unable to Forward,” but the first-class mail was not returned. Meanwhile, 2CC constructed a home on the property, obtaining a mortgage for the construction from RFA. A land examiner working for Title Check visited the property; determined it to be occupied; and being unable to personally meet with any occupant, posted notice of the show-cause hearing and judicial-foreclosure hearing on a window next to the front door of the newly constructed home. Title Check continued its notice efforts through the rest of 2013 and into 2014, mailing various notices as well as publishing notice in a local newspaper for three consecutive weeks. After no one appeared on 2CC’s behalf at the show-cause hearing or the 2014 judicial-foreclosure hearing, the Cass Circuit Court entered the judgment of foreclosure. The property was not redeemed by the March 31, 2014 deadline, and fee simple title vested with defendant. 2CC learned of the foreclosure a few weeks later. In July 2014, 2CC moved to set aside the foreclosure judgment on due-process grounds. These efforts failed because the circuit court concluded defendant’s combined efforts of mailing, posting, and publishing notice under the GPTA provided 2CC with notice sufficient to satisfy due process. In an unpublished per curiam opinion, the Court of Appeals affirmed. 2CC moved to set aside the foreclosure judgment, filing a separate action in the Court of Claims for monetary damages under MCL 211.78l(1), alleging it had not received any notice required under the GPTA. After a bench trial at the Court of Claims and at the close of 2CC’s proofs, the court granted an involuntary dismissal in favor of defendant, holding, in relevant part, that 2CC had received at least constructive notice of the foreclosure proceedings when the land examiner posted notice on the home. 2CC appealed as of right, and the Court of Appeals also affirmed. Finding no reversible error, the Michigan Supreme Court affirmed too. View "2 Crooked Creek, LLC v. Cass Cty. Treas." on Justia Law

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After taxpayers filed suit challenging the IRS's deficiency findings and penalties, the tax court sustained the deficiency determinations but rejected the accuracy-related penalties. In this case, the Miccosukee Tribe shared profits from its casino with Tribe members and encouraged its members to hide their payments from the IRS. The taxpayers here followed the Tribe's advice, and they are now subject to hundreds of thousands of dollars in tax deficiencies.The Eleventh Circuit affirmed the tax court's judgment and rejected taxpayers' assertion that any taxes are barred by the Miccosukee Settlement Act that exempted an earlier land transfer from taxation. Even if the court interpreted the Act as providing an indefinite tax exemption for the "lands" conveyed under it or the agreement, the casino revenues still do not fit the bill because the casino's land was not conveyed under either the Act or the agreement. Furthermore, an exemption for "lands" only exempts income "derived directly" from those lands, and this court has already held that casino revenues do "not derive directly from the land." The court also rejected taxpayers' assertion that the payments are merely nontaxable lease payments from the casino, citing factual and legal problems. Rather, the court concluded that the payments are taxable income. View "Clay v. Commissioner of Internal Revenue" on Justia Law

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The Court of Appeals affirmed the denial of Clear Channel Outdoor, Inc.'s request for a refund of the taxes that it paid pursuant to a Baltimore City ordinance for the privilege of selling advertising on billboards that are not located on the premises where the goods or services being advertised were offered or sold, holding that the ordinance is constitutional.Clear Channel, which was in the business of selling advertising on its billboards in Baltimore City, sought a refund from the City Director of Finances of the taxes it paid pursuant to the city ordinance at issue. Clear Channel claimed that the ordinance was unconstitutional under the First and Fourteenth Amendments and Article 40 of the Maryland Declaration of Rights. The City denied a refund, and the Maryland Tax Court affirmed. The circuit court and court of appeals affirmed. The Supreme Court affirmed, holding that the ordinance survives the application of a rational basis test and, accordingly, is constitutional. View "Clear Channel Outdoor, Inc. v. Department of Finance of Baltimore City" on Justia Law

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The tax at issue in this case related to the State Water Project ("SWP"): California’s vast system of storage and conveyance facilities designed to provide water to its millions of residents and farmers. In 2013, the Coachella Valley Water District (the water district) passed a resolution adopting a two-cent increase to the rate of its ad valorem property tax, which the water district levies annually to satisfy its contractual financial obligations to the SWP. In 2018, Randall Roberts filed a lawsuit against the water district and the County of Riverside, seeking to invalidate the tax under the Burns-Porter Act of 1960, and the California Constitution, and to obtain a refund. The water district demurred, arguing the entire action was time-barred because Roberts was required under the validation statutes to present his claims in a “reverse validation action” no later than 60 days after the water district adopted the tax, which it does annually by resolution. The trial court concluded the validation statutes did not apply to the SWP tax and overruled the demurrer. The Court of Appeal concurred with the water district that the validation statutes applied to the SWP tax by operation of the County Water District Law, which made the validation statutes applicable to any action to determine the validity of a county water district's "assessment" (and defined a property tax as an "assessment"). View "Coachella Valley Water Dist. v. Super. Ct." on Justia Law

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In 2009, Meidinger submitted whistleblower information to the IRS under 26 U.S.C. 7623, concerning “one million taxpayers in the healthcare industry that are involved in a kickback scheme.” The IRS acknowledged receipt of the information, but did not take action against the accused persons. The IRS notified Meidinger of that determination. Meidinger argued that the IRS created a contract when it confirmed receipt of his Form 211 Application, obligating it to investigate and to pay the statutory award. The Tax Court held that it lacked the authority to order the IRS to act and granted the IRS summary judgment. The D.C. Circuit affirmed that Meidinger was not eligible for a whistleblower award because the information did not result in initiation of an administrative or judicial action or collection of tax proceeds.In 2018, Meidinger filed another Form 211, with the same information as his previous submission. The IRS acknowledged receipt, but advised Meidinger that the information was “speculative” and “did not provide specific or credible information regarding tax underpayments or violations of internal revenue laws.” The Tax Court dismissed his suit for failure to state a claim; the D.C. Circuit affirmed, stating that a breach of contract claim against the IRS is properly filed in the Claims Court under the Tucker Act: 28 U.S.C. 1491(a)(1). The Federal Circuit affirmed the Claims Court’s dismissal, agreeing that the submission of information did not create a contract. View "Meidinger v. United States" on Justia Law

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The Supreme Court affirmed in part and reversed in part the decision of the administrative hearing commission (AHC) finding no use tax liability for APLUX LLC and Paul and Ann Lux Associates L.P. on the out-of-state purchase of two aircraft, holding that APLUX was not entitled to resale exemption on the purchase of either aircraft.After purchase, both aircraft - referred to as "the TBM" and "the Excel" - were brought to Missouri. APLUX asserted that it leased, on a non-exclusive basis, the TBM to its parent company, Luxco, Inc., and the Excel concurrently to both Luxco and Aero Charter, Inc. The AHC held that each lease agreement constituted a "sale" for purposes of the tax resale exemption set out in Mo. Rev. Stat. 144.018. The Supreme Court reversed in part, holding that a "sale" to Luxco did not occur, and therefore, APLUX was not entitled to a resale exemption based on the Luxco agreement. View "APLUX, LLC v. Director of Revenue" on Justia Law

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Ashford San Francisco owns the 2nd Street property. In 2013, a majority ownership interest in Ashford San Francisco was acquired by Ashford Hospitality. The transfer resulted in a change in ownership of the property, which the city determined triggered the imposition of the transfer tax. Ashford paid $3,348,025 in transfer taxes based upon the $133,920,700 self-reported value of the property, then filed an administrative claim for a refund. The transfer tax has five tiered (graduated) tax rates.When the city did not timely act, Ashford filed suit. seeking a refund, alleging that the transfer tax “imposes different tax rates on taxpayers for performing the same exact function” and arbitrarily classifies property transfer instruments for the imposition of a varying rate of taxation, solely by reference to the amount of the consideration in the transactions in violation of the Equal Protection Clause.The court of appeal affirmed a judgment in favor of the city. The city rationally chose to treat the sale or transfer of a higher-valued property differently from the sale of a lower-valued property; the transfer tax “taxes all transfers of the same consideration or value equally.” The court noted the city’s justifications: the owner’s ability to pay and that time and costs associated with the city’s audits for the self-reported transfer tax may increase depending on the value of the property. View "Ashford Hospitality v. City and County of San Francisco" on Justia Law