Justia Tax Law Opinion Summaries

The case revolves around a tax appraisal dispute involving Texas Disposal Systems Landfill, Inc. (the Landfill) and Travis Central Appraisal District (the District). The Landfill owns 344 acres of land in Travis County, which it operates as a landfill. In 2019, the District appraised the market value of the landfill at $21,714,939. The Landfill protested this amount under the Tax Code provision requiring equal and uniform taxation but did not claim that the District’s appraised value was higher than the market value of the property. The appraisal review board reduced the appraised value of the subject property by nearly ninety percent. The District appealed to the trial court, claiming that the board erred in concluding that the District’s appraised value was not equal and uniform when compared with similarly situated properties. The District also claimed that the board’s appraised value was lower than the subject property’s true market value.The trial court granted the Landfill’s plea to the jurisdiction, arguing that the challenge it made before the appraisal review board was an equal-and-uniform challenge, not one based on market value. Thus, the trial court lacked jurisdiction to consider market value. However, the court of appeals reversed this decision, holding that a trial court’s review of an appraisal review board’s decision is not confined to the grounds the taxpayer asserted before the board.The Supreme Court of Texas affirmed the court of appeals' judgment. The court concluded that the Tax Code limits judicial review to conducting a de novo trial of the taxpayer’s protest. In deciding the taxpayer’s protest in this case, the trial court is to determine the equal and uniform appraised value for the property subject to taxation. This limit, though mandatory, is not jurisdictional. The case was remanded to the trial court for further proceedings. View "TEXAS DISPOSAL SYSTEMS LANDFILL, INC. v. TRAVIS CENTRAL APPRAISAL DISTRICT" on Justia Law

The Supreme Court of California ruled that the Taxpayer Protection and Government Accountability Act (TPA), a proposed initiative measure, could not be placed on the November 2024 general election ballot. The TPA sought to revise the California Constitution by requiring voter approval for any new or increased state or local tax, and by expanding the definition of "tax" to include a wider range of government charges. The petitioners, the Legislature of the State of California, Governor Gavin Newsom, and former Senate President Pro Tempore John Burton, argued that the TPA was invalid because it attempted to revise the California Constitution via citizen initiative, and because it would seriously impair essential government functions.The court agreed with the petitioners, finding that the TPA would substantially alter the basic governmental framework set forth in the California Constitution. The court noted that the TPA would eliminate the Legislature's ability to levy taxes without prior voter approval, shift power between the executive and legislative branches, and transform local revenue-raising by requiring that exempt charges go through legislative rather than administrative processes. The court concluded that these changes were so significant that they amounted to a revision of the Constitution, which could not be enacted by initiative. The court therefore issued a writ of mandate directing the Secretary of State to refrain from placing the TPA on the November 2024 election ballot. View "Legislature of the State of California v. Weber" on Justia Law

The case involves Charles and Kathleen Moore, who invested in an American-controlled foreign corporation, KisanKraft. From 2006 to 2017, KisanKraft generated substantial income but did not distribute it to its American shareholders. At the end of the 2017 tax year, the application of the new Mandatory Repatriation Tax (MRT) resulted in a tax bill of $14,729 on the Moores’ pro rata share of KisanKraft’s accumulated income from 2006 to 2017. The Moores paid the tax and then sued for a refund, claiming that the MRT violated the Direct Tax Clause of the Constitution because it was an unapportioned direct tax on their shares of KisanKraft stock. The District Court dismissed the suit, and the Ninth Circuit affirmed.The Supreme Court of the United States affirmed the Ninth Circuit's decision. The Court held that the MRT, which attributes the realized and undistributed income of an American-controlled foreign corporation to the entity’s American shareholders, and then taxes the American shareholders on their portions of that income, does not exceed Congress’s constitutional authority. The Court's decision was based on the broad power of Congress to lay and collect taxes, which includes direct taxes—those imposed on persons or property—and indirect taxes—those imposed on activities or transactions. The Court also noted that taxes on income are indirect taxes, and the Sixteenth Amendment confirms that taxes on income need not be apportioned. The Court's holding is narrow and limited to entities treated as pass-throughs. View "Moore v. United States" on Justia Law

The case involves Santa Fe Natural Tobacco Company (Santa Fe), a New Mexico corporation that sells branded tobacco products to wholesalers, who then sell to retailers in Oregon. The primary issue is whether a federal statutory limit on a state’s ability to impose income tax on out-of-state corporations, 15 USC section 381, precludes Oregon from taxing Santa Fe because its business in Oregon is limited. The Oregon Department of Revenue concluded that Santa Fe’s various actions in Oregon had taken it outside the safe harbor of Section 381, thus rendering Santa Fe liable to pay Oregon tax. The Tax Court agreed with the department that Santa Fe’s actions had made it subject to taxation in this state.The Tax Court agreed with the Oregon Department of Revenue that Santa Fe Natural Tobacco Company's actions in Oregon had made it subject to taxation in the state. The court found that Santa Fe's representatives had exceeded the scope of "solicitation of orders" when they obtained "prebook orders" from Oregon retailers. These orders, bolstered by incentive agreements with wholesalers, facilitated sales on behalf of wholesalers, who were effectively committed to accept those sales. This activity went beyond the protections of Section 381(a)(2), which limits a state's ability to impose income tax on out-of-state corporations whose in-state activities are limited to the solicitation of orders.The Supreme Court of the State of Oregon affirmed the judgment of the Tax Court. The court concluded that Santa Fe's pursuit of prebook orders in Oregon, invoking incentive agreement contractual provisions used by Santa Fe to ensure that wholesalers treated each one of those orders favorably, exceeded the scope of permitted "solicitation of orders" under Section 381(a)(2). The court further agreed that Santa Fe's activities were not de minimis. Accordingly, Santa Fe was subject to Oregon income tax. View "Santa Fe Natural Tobacco Co. v. Dept. of Rev." on Justia Law

The case involves two casino operators, PNK (Baton Rouge) Partnership, PNK Development 8 LLC, PNK Development 9 LLC, and Centroplex Centre Convention Hotel, LLC, who incentivize their patrons with rewards, including complimentary hotel stays. The City of Baton Rouge/Parish of East Baton Rouge Department of Finance and Linda Hunt, its director, discovered through an audit that the operators had not remitted state and local taxes associated with these complimentary stays for several years. The City argued that the operators needed to pay these taxes, while the operators presented various arguments as to why they did not. The City filed a lawsuit in state court, which the operators removed to federal court on diversity jurisdiction grounds.The operators' removal of the case to federal court was challenged by the City, which argued that the tax abstention doctrine (TAD) warranted abstention in this case. The United States District Court for the Middle District of Louisiana agreed with the City, finding that all five TAD factors favored abstention: Louisiana's wide regulatory latitude over its taxation structure, the lack of heightened federal court scrutiny required by the operators' due process rights invocation, the potential for the operators to seek an improved competitive position in the federal court system, the greater familiarity of Louisiana courts with the state's tax regime and legislative intent, and the constraints on remedies available in federal court due to the Tax Injunction Act.The United States Court of Appeals for the Fifth Circuit affirmed the District Court's decision. The Appeals Court found that the District Court had correctly applied the TAD and had not abused its discretion in deciding to abstain. The Appeals Court agreed that all five TAD factors favored abstention and that any doubt about the propriety of removal should be resolved in favor of remand. View "City of Baton Rouge v. PNK" on Justia Law

The case involves two casino operators, PNK (Baton Rouge) Partnership, PNK Development 8 LLC, PNK Development 9 LLC, and Centroplex Centre Convention Hotel, LLC, who incentivize their patrons with rewards, including complimentary hotel stays. The City of Baton Rouge/Parish of East Baton Rouge Department of Finance and its director, Linda Hunt, discovered that the operators had not remitted state and local taxes associated with these complimentary stays for several years. The City argued that the operators needed to pay these taxes, while the operators put forth various arguments as to why they did not. The City filed a suit in state court, which the operators removed to federal court on diversity jurisdiction.The operators' cases were initially heard in the United States District Court for the Middle District of Louisiana. The City filed a Motion to Remand, arguing that the tax abstention doctrine (TAD), as put forth in Levin v. Commerce Energy, Inc., warranted abstention. The District Court agreed with the City, stating that all five TAD factors favored abstention: Louisiana's wide regulatory latitude over its taxation structure, the lack of heightened federal court scrutiny required for the operators' due process rights under the Louisiana Constitution, the potential for the operators to seek an improved competitive position in the federal court system, the familiarity of Louisiana courts with the state's tax regime and legislative intent, and the constraints of the Tax Injunction Act on remedies available in federal court.The case was then reviewed by the United States Court of Appeals for the Fifth Circuit. The court affirmed the District Court's decision, agreeing that the TAD applied and that all five factors favored abstention. The court concluded that the District Court's decision to abstain was within its discretion. View "City of Baton Rouge v. Centroplex Centre Convention Hotel, LLC" on Justia Law

A limited-partnership subsidiary of Argent Financial Group, RSBCO, was required to file over 21,000 annual information returns with the IRS for the 2012 tax year. However, due to errors in the files, the returns were not processed on time. The IRS imposed penalties on RSBCO for the delay in filing processable 2012 returns. RSBCO paid the penalties and accrued interest in full and filed an administrative refund claim, asserting a reasonable cause defense. When the IRS failed to act on the claim within six months, RSBCO filed a complaint for a refund in federal district court.The district court denied the Government’s motions for judgment as a matter of law or a new trial. The court then granted RSBCO’s post-trial motion for attorney fees. The court determined that the Government could “not overcome the presumption that it was not substantially justified” in denying RSBCO’s refund claim “because [the IRS] did not follow its applicable published guidance[.]” The district court awarded fees at a rate exceeding the statutory rate provided in I.R.C. § 7430(c)(1)(B)(iii), finding that “special factors” were present.The United States Court of Appeals for the Fifth Circuit found that the jury instructions were irredeemably flawed, vacated the verdict, and remanded for a new trial. The court also vacated the attorney fees and costs awarded to RSBCO because RSBCO was no longer the prevailing party. The court found that the district court’s jury instruction as to “impediments” that would excuse RSBCO’s untimely filing of its 2012 information returns was fatally inconsistent with the governing Treasury Regulation. View "RSBCO v. United States" on Justia Law

The case revolves around the issue of whether reimbursements paid to a hotel for a loyalty program member’s complimentary stay constitute gross income for purposes of Arizona’s transaction privilege tax (TPT). The hotel in question, Dove Mountain, participates in the Marriott Rewards Program. As part of the program, Dove Mountain and other participating hotels fund the program's marketing efforts by paying a percentage of room revenues and providing rooms for complimentary stays to program members. When a member redeems points for a complimentary stay at Dove Mountain, Marriott Rewards issues a reimbursement payment to the hotel.The Arizona Department of Revenue (ADOR) denied Dove Mountain's request for a refund of TPT paid on certain reimbursements between 2012 and 2016. Dove Mountain appealed ADOR’s decision to the tax court, arguing that the reimbursements were part of a rewards program not subject to TPT. The tax court concluded that Dove Mountain was not eligible for a refund and entered judgment for ADOR. The court of appeals affirmed the tax court's decision, holding that the reimbursements fell within the statutory definitions of gross receipts and gross income and were subject to TPT.The Supreme Court of the State of Arizona affirmed the lower courts' decisions. The court held that the reimbursements paid by Marriott Rewards to Dove Mountain constitute gross income for TPT purposes. The court distinguished the case from a previous case, Consumers Market, which Dove Mountain argued was materially indistinguishable. The court found that the nature and operation of the Rewards Program undermined Dove Mountain’s effort to characterize its Points-earning transactions, subsequent redemptions, and Reimbursements as analogous to the “whole transaction” at issue in Consumers Market. The court concluded that Dove Mountain's various characterizations of Reimbursements as “post-tax” reserves, returns of capital, or bank deposits were not supported by the facts or the law. View "DOVE MOUNTAIN v ADOR" on Justia Law

The case involves a dispute over two years of Minnesota individual tax returns filed by Christopher and Nancy Wendell, residents of Wisconsin. In 2019 and 2020, the Wendells filed joint tax returns reporting no Minnesota taxable income, despite receiving over $1 million in payments from Minnesota sources. The Wendells claimed that the payments were not taxable wages or ordinary business income. The Commissioner of Revenue disagreed, modified the Wendells’ reported income, assessed additional income tax, and imposed a 25 percent penalty for filing a frivolous tax return. The Wendells appealed the Commissioner’s assessment, and the Minnesota Tax Court granted summary judgment in the Commissioner’s favor.The Minnesota Tax Court found that the Wendells’ tax liability was correctly calculated and adjusted, that no material facts were in dispute, and that the frivolous return penalty statute was constitutional. The Wendells then appealed to the Minnesota Supreme Court.The Minnesota Supreme Court affirmed the decision of the tax court. The court held that the Commissioner of Revenue had the authority to adjust the Wendells’ reported federal adjusted gross income, the tax court did not err in granting summary judgment in favor of the Commissioner, and the statutory penalty for filing a frivolous return is constitutional. The court rejected the Wendells' arguments that the penalty for filing a frivolous tax return was unconstitutional under the Due Process Clauses and Excessive Fines Clauses of the United States Constitution and Minnesota Constitution or the Equal Protection Clause of the United States Constitution. View "Wendell vs. Commissioner of Revenue" on Justia Law

The case revolves around J-W Power Company (J-W Power), a company that leases, sells, and services natural gas compressors used in oil and gas operations. The company maintains these compressors in many counties across Texas and often leases them to customers in neighboring counties. The case specifically involves the taxation of compressors maintained in Ector County that were leased to customers in Sterling and Irion Counties. J-W Power filed motions to correct the appraisal rolls under section 25.25(c) of the Tax Code, arguing that the appraisal rolls included “property that does not exist in the form or at the location described in the appraisal roll.” The Appraisal Review Boards (ARBs) in both counties denied the motions, leading to the current lawsuits.Previously, the district court granted summary judgment to the appraisal districts, arguing among other things that res judicata barred the section 25.25(c) motions because those motions involved the same subject matter as the prior Chapter 41 protests. The court of appeals affirmed this decision, holding that res judicata barred J-W Power’s section 25.25(c) motions, which raised “nearly verbatim” claims as compared to its prior Chapter 41 protests.However, the Supreme Court of Texas disagreed with the lower courts' decisions. The Supreme Court held that section 25.25(l) of the Tax Code preserved J-W Power’s right to file a section 25.25(c) motion notwithstanding its prior Chapter 41 protests. The court interpreted the phrase “regardless of whether” in section 25.25(l) to mean that a property owner can file a section 25.25(c) motion regardless of whether there was a prior Chapter 41 protest related to the value of the property. Therefore, the Supreme Court reversed the judgments of the court of appeals and remanded the cases for further proceedings. View "J-W POWER COMPANY v. IRION COUNTY APPRAISAL DISTRICT" on Justia Law