Justia Tax Law Opinion Summaries

The First Circuit affirmed the judgment of the tax court sustaining a notice of deficiency issued by the Internal Revenue Services (IRS) to TBL Licensing LLC for the 2011 tax year, holding that the Tax Commissioner properly determined that TBL's transfer of its intangible property was followed by a disposition of that property, requiring TBL to pay the tax due in a lump sum.In 2011, TBL transferred the intangible property at issue, which was worth approximately $1.5 billion, to an affiliated foreign corporation. TBL argued that the tax attributable to the transfer, which occurred in the context of a corporate reorganization involving an exchange as described in section 26 U.S.C. 361, could be paid on an annual basis by one of TBL's affiliates. The IRS disagreed and assessed a deficiency based on its position that TBL was required to pay tax on the entire gain and to do so in its 2011 tax return. The First Circuit affirmed, holding that there was nothing in 26 U.S.C. 367(d) that would absolve TBL of its responsibility under the disposition-payment rule. View "TBL Licensing LLC v. Werfel" on Justia Law

Freed fell behind approximately $1,100 on his property taxes. Thomas, Gratiot County’s treasurer, foreclosed on Freed’s property and sold it at a public auction for $42,000. The County retained the entire proceeds. Freed sued the County and Thomas under 42 U.S.C. 1983, alleging an unconstitutional taking under the Fifth and Fourteenth Amendments and an unconstitutional excessive fine under the Eighth Amendment.Following a remand, the district court granted Freed summary judgment on his Fifth Amendment claim, rejecting Freed’s argument that he was entitled to the fair market value of his property, minus his debt, and holding that Freed was owed just compensation in the amount of the difference between the foreclosure sale and his debt, plus interest from the date of the foreclosure sale. Freed was owed about $40,900 plus interest, $56,800 less than he was seeking. The court also held that Freed’s claims against Thomas were barred by qualified immunity and denied Freed’s subsequent motion for attorney’s fees. The Sixth Circuit affirmed. Following a public sale, a debtor is entitled to any surplus proceeds from the sale, which represent the value of the equitable title extinguished. Thomas did not violate a right that was clearly established at the time of her alleged misconduct. View "Freed v. Thomas" on Justia Law

The Supreme Court reversed the order of the district court in this tax appeal, holding that the district court erred by concluding that Mont. Code Ann. 15-30-2119, the NOL statute, operates as a dollar-for-dollar offset provision that indirectly taxes out-of-state income.At issue was the decision of the Department of Revenue to deny nonresident taxpayers Franklin and Janet Tiegs a carryover net operating loss (NOL) deduction on their 2014 and 2015 Montana income tax returns. The Montana Tax Appeal Board upheld the Department's decision, but the district court reversed, concluding that Mont. Code Ann. 15-30-2119 was unconstitutional because it authorized taxation of non-Montana income. The Supreme Court reversed, holding that the district court (1) erred by holding that the general use of out-of-state income within the Montana income tax framework violated Mont. Code Ann. 15-30-2102 and federal constitutional principles; and (2) erred by concluding that section 15-30-2119 constitutes impermissible taxation of income outside of Montana's jurisdictional reach. View "Tiegs v. State, Dep't of Revenue" on Justia Law

The Supreme Court reversed the judgment of the court of appeals affirming the order of the trial court dismissing Duncan House Charitable Corporation's application for a charitable organization exemption, holding that the court of appeals erred in concluding that Duncan's failure to timely apply for later exemption precluded it from receiving that exemption even if it ultimately qualified for an earlier exemption.For the 2017 tax year, Duncan applied for a charitable tax exemption covering its fifty percent ownership interest in a Houston historic home. The appraisal district denied the exemption, and the review board denied Duncan's ensuing protest. Duncan filed for judicial review. Thereafter, although Duncan House never applied for the charitable exemption for the 2018 tax year, it protested the district's 2018 appraisal on the grounds that the district court to apply the charitable exemption. The review board denied the protest. Duncan then amended its trial court petition to challenge the denial of the 2018 exemption. The trial court dismissed the 2018 claim for want of jurisdiction, and the court of appeals affirmed. The Supreme Court reversed, holding that the court of appeals erred in holding that Duncan's failure to timely apply for the 2018 exemption precluded it from receiving that exemption even if it ultimately qualified for the 2017 exemption. View "Duncan House Charitable Corp. v. Harris County Appraisal District" on Justia Law

Defendants appealed from a judgment of the district court awarding the United States $112,324.18, plus statutory additions and interest, in connection with an unpaid tax assessment from 2007. The district court granted summary judgment in favor of the government, notwithstanding the fact that the Internal Revenue Service (the “IRS”) referred the assessment to the Department of Justice (the “DOJ”) before formally rejecting Defendants’ proposed installment agreement. Defendants contended that this referral violated the provisions of the Internal Revenue Code and the implementing Treasury Regulations that curb the IRS’s collection activities while a proposed installment agreement remains on the table.   The Second Circuit affirmed. The court explained that as their plain terms indicate, the suspension provisions of Section 6331(i) and (k) prohibit the commencement of a collection action in court during specified periods, not the IRS’s antecedent request that the DOJ file such an action. The court wrote that the Internal Revenue Code is silent on when the IRS may refer an action to the DOJ, and a Treasury Regulation that limits the IRS’s referral power cannot read into the statute something that is not there. Further, this conclusion is not altered because authorization from the Treasury Secretary is a prerequisite to commencing an in-court proceeding.   Further, the court explained that Defendants have not claimed a violation of their constitutional rights and the regulatory limits on IRS referrals of collection actions are not statutorily derived. As a result, Defendants must demonstrate prejudice for the government’s regulatory violation to invalidate the instant collection action. The court found that Defendants have failed to do so. View "United States v. Schiller" on Justia Law

The Supreme Court affirmed the decision of the Board of Equalization upholding the final determinations of the Department of Revenue (DOR) increasing the taxable value of Jonah Energy LLC's natural gas liquids (NGL) production for 2014 through 2016, holding that Jonah was not entitled to relief on its allegations of error.On appeal, Jonah argued that the Board misinterpreted the NGL purchase agreement between Jonah and the purchaser of its NGL, Enterprise Products Operating LLC, by refusing to account for deficiency fees Jonah paid to Enterprise in determining the NGL's taxable value. The Supreme Court affirmed, holding (1) the Board did not misinterpret the NGL purchase agreement at issue; and (2) the Board did not err by failing to take the facts and circumstances surrounding execution of the purchase agreement into account when interpreting it because there was no basis for losing outside the four corners of the purchase agreement to determine its meaning. View "Jonah Energy LLC v. Wyo. Dep't of Revenue" on Justia Law

The Supreme Court affirmed the decision of the Board of Tax Appeals upholding the final determination by the tax commissioner assessing a use tax against Appellant, holding that the Board did not err in upholding that tax commissioner's final determination.The challenged assessment in this action related to items used in the construction of a data center that Appellant contracted to have built. The Supreme Court affirmed the Board's decision upholding the use tax assessed against Appellant, holding (1) Appellant failed to cite to any authority to support its argument that it was not liable for the use tax because a contractor had already paid it on the items in question; (2) Appellant forfeited the arguments under its third and fourth positions of law; and (3) Appellant's first and second propositions of law were moot. View "PCM, Inc. v. Harris" on Justia Law

The Supreme Court affirmed in part and vacated in part the decision of the tax court that the taxable 2018 market value of a DoubleTree in Bloomington was $25,500,000, an amount that exceeded the valuations offered by the DoubleTree's owner and the County of Hennepin, holding that remand was required on a single issue.The County initially assessed the value of the DoubleTree property at $31,586,400, but Relator, the DoubleTree's owner, appealed the valuation to the tax court. After a trial, the tax court determined that the taxable 2018 market value of the DoubleTree was $25,500,000. The Supreme Court vacated the judgment in part and otherwise affirmed, holding that remand was required for the tax court to revisit and explain its adoption of the percentage reduction to the sales price of one of the hotels it used in its sales comparison analysis to account for non-taxable assets included in the sales price of comparator hotels. View "Bloomington Hotel Investors, LLC v. County of Hennepin" on Justia Law

Jarrett produces Tezos tokens cryptocurrency by “staking.” Jarrett claims staking uses existing Tezos tokens and computing power to produce new tokens, so he owes tax on the tokens only when he sells or transfers them and “realizes” income, 26 U.S.C. 61(a). The IRS's position was that Jarrett realized income when he received each token. Jarrett’s 2019 staking yielded 8,876 Tezos tokens; he “did not sell, exchange, or otherwise dispose of these tokens during 2019.” He reported those tokens as income and paid tax, then asked the IRS for a refund ($3,793). After six months, Jarrett filed a refund lawsuit, 28 U.S.C. 1346(a)(1), seeking a judgment that Jarrett was entitled to a refund; costs and attorney’s fees; and an injunction preventing the IRS “from treating tokens created by the Jarretts as income.”The Attorney General approved Jarrett’s refund request. The IRS issued a $4,001.83 refund check and a “Notice of Adjustment.” Preferring to litigate the case to judgment, Jarrett has “not cashed, and [does] not intend to cash, this check.” The district court dismissed the case as moot. The Sixth Circuit affirmed. Refund lawsuits exist for a single purpose: “the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected.” The IRS satisfies its repayment obligation when it issues and mails a refund check for the full amount of the overpayment. View "Jarrett v. United States" on Justia Law

The Westin St. Francis, in Union Square, is San Francisco’s third largest hotel. In return for a base management fee and an incentive fee, the Company manages and maintains the hotel, handles personnel and employment matters, provides advertising and promotional services, and provides all computer services, including reservations. In addition to renting its rooms, the Westin receives income from guest cancellations, no-shows, and attrition. The hotel also profits from in-room movies and guest laundry services provided by third parties. In 2015, BRE purchased Strategic, the owner of the Westin St. Francis and other hotels, triggering a reassessment. The Assessor assessed the hotel’s value at approximately $785 million. Strategic sought a refund. The trial court upheld the Board’s determination.The court of appeal held that the method used by the city to exclude the value of nontaxable, intangible assets from the assessed value of the hotel—i.e., the deduction of fees or expenses associated with the asset from the hotel’s future income stream—is legally incorrect. As a result, the assessed value of the hotel improperly subsumed the value of the management agreement, in-room movies, and guest laundry services. However, the assessed value properly included the cancellation/no-show/attrition income because that asset is a taxable attribute of the property. The court remanded for a redetermination of the taxable value of the hotel. View "SHR St. Francis, LLC v. City and County of San Francisco" on Justia Law