Justia Tax Law Opinion Summaries

The Supreme Court affirmed the judgments of the tax court declining to include a "concession fee" as rental income attributable to the properties in this case under the income-capitalization approach to property valuation, holding that the tax court did not err.At issue was Hennepin County's valuation of the respective properties owned by Enterprise Leasing Company of Minnesota and Avis Budget Car Rental, LLC at the Minneapolis-St. Paul International Airport. The tax court disagreed with Hennepin County's approach, decided not to include the concession fee as rental income, and estimated a market value in each case that was lower than the value that the County sought at trial. The Supreme Court affirmed in both cases, holding that the tax court did not clearly err in excluding the concession fee from rental income. View "Enterprise Leasing Co. of Minn. v. County of Hennepin" on Justia Law

Petitioner sent $10,263,750 to the United States Internal Revenue Service (“IRS”) as a “deposit” toward his expected gift tax liability. After an IRS audit examination and Petitioner’s tax deficiency proceeding in the Tax Court, Petitioner and the IRS settled the deficiency proceeding, stipulating that Petitioner owed a gift tax deficiency of $6,790,000 for 2011. The IRS applied the $10,263,750 to that 2011 deficiency and issued Petitioner a check for the balance of $3,473,750. The parties disputed the interest rate. The IRS used the interest rate for deposits, which is the federal short-term rate. Petitioner wanted the interest rate for overpayments, which is the federal short-term rate plus three percentage points. In the Tax Court, Petitioner filed a petition to reopen his case to redetermine interest. The Tax Court has jurisdiction to redetermine interest due to a taxpayer if the court previously found a remittance was an overpayment. So its jurisdiction turns on whether the Tax Court found that Petitioner made an overpayment of tax.   The Eleventh Circuit affirmed the Tax Court’s decision denying Petitioner’s motion to redetermine interest for lack of jurisdiction. The court concluded that there is no Tax Court finding that Petitioner made an overpayment of tax, and thus the Tax Court did not have jurisdiction over Petitioner’s post-judgment motion to redetermine interest. The court explained that, at most, the Tax Court was silent on whether Petitioner made an overpayment for the tax year 2011. The Tax Court’s silence cannot be, and is not, a finding of an overpayment for Section 6512(b)(1) jurisdictional purposes. View "Albert G. Hill, III v. Commissioner of Internal Revenue" on Justia Law

Tax assessors sometimes appraise commercial property using the income method: they forecast yearly income the property will yield and discount the future stream to present value. This method requires assessors to subtract income fairly ascribed to intangible assets, including those directly necessary to the productive use of the property. (Roehm v. Orange County (1948) 32 Cal.2d 280, 285 (Roehm); Elk Hills Power, LLC v. Board of Equalization (2013) 57 Cal.4th 593, 614–615, 617–619 (Elk Hills). Defendant County of Los Angeles assessed a hotel owned by the protesting taxpayer, Olympic and Georgia Partners, LLC (Olympic). The County’s assessor included income from three intangibles: a subsidy, a discount; and some hotel enterprise assets.The Second Appellate District reversed the portion of the judgment concerning the subsidy and the discount. Regarding the hotel enterprise assets, the court affirmed the trial court’s remand of the case to the County’s Assessment Appeals Board (Board) for re-evaluation. The court explained that Defendant violated the Roehm and Elk Hills rules. The court explained that the County argued there is no agreement the subsidy is an intangible asset. But the Board did find it was an intangible asset. The County does not argue the subsidy is something tangible you can touch. Accordingly, the court found that this argument is ineffective. View "Olympic and Georgia Partners, LLC v. County of Los Angeles" on Justia Law

Ahmed was President of Aspen Construction, which failed to pay the IRS federal income, Social Security, and Medicare taxes withheld from employees' wages, 26 U.S.C. 7501, 3102(a), 3402(a). Aspen owed more than $600,000 in withheld taxes. Without recourse against Aspen’s individual employees (who were credited with withheld taxes when their net wages were paid), the IRS shifted liability to Ahmed, 26 U.S.C. 6672. Whether Ahmed received notification of proposed penalties is unclear. The IRS assessed the penalties and later filed liens against Ahmed’s property to secure the penalties. Ahmed immediately sought a Collection Due Process review with the IRS Independent Office of Appeals.While Ahmed’s petition was pending, he sent the IRS $625,000, with instructions that it be treated as a “deposit” to freeze the running of interest on his disputed penalties. The IRS instead applied the money as a direct payment to the tax bill, thereby ending the matter. Without any remaining tax liability to dispute, the Tax Court dismissed Ahmed’s petition. The Third Circuit vacated. Ahmed’s petition was moot only if the IRS properly treated his remittance as a payment, which depends on whether he sent money to the IRS after it validly assessed his penalties. There is ambiguity in the record on that issue. View "Ahmed v. Commissioner of Internal Revenue" on Justia Law

The Supreme Court quashed the decision of the Second District Court of Appeal affirming the judgment of the circuit court in favor of Landlord in this action he brought seeking a refund of the amount he paid after a property appraiser determined that he had improperly received a homestead tax exemption, holding that Landlord's arguments in support of the district court's decision were unpersuasive.At issue in this case was how to determine the scope of Landlord's residence for purpose of the homestead tax exemption. Landlord lived on the bottom floor, and during the entire time period in question Landlord rented a portion of the structure to at least one tenant. When the county property appraiser concluded that at least fifteen percent of the property was not being used as Landlord's residence and thus revoked the homestead exemption as to fifteen percent of the total property. After he paid $7,000 in back taxes, penalties, and interest Landlord brought this action. The circuit court granted judgment for Landlord, and the court of appeal affirmed. The Supreme Court quashed the decision below, holding that the district court erred by concluding that, for purposes of applying the homestead tax exemption, the entire structure was Landlord's residence. View "Furst v. Rebholz" on Justia Law

An Ohio tax lien on real property is enforced through a foreclosure action, which may result in a sale of the property at auction. If such a sale occurs and the price exceeds the amount of the lien, the excess funds may go to junior lienholders or the owner. If the tax-delinquent property is abandoned, an auction may not be required; the property may be transferred directly to a land bank, free of liens. When that happens, the county gives up its right to collect the tax debt, and any junior lienholders and the owner get nothing. The properties at issue were transferred directly to county land banks. US Bank owned one foreclosed property and claims to have held mortgages on the other two. US Bank alleges that at the time of the transfers, the fair market value of each property was greater than the associated tax lien and that the transfers to the land banks constituted takings without just compensation.The Supreme Court of Ohio affirmed the dismissals of the suits. US Bank lacks standing in one case; it did not hold the mortgage at the time of the alleged taking. As to the other properties, US Bank had adequate remedies in the ordinary course of the law. It could have redeemed the properties by paying the taxes; it could have sought transfers of the foreclosure actions from the boards of revision to the common pleas courts; it could have appealed the foreclosure adjudications to those courts. View "US Bank Trust, National Association v. Cuyahoga County" on Justia Law

In 2005-2013, Nocito, president and CEO of AHS, characterized his personal expenses as deductible AHS business expenses and “shuffled” AHS’s untaxed profits between shell companies he owned that “performed no significant business purpose.” In 2013, Sundo, AHS’s secretary and CFO, provided documents to government investigators under a cooperation agreement, including Exhibit J, later determined by the court to be a privileged document in which Sundo conveyed legal advice to Nocito.After his indictment for tax fraud (18 U.S.C. 371), Nocito moved for pre-trial discovery of all the documents provided by Sundo to support a possible motion to suppress based on government misconduct. The court denied the motion, concluding that Exhibit J did not offer a “colorable basis” for his governmental misconduct claim. A subsequent motion to intervene, brought by the shell companies, attached a Federal Rule 41(g) motion for the return of property, in an attempt to prevent the government from using Exhibit J in future proceedings.The court permitted the companies to intervene but denied their Rule 41(g) motion. It found the Intervenors—even assuming they could establish Exhibit J’s privilege was “a property interest” of which they were deprived—were attempting to use Rule 41(g) improperly to suppress Exhibit J from the evidence against Nocito. The Third Circuit dismissed an appeal for lack of jurisdiction. The Rule 41(g) motion was part of an ongoing criminal process; its denial did not constitute a final order. View "United States v. Nocito" on Justia Law

Defendant was found guilty by a jury on a three-count indictment charging him with failure to file a tax return and tax evasion for personal returns in 2014 and 2015. After considering and denying Defendant’s post-trial motions for a new trial and acquittal, the district court sentenced Defendant to 36 months imprisonment and ordered him to pay over $350,000 in restitution. Defendant appealed, arguing that the district court abused its discretion when it (1) allowed for the expert testimony of the Special Agent (SA), (2) denied Defendant’s motions for a new trial and acquittal, and (3) ruled for the government on a Jencks Act issue.   The Eighth Circuit affirmed. The court found that here, the SA did not directly testify to Defendant’s mental state but rather to the modus operandi of tax evasion criminals. Therefore, the district court did not abuse its discretion by admitting the SA’s expert testimony. Further, the court found that had the SA testified about specific cases that he had worked on in the past, these statements may have been related. But the general testimony given by the SA describing common types of tax evasion does not trigger Jencks Act disclosure of all statements from prior investigations related generally to tax evasion. Finally, the court explained that regardless of whether the government was required to prove that UAD was a C corporation or “a corporation not expressly exempt from tax,” the court held that the evidence was sufficient for a jury to convict on the indictment. View "United States v. Gary Primm, Jr." on Justia Law

In 2018, the California Legislature passed a law titled the “Keep Groceries Affordable Act of 2018” (the Groceries Act). The Act sought prohibit charter cities, counties, and other local governments from imposing taxes, fees, or assessments on certain grocery items, including, most relevant here, on sodas and other sugar-sweetened drinks. The act also imposes a penalty—the loss of all revenue from sales and use taxes—for violations of its terms. But it imposes its penalty only on charter cities and only if the city’s “tax, fee, or other assessment is a valid exercise of [the] city’s authority under Section 5 of Article XI of the California Constitution with respect to the municipal affairs of that city.” A nonprofit health advocacy organization and a city council member appearing in her individual capacity filed suit to challenge the act’s penalty provision, arguing the provision wrongly served to penalize charter cities that lawfully exercised their constitutional rights under the home rule doctrine. The trial court ultimately agreed the Groceries Act’s penalty provision was unlawful and deemed it unenforceable. On appeal, the State of California, the California Department of Tax and Fee Administration, and the department’s director (collectively, the Department) challenged the trial court’s decision, arguing: (1) the Groceries Act’s penalty provision did not penalize a charter city only when its tax on groceries “is a valid exercise” of the city’s constitutional powers; and (2) even if the trial court properly construed the act’s penalty provision, the trial court should have severed certain words from the penalty provision rather than deem the provision unenforceable in its entirety. Finding no reversible error in the trial court's judgment, the Court of Appeal affirmed. View "Cultiva La Salud v. State of California" on Justia Law

The San Francisco Giants Ballpark sits on public land that the Taxpayer leases. The Taxpayer appealed Assessor’s valuations. In 2006, the parties applied the cost method and reached a settlement for tax years 2001–2010, approved by the County Board. When the Taxpayer appealed the valuation for tax years 2011–2014, the Board applied both the income and cost approaches, found neither approach “completely persuasive,” and reached a final conclusion between the two values. Neither party sought judicial review. The Taxpayer later appealed the determination of value for the 2015–2017 tax years. The Board accepted the parties’ stipulation to use the cost approach but “retained the right to seek additional information." The Board made findings as to the land value, replacement cost, and physical deterioration, then deducted the cost of the substantial capital expenditures that it believed would be necessary to prevent future functional obsolescence, $180 million for each tax year.The court of appeal directed a remand to the Board. Although the Board has substantial latitude, the deduction for functional obsolescence was impermissible. To the extent the Board continues to consider the cost of funding a reserve to prevent future functional obsolescence, it must do so by a means reasonably calculated to approximate the fair market value of the Taxpayer’s property interest. The method used failed to do that. View "Torres v. San Francisco Assessment Appeals Board No. 1" on Justia Law