Justia Tax Law Opinion Summaries

Petitioners challenged he post-trial rulings of the United States Tax Court regarding their tax obligations for the 2004 tax year. Petitioners argued that the Tax Court erroneously concluded that (1) they filed a valid joint return, (2) the Internal Revenue Service issued a statutory notice of deficiency before the limitations period for a tax assessment under I.R.C. Sections 6501(a) and (c)(4) expired, (3) they owed a $28,836 penalty pursuant to I.R.C. Section 6651(a)(1) for filing a late tax return, and (4) they owed a $128,526 penalty pursuant to I.R.C. Section 6662 for filing an inaccurate tax return.   The Second Circuit affirmed. The court held that the Tax Court did not clearly err in its finding that Petitioners intended to jointly file the Return. Further, the court wrote that the IRS issued the Deficiency Notice within the limitations period for the tax assessment. Moreover, the court held that Petitioners are subject to a $28,836 late-filing penalty under I.R.C. Section 6651(a)(1). Finally, the court held that Petitioners are subject to a $128,526 accuracy-related penalty under I.R.C. Section 6662. View "Soni v. Comm'r of Internal Revenue" on Justia Law

School districts may levy “qualified special taxes,” Government Code section 50079, with the approval of two-thirds of district voters. A qualified special tax must “apply uniformly to all taxpayers or all real property within the school district” (with some statutory exemptions) and not be “imposed on a particular class of property or taxpayers.” Measure A, approved in 2020 by voters in the Alameda Unified School District, authorizes a tax on improved parcels at “the rate of $0.265 per building square foot not to exceed $7,999 per parcel.” In Traiman’s action challenging Measure A, the trial court ruled that the tax was not applied uniformly and invalidated the tax. The court awarded Traiman $374,960 in attorney fees (Code of Civil Procedure section 1021.5).The court of appeal reversed. Measure A tax applies uniformly within the meaning of section 50079 because every nonexempt taxpayer and every improved parcel in the District is taxed using the same formula. Neither the language of the statute, case law, legislative history, nor public policy indicates that a school district cannot base a qualified special tax on building square footage with a maximum tax per parcel. View "Traiman v. Alameda Unified School District" on Justia Law

The Supreme Court affirmed in part and reversed in part the judgment of the Ohio Board of Tax Appeals (BTA) that some of Taxpayer's equipment used in fracking was subject to Ohio's sales and use tax, holding most of the equipment at issue was exempt from taxation.While Ohio law generally exempts from taxation equipment used direction in oil and gas production not everything in the production of oil and gas qualifies for the exemption. After Taxpayer purchased equipment for use in its fracking operations the tax commissioner issued use-tax assessments, one for each piece of equipment. The commissioner then canceled about half the assessments. The BTA affirmed. The Supreme Court reversed in part, holding that equipment consisting of blenders, hydration units, chemical-additive units, t-belts, and sand kings are tax exempt. View "Stingray Pressure Washing, L.L.C. v. Harris" on Justia Law

Vectren Infrastructure Services Corporation, the successor in interest to Minnesota Limited, Inc. (ML), sued the Department of Treasury (the Department) in the Michigan Court of Claims, alleging that the Department had improperly assessed a tax deficiency against ML after auditing ML’s Michigan Business Tax returns for 2010 and part of 2011. Following an audit, the Department determined that ML had improperly included its gain from a sale of its assets in the sales-factor denominator, resulting in an overstatement of its total sales and the reduction of its Michigan tax liability. The auditor excluded ML’s sale of assets from the sales factor and included it in ML’s preapportioned tax base, which increased ML’s sales factor from 14.9860% to 69.9761% and consequently increased its tax liability. ML asked the Department for an alternative apportionment for the period in 2011 before the sale, January 1, 2011 to March 31, 2011 (the short year), but the Department denied ML’s request and determined that ML had not overcome the presumption that the statutory apportionment fairly represented ML’s business activity in Michigan for the short year. The Court of Appeals ultimately held the Court of Claims had correctly analyzed the relevant statutes and applied the apportionment formula; however, the Court of Appeals concluded that Vectren was entitled to an alternative apportionment because applying the formula extended Michigan’s taxing powers beyond their acceptable scope, and ordered the parties to work together to determine an alternative method of apportionment. The Michigan Supreme Court held: (1) the income from the asset sale was properly attributable under the MBTA; and (2) the MBTA formula, as applied, did not impermissibly tax income outside the scope of Michigan’s taxing powers. The Court reversed the Court of Appeals and remanded this case to the Court of Claims for further proceedings. View "Vectren Infrastructure Services Corp v. Department Of Treasury" on Justia Law

From 2014-2018, the Affordable Care Act’s individual mandate instructed most Americans to purchase health insurance, 26 U.S.C. 5000A(a) Juntoff opted not to buy the minimum health insurance and failed to make his Shared Responsibility Payment of 2.5% of the taxpayer’s income, subject to a floor and a ceiling. After he declared bankruptcy, the IRS tried to collect the Payment from him and filed a proof of claim in bankruptcy court. The agency asked for priority above other debtors under a provision that covers bankruptcy “claims” by “governmental units” for any “tax on or measured by income,” 11 U.S.C. 507(a)(8)(A). The bankruptcy court denied the request, reasoning that the Shared Responsibility Payment was not a “tax on or measured by income” but was a penalty. The Bankruptcy Appellate Panel reversed.The Sixth Circuit ruled in favor of the government. The Shared Responsibility Payment is a “tax” under section 507(a)(8) and is “measured by income.” View "In re: Juntoff" on Justia Law

Mylan regularly submitted abbreviated new drug applications (ANDAs) to the FDA, often including Paragraph IV certifications stating that the proposed generic drug at issue would not infringe valid patents. Mylan incurred tens of millions of dollars in legal fees defending itself in about 120 patent infringement suits, 35 U.S.C. 271(e)(2). Mylan incurred additional, much lower legal fees in preparing the notice letters associated with the Paragraph IV certifications. Mylan's fees were $46,158,403, $38,211,911, and $38,618,993 during 2012, 2013, and 2014, respectively, for preparing notice letters and litigating the ANDA suits. In tax filings, Mylan deducted those amounts in the years incurred. The IRS responded that Mylan could not deduct the nearly $130 million of legal expenses incurred from 2012-2014 and that its additional tax liability was about $50 million.The Tax Court considered expert testimony regarding internal FDA processes and the typical course of dealing between an ANDA applicant and the FDA during the submission process for an ANDA with a paragraph IV certification and held that the legal expenses Mylan incurred to prepare notice letters were required to be capitalized because they were necessary to obtain FDA approval of its generic drugs. The Third Circuit affirmed its holding that the legal expenses incurred to defend patent infringement suits were deductible as ordinary and necessary business expenses because the patent litigation was distinct from the FDA approval process. View "Mylan Inc v. Commissioner of Internal Revenue" on Justia Law

Petitioners challenged the post-trial rulings of the United States Tax Court regarding their tax obligations for the 2004 tax year. Petitioners argued that the Tax Court erroneously concluded that (1) they filed a valid joint return, (2) the Internal Revenue Service issued a statutory notice of deficiency before the limitations period for a tax assessment under I.R.C. Sections 6501(a) and (c)(4) expired, (3) they owed a $28,836 penalty pursuant to I.R.C. Section 6651(a)(1) for filing a late tax return, and (4) they owed a $128,526 penalty pursuant to I.R.C. Section 6662 for filing an inaccurate tax return.   The Second Circuit affirmed. The court held that the Tax Court did not clearly err in its finding that Petitioners intended to jointly file the Return. Further, the court concluded that the IRS issued the Deficiency Notice within the limitations period for the tax assessment. The court held that Petitioners are subject to a $28,836 late-filing penalty under I.R.C. Section 6651(a)(1). Finally, the court held that Petitioners are subject to a $128,526 accuracy-related penalty under I.R.C. Section 6662. The court explained that Petitioner’s inaccuracy was not the product of reasonable reliance upon the advice of a tax professional. As the Tax Court also found, Petitioners failed to provide their accountants “necessary and accurate information.” Moreover, the record includes evidence that Petitioner disregarded the advice of accountants who warned him that he would need proof to substantiate the claimed loss. View "Soni v. Comm'r of Internal Revenue" on Justia Law

Show Me State Premium Homes wants its purchase of a foreclosed property to be free and clear of all other interests, including those belonging to the United States. Getting what it wants would require a “judicial sale.” After removing the case the United States filed a motion to dismiss. Its position was that there could be no foreclosure without a judicial sale. The district court agreed, declined to exercise supplemental jurisdiction over what remained, and remanded to state court.   The Eighth Circuit affirmed the judgment of the district court but modified the dismissal of the ejectment and damages claims to be without prejudice. The court explained that a buyer’s interest is only “inchoate” before it gets a valid deed, not after. And here, title vested once the bond company “exercised its right to have the legal title transferred.” No “judicial sale” ever took place, and it is too late to hold one now, meaning that the interests held by the United States have never been foreclosed. View "Show Me State Premium Homes, LLC v. George McDonnell" on Justia Law

The Culps each received $8,826.30 to settle a lawsuit and reported their payments as “Other income,” “PRIZES, AWARDS” in their 2015 tax return. In 2017 the IRS proposed to increase their taxes owed for 2015 to reflect a perceived underpayment, giving the Culps 30 days to respond and stating it would send a notice of deficiency if they failed to do so. The Culps did not respond. The IRS mailed a notice of deficiency, informing the Culps of their right to file a petition in the Tax Court within 90 days. In May 2018, the IRS sent the Culps another letter stating they owed only $2,087 in 2015 taxes, penalties, and interest—less than the amount previously assessed. Again they failed to respond. The IRS levied on their property, collecting approximately $1,800 from the Culps’ Social Security payments and 2018 tax refund.The Culps filed a petition in the Tax Court, which dismissed their petition for lack of jurisdiction, reasoning its “jurisdiction depends upon the issuance of a valid notice of deficiency and the timely filing of a petition,” 26 U.S.C. 6212, 6213, 6214. It found the petition untimely because the Culps did not file it within 90 days of the date the IRS sent the second notice of deficiency. The Third Circuit reversed. Congress did not clearly state that section 6213(a)’s deadline is jurisdictional; non-jurisdictional time limits are presumptively subject to equitable tolling. That presumption was not rebutted. View "Culp v. Commissioner of Internal Revenue" on Justia Law

The Supreme Court quashed the order of the district court granting the motion to dismiss filed by the State of Rhode Island, acting by and through the Division of Taxation (Division), in this appeal stemming from a series of transactions for the purchase and sale of gasoline, holding that the district court erred in granting the Division's motion to dismiss based on Plaintiff's failure to exhaust its administrative remedies.The tax at issue was levied on a transaction between Plaintiff and another party and was the subject of several transactions between various entities. Plaintiff reimbursed a third-party for the tax assessed on the sale of 300,000 barrels of gasoline and then initiated this action alleging constitutional violations and violations of the Motor Fuel Tax. The trial judge dismissed the case for Plaintiff's failure to exhaust administrative remedies. The Supreme Court reversed, holding that the trial judge erroneously dismissed the action based on Plaintiff's failure to exhaust its administrative remedies. View "Gunvor USA, LLC v. State, ex rel. Division of Taxation" on Justia Law