Justia Tax Law Opinion Summaries

The case concerns the method by which county tax assessors in Georgia determine the fair market value of properties that qualify for federal low-income housing tax credits under Section 42 of the Internal Revenue Code. The property owner, who operates a Section 42 affordable housing complex, challenged the county’s assessment of the property’s value for tax purposes. The dispute centers on whether tax assessors may use the “income approach”—a method that estimates value based on projected income streams—when valuing such properties, given statutory limitations on how Section 42 tax credits may be considered as income.After the county tax assessors issued a notice valuing the property, the owner appealed to the Superior Court of Lowndes County. The assessors moved for partial summary judgment, arguing that, under existing precedent, the income approach could not be used because Section 42 tax credits do not generate “actual income” for the property owner. The trial court agreed and granted summary judgment on this issue. The Georgia Court of Appeals affirmed, relying on its prior decision in Freedom Heights, LP v. Lowndes County Board of Tax Assessors, which interpreted both the relevant statute and Supreme Court of Georgia precedent as prohibiting use of the income approach under these circumstances.The Supreme Court of Georgia reviewed the case to clarify the proper interpretation of the statute and its own precedent. The court held that tax assessors are permitted to use the income approach to determine the fair market value of Section 42 properties, even though Section 42 tax credits, as currently structured, may not be treated as “income” under that approach. The court overruled the contrary holding in Freedom Heights, reversed the judgment of the Court of Appeals, and remanded the case for further proceedings. View "GATEWAY PINES HAHIRA, LP v. LOWNDES COUNTY BOARD OF TAX ASSESSORS" on Justia Law

The petitioner, a taxpayer, received a notice of deficiency from the Internal Revenue Service (IRS) regarding her 2022 tax return. The IRS determined that she was not entitled to certain tax credits and imposed penalties. The notice, dated May 30, 2023, was sent to her former address, and she did not become aware of it until after the deadline to contest the deficiency had passed. She filed a petition for redetermination with the United States Tax Court on November 1, 2023, well after the ninety-day deadline specified in the Internal Revenue Code. In her petition, she argued that she was entitled to the disputed credits and status, and requested equitable tolling of the filing deadline due to her lack of timely notice.The United States Tax Court dismissed her petition for lack of jurisdiction, holding that the ninety-day deadline in I.R.C. § 6213(a) was a strict jurisdictional requirement that could not be extended or tolled, regardless of the circumstances. The court relied on prior Sixth Circuit precedent that had characterized the deadline as jurisdictional and rejected the petitioner’s arguments for equitable tolling.On appeal, the United States Court of Appeals for the Sixth Circuit reviewed the Tax Court’s dismissal de novo. The Sixth Circuit held that, in light of recent Supreme Court guidance, the ninety-day deadline in § 6213(a) is not a jurisdictional rule but rather a nonjurisdictional claims-processing rule. As such, it is presumptively subject to equitable tolling. The court reversed the Tax Court’s dismissal and remanded the case for the Tax Court to consider, in the first instance, whether the petitioner is entitled to equitable tolling of the filing deadline based on the specific facts of her case. View "Oquendo v. Comm'r of Internal Revenue" on Justia Law

Philip Morris USA, Inc., a Virginia-based corporation doing business in North Carolina, was assessed additional franchise taxes by the North Carolina Department of Revenue for tax years 2012–2014. The Department determined that Philip Morris had improperly deducted certain debts from its capital base, as the debtor corporations were not subject to North Carolina’s franchise tax, contrary to the requirements of the relevant statute. After exhausting administrative remedies, Philip Morris petitioned the Office of Administrative Hearings (OAH) for a contested case hearing, arguing that the statute, as applied to it, violated the dormant Commerce Clause of the U.S. Constitution.An administrative law judge (ALJ) at the OAH rejected the Department’s argument that the OAH lacked subject matter jurisdiction over Philip Morris’s constitutional claim and granted summary judgment in favor of Philip Morris, finding the statute unconstitutional as applied. The Department sought judicial review, and the case was assigned to the North Carolina Business Court. The Business Court reversed the ALJ’s decision, holding that the OAH lacked subject matter jurisdiction over as-applied constitutional challenges to tax statutes, reasoning that such challenges must be heard by the judiciary, not administrative agencies, and that the relevant statutes did not confer such jurisdiction on the OAH.The Supreme Court of North Carolina reviewed the Business Court’s decision de novo. The Court held that N.C.G.S. § 105-241.17 does not grant the OAH subject matter jurisdiction over as-applied constitutional challenges to tax statutes. The Court reasoned that the power to rule on the constitutionality of statutes is reserved for the judiciary, and the statute’s language and legislative intent did not clearly confer such authority on the OAH. The Supreme Court of North Carolina affirmed the Business Court’s order reversing the OAH’s decision and remanding the case for dismissal. View "Dep't of Revenue v. Philip Morris USA, Inc." on Justia Law

Liberty Global, a U.S. corporation, sold its controlling interest in a Japanese company for approximately $3.9 billion, realizing a gain of $3.2 billion. On its 2010 tax return, Liberty Global characterized $438 million of the gain as a foreign-source dividend and $2.8 billion as foreign-source capital gain. Of the capital gain, $474 million was re-sourced to the United States to recapture prior overall foreign losses, while the remaining $2.3 billion was treated as foreign-source capital gain, making Liberty Global eligible for a $240 million foreign tax credit.The Commissioner of Internal Revenue issued a notice of deficiency, asserting that the $2.3 billion in excess of the overall foreign loss account was U.S.-sourced, not foreign-sourced, and therefore Liberty Global was not entitled to the claimed tax credit. Liberty Global challenged this determination in the United States Tax Court, which reviewed the case on a stipulated record. The Tax Court agreed with the Commissioner, holding that only the portion of gain equal to the overall foreign loss balance could be treated as foreign-sourced under Internal Revenue Code § 904(f)(3), and the excess gain was U.S.-sourced.On appeal, the United States Court of Appeals for the Tenth Circuit reviewed the Tax Court’s decision de novo. The Tenth Circuit held that under the plain language of the Tax Code, specifically § 904(f)(3)(A)(i), only the lesser of the gain from the sale or the remaining overall foreign loss balance is treated as foreign-sourced income. The excess gain above the overall foreign loss balance is U.S.-sourced under § 865(a). The court rejected Liberty Global’s arguments based on statutory interpretation and Treasury regulations, affirming the Tax Court’s judgment and denying Liberty Global’s claim to the $240 million foreign tax credit. View "Liberty Global v. CIR" on Justia Law

A Virginia-based company provided tax debt relief services to clients in Idaho, assisting them in negotiating settlements or payment plans for tax debts owed to the IRS and the State of Idaho. The company did not offer services for other types of debt and employed IRS-enrolled agents to represent clients in administrative tax proceedings. Despite conducting substantial business in Idaho, the company did not register as a corporation in the state or obtain a license under the Idaho Collection Agency Act (ICAA). After receiving multiple complaints from Idaho residents about the company’s practices, the Idaho Department of Finance investigated and determined that the company was operating as a “debt counselor” under the ICAA and required a license.The Department initiated an administrative enforcement action, resulting in a hearing officer’s order imposing civil penalties and restitution. The company appealed to the Director of the Department of Finance, who largely upheld the hearing officer’s findings but reduced the restitution amount. The company then sought judicial review in the District Court of the Fourth Judicial District, which affirmed the Director’s final order. The company appealed to the Idaho Supreme Court.The Supreme Court of the State of Idaho held that the company’s activities—negotiating and managing tax debts—fell within the ICAA’s definition of a “debt counselor,” and that unpaid taxes constitute “debt” or “indebtedness” under the Act’s plain language. The Court also found that the ICAA was not preempted by federal law, that the Director did not abuse her discretion in evidentiary or sanction decisions, and that the civil penalties and restitution were supported by substantial evidence. The Court affirmed the district court’s decision and awarded costs, but not attorney fees, to the Department on appeal. View "Wall & Associates, Inc. v. Idaho Department of Finance" on Justia Law

A religious corporation in Boise owned property that it used for its church activities. The church entered into a Shared Use Agreement with the local YMCA, allowing the YMCA to operate a daycare program on a portion of the property during weekdays. The YMCA paid the church a monthly amount that was below market rent, intended to help cover maintenance expenses. The daycare provided services to working parents in downtown Boise, including those who could not afford to pay full price, and the church considered this partnership part of its mission outreach to the community.The Ada County Board of Commissioners granted the church only an 82% property tax exemption, determining that the portion used by the YMCA was not exempt because it was leased for business or commercial purposes. The Ada County Board of Equalization affirmed this decision after a hearing, and the District Court of the Fourth Judicial District also affirmed, reasoning that the daycare use was not a religious purpose of the church and that the Shared Use Agreement constituted a lease for business or commercial purposes. The district court declined to consider the church’s alternative argument for a charitable exemption because it was not raised in the original application.On appeal, the Supreme Court of the State of Idaho reviewed the statutory requirements for property tax exemptions for religious entities under Idaho Code section 63-602B. The court held that the church’s partnership with the YMCA to provide daycare services was in connection with its religious purposes, as supported by the church’s mission statement and evidence of its outreach activities. The court further held that, although the Shared Use Agreement was a lease, the use of the property for daycare constituted use of recreational facilities and meeting rooms in connection with the church’s purposes, and thus was not a business or commercial purpose under the statute. The Supreme Court of Idaho reversed the district court’s decision and held that the church was entitled to a 100% property tax exemption. View "First Presbyterian Church of Boise, Idaho, Inc. v. Ada County" on Justia Law

Robert and Mary Morris, a married couple, owned homes in both Connecticut and New Hampshire. In 2017, they took several steps indicating a possible move to New Hampshire, including obtaining New Hampshire driver’s licenses, registering to vote there, and using their New Hampshire address on tax documents. They also made significant estimated tax payments to New Hampshire. However, they maintained strong ties to Connecticut, such as keeping important possessions there, using Connecticut professionals, and spending substantial time at their Connecticut home. Ultimately, they did not relocate to New Hampshire and filed Connecticut resident tax returns for 2017.After an audit, the New Hampshire Department of Revenue Administration (DRA) determined that the Morrises were New Hampshire residents from June 16 to December 31, 2017, and assessed interest and dividends taxes, penalties, and interest for that period. The Morrises challenged the assessment, first through a petition for redetermination with the DRA, which was denied, and then by appealing to the Superior Court of New Hampshire. The superior court denied their motion for summary judgment and, after a bench trial, upheld the DRA’s determination, finding that the Morrises’ actions demonstrated an intent to establish New Hampshire residency.The Supreme Court of New Hampshire reviewed the case and affirmed the superior court’s decision. The court held that the relevant statute and administrative rule were properly applied, and that the Morrises’ conduct evidenced an intent to make New Hampshire their principal place of physical presence for the indefinite future. The court also held that New Hampshire’s tax scheme did not violate the state or federal constitutions, that the Morrises were not entitled to credits for taxes paid to Connecticut, and that the trial court did not err in declining to abate penalties, interest, or award attorney’s fees. The judgment of the superior court was affirmed. View "Morris v. Comm'r, N.H. Dep't of Revenue Admin." on Justia Law

The case concerns a taxpayer, Stephanie Murrin, who underpaid her federal income taxes from 1993 to 1999. The underpayment resulted from her tax preparer, Duane Howell, making false or fraudulent entries on her tax returns with the intent to evade tax. Murrin herself did not cause these false entries and did not have any intent to evade tax. More than twenty years later, in 2019, the Internal Revenue Service (IRS) issued a notice of deficiency to Murrin for the underpaid taxes from those years. Murrin did not dispute the amount of tax owed, the accuracy-related penalty, or the interest, but argued that the IRS was barred from assessing the tax by the three-year statute of limitations.The United States Tax Court reviewed the case after Murrin petitioned for a redetermination of the deficiency. The Tax Court held that the exception to the statute of limitations in Internal Revenue Code § 6501(c)(1) applied because the false or fraudulent returns were prepared with the intent to evade tax, even though that intent was held by the preparer and not by Murrin herself. The Tax Court concluded that the IRS’s notice of deficiency was not barred by the statute of limitations, and Murrin appealed.The United States Court of Appeals for the Third Circuit reviewed the Tax Court’s interpretation of § 6501(c)(1) de novo. The Third Circuit held that the statute does not require the taxpayer herself to have the intent to evade tax; rather, the exception to the statute of limitations applies if anyone—such as a tax preparer—prepares a false or fraudulent return with the intent to evade tax. The court affirmed the judgment of the Tax Court, holding that taxpayer intent is not required for the exception to apply. View "Murrin v. Commissioner of Internal Revenue" on Justia Law

Maryland enacted a statute imposing a tax on digital advertising revenues, targeting only large companies with at least $100 million in global annual gross revenues. In response to concerns that these companies would pass the tax cost onto customers and potentially blame the state for price increases, Maryland amended the law to include a “pass-through provision.” This provision prohibited companies from directly passing the tax cost to customers by means of a separate fee, surcharge, or line-item on invoices, though it did not prevent companies from raising prices or otherwise recouping the tax cost in a non-itemized way.A group of trade associations challenged the pass-through provision, arguing that it violated the First Amendment by restricting their ability to communicate with customers about the tax and its impact on pricing. The United States District Court for the District of Maryland initially dismissed the First Amendment claims for lack of jurisdiction under the Tax Injunction Act. On appeal, the United States Court of Appeals for the Fourth Circuit determined that the Act did not bar the claims and remanded for consideration on the merits. On remand, the district court found that the provision regulated speech but dismissed the facial challenge, reasoning that the provision had constitutional applications.The United States Court of Appeals for the Fourth Circuit reviewed the case and held that the pass-through provision is a content-based restriction on speech, as it prohibits companies from communicating certain truthful information to customers. The court found that the provision could not survive even intermediate scrutiny under the First Amendment, as it was not adequately tailored to any substantial government interest. The Fourth Circuit reversed the district court’s decision and remanded the case for consideration of the appropriate remedy, holding that the pass-through provision is facially unconstitutional in all its applications. View "Chamber of Commerce v. Lierman" on Justia Law

The Internal Revenue Service sent a notice of deficiency to two taxpayers regarding their 2018 income tax return. Under the Internal Revenue Code, a taxpayer generally has ninety days from the date the notice is mailed to file a petition with the United States Tax Court to challenge the deficiency. In this case, the taxpayers’ counsel filed the petition nine days after the ninety-day deadline had passed.The United States Tax Court, presided over by Chief Judge Kerrigan, found that the IRS had properly mailed the notice and that the petition was untimely. Relying on longstanding precedent, the Tax Court concluded that the ninety-day deadline in section 6213(a) of the Internal Revenue Code was jurisdictional, meaning that missing the deadline deprived the court of the power to hear the case. The Tax Court therefore dismissed the petition for lack of jurisdiction. The taxpayers appealed this dismissal.The United States Court of Appeals for the Second Circuit reviewed the Tax Court’s dismissal de novo. The Second Circuit held that, in light of recent Supreme Court decisions, the ninety-day deadline in section 6213(a) is not jurisdictional but is instead a nonjurisdictional, claim-processing rule. The court further held that this deadline is subject to equitable tolling, meaning that the Tax Court may consider late petitions if the taxpayers can show that equitable tolling is warranted. The Second Circuit reversed the Tax Court’s dismissal and remanded the case for the Tax Court to determine whether the taxpayers are entitled to equitable tolling. View "Buller v. Comm'r" on Justia Law