Justia Tax Law Opinion Summaries

The Eighth Circuit reviewed a case for the second time regarding “whether a South Dakota tax on nonmember activity on the Flandreau Indian Reservation (the Reservation) in Moody County, South Dakota is preempted by federal law. On remand, and after a six-day video bench trial, the district court entered judgment in favor of the Tribe, concluding again that federal law preempts the imposition of the tax.   The Eighth Circuit reversed and remanded. The court explained that in light of guideposts from the Supreme Court, even with the evidence that the district court heard at trial, the court cannot conclude that the federal regulation in IGRA regarding casino construction is extensive. The court reasoned that even with a more factually developed record than the court considered on summary judgment, the Bracker balancing test does not weigh in favor of preemption under IGRA because the extent of federal regulation over casino construction on tribal land is minimal, the impact of the excise tax on the tribal interests is minimal, and the State has a strong interest in raising revenue to provide essential government services to its citizens, including tribal members. The district court thus erroneously entered judgment in favor of the Tribe based on IGRA’s preemption of the excise tax. View "Flandreau Santee Sioux Tribe v. Michael Houdyshell" on Justia Law

The government filed a complaint against Defendant, alleging that he promoted a tax evasion scheme in which he advised his clients to claim unwarranted federal income tax deductions for bogus charitable donations. The government sought to enjoin him from operating his business, as well as disgorgement of all of the proceeds from his scheme.   The question before the Eleventh Circuit was whether the Act bars a defendant from moving—in an action initiated by the government—for a protective order to restrain the government from using his responses to requests for admission when assessing a tax penalty in a separate administrative proceeding.   The Eleventh Circuit vacated the district court’s dismissal of Defendant’s motion under the Anti-Injunction Act and remanded for further proceedings. The court explained that because moving for a protective order in an action filed by the government does not amount to the maintenance of a “suit,” the Act does not apply. View "USA v. Michael L. Meyer" on Justia Law

Plaintiff appealed from the dismissal of his claims challenging tax penalties assessed against him, as well as the revocation of his passport pursuant to those penalties. He also appealed the denial of an award of attorneys’ fees under the Freedom of Information Act (FOIA).   The Fifth Circuit affirmed. The court explained that Plaintiff sought to overturn the penalties, restrain collection of them, or otherwise cast doubt on the validity of the assessment. The government has not waived its sovereign immunity for those challenges, and so the district court was correct to dismiss them for lack of jurisdiction. Further, the court explained that Congress was within its rights to provide the IRS another arrow in its quiver to support its efforts to recoup seriously delinquent tax debts. Under even intermediate scrutiny, the passport-revocation scheme is constitutional. Thus, the district court was correct to dismiss Plaintiff’s challenge.   Finally, the court explained that when considering FOIA attorneys’ fees, the court has generally looked with disfavor on cases with no public benefit. Here, the district court did not abuse its discretion in declining to award fees. Plaintiff’s lawsuit is far afield from the purposes for which FOIA, and its attorneys’ fees provision, were designed. There is no public value in the information and no value for anyone other than Plaintiff. Instead, Plaintiff only sought the information to aid him in his personal fight with the IRS regarding his tax penalties. View "Franklin v. United States" on Justia Law

Books-A-Million was a retail bookstore operating thirteen locations throughout South Carolina. For $25 per year, Books-A-Million customers could become members in the "Millionaire's Club" to receive retail discounts. In 2015, the South Carolina Department of Revenue audited three years of Books-A-Million's financial records and discovered that no sales tax was being charged on Millionaire's Club memberships. The Department thereafter issued a Notice of Proposed Assessment for $242,076.97 in unpaid sales tax. Taxpayer was granted a contested hearing before an ALC, which upheld the assessment because, under South Carolina law, the sales of intangible memberships can be taxable if their value originates from the sale of taxable goods. Taxpayer then appealed to the court of appeals which affirmed. Both courts held that the pertinent language of "value proceeding or accruing" from the definition of "gross proceeds of sales" was inclusive of Taxpayer's Millionaire's Club membership fees because the language included value related to sales, not merely the value of the sales themselves. Taxpayer argued on appeal that its sales of Millionaire's Club memberships were not taxable under South Carolina's sales tax because the language of the statute excluded it. The Department contended that the state tax code contemplated value not just from sales of tangible goods, but from related costs because of the language "proceeding or accruing" as well as the jurisprudence of the South Carolina Supreme Court. The Supreme Court agreed with the Department, and affirmed the lower courts' judgments. View "Books-A-Million, Inc., v. South Carolina Department of Revenue" on Justia Law

The Supreme Court affirmed the decision of the administrative hearing commission (AHC) finding beyond Housing, Inc. and Pagedale Town Center II, LLC (PTC II) qualify for sales and use tax exemptions as charitable organizations pursuant to Mo. Rev. Stat. 144.030.2(19), holding that the AHC's decision was proper.On appeal, the director of the department of revenue argued, among other things, that the HAC erred in determining that Beyond Housing and PTC II could qualify as a charitable organization because Beyond Housing was previously granted civic exemptions and, the director claimed, the statutory categories of charitable and civic exemptions are mutually exclusive classifications. The Supreme Court affirmed, holding (1) the AHC did not err in finding Beyond Housing and PTC II qualified for the charitable exemption; and (2) the AHC’s determination that Beyond Housing and PTC II qualified for sales and use tax exemptions as charities was supported by competent and substantial evidence and comported with the law. View "Beyond Housing, Inc. v. Director of Revenue" on Justia Law

The Supreme Court vacated the decision of the Administrative Hearing Commission (AHC) that the purchases by Carfax, Inc. of certain equipment used to create vehicle history reports (VHRs) were exempt from sales and use taxes under Mo. Rev. Stat. 144.030.2(5) and 144.054.2 because Carfax used such equipment to "manufacture" VHRs, holding that Carfax did not use the equipment in the "manufacturing" of its VHRs.After an audit, the Director of Revenue determined that Carfax did not use the disputed equipment to manufacture VHRs, and therefore, its purchase of that equipment was not exempt from sales and use taxes. On appeal, the AHC found that Carfax's purchases of the equipment were exempt from sales and use taxes under both sections 144.303.2(5) and 144.054(2) because Carfax used that equipment directly in manufacturing VHRs. The Supreme Court vacated the decision below, holding that, for purposes of these statutes, Carfax did not use the disputed equipment to manufacture VHRs. View "Carfax, Inc. v. Director of Revenue" on Justia Law

Petitioner failed to report millions of dollars in income. After an audit, an IRS examiner sent him a letter that said Petitioner owed penalties on top of his back taxes. Petitioner tried to negotiate without success; the examiner’s direct supervisor signed a second letter, which proposed the same penalties, as well as a form approving those penalties. The Tax Court disallowed the penalties, holding that the supervisor’s approval came too late because she had not approved the penalties at the time of the first letter. The IRS appealed, arguing that the Tax Court misinterpreted Section 6751(b)’s requirements.   The Eleventh Circuit reversed the Tax Court. The court explained that the statute prohibits assessing a penalty unless a condition has been met—supervisory approval of the initial determination of an assessment. But the statute regulates assessments; it does not regulate communications to the taxpayer. Because the IRS did not assess Petitioner’s penalties without a supervisor approving an “initial determination of such assessment,” the court held that the IRS has not violated Section 6751(b). View "Burt Kroner v. Commissioner of Internal Revenue" on Justia Law

In 2002, Douglas Coe, Jacqueline Coe, and GFLIRB, LLC (collectively the “Coes”) were involved in the sale of a company in which they held a substantial interest. Their accountants, BDO Seidman, LLP (“BDO”), advised them of a proposed tax strategy in which the Coes could invest in distressed debt from a foreign company in order to offset their tax obligations. In connection with the proposed tax strategy, BDO advised the Coes to obtain a legal opinion from an independent law firm, Proskauer Rose LLP (“Proskauer”). The Coes followed BDO’s advice, obtained a legal opinion from Proskauer, and claimed losses on their tax returns as a result. But in 2005, the Internal Revenue Service (“IRS”) initiated an audit, which ultimately led to a settlement in 2012. After settling with the IRS, the Coes filed suit against Proskauer in December 2015, asserting legal malpractice, breach of fiduciary duty, fraud, negligent misrepresentation, and other claims. After limited discovery on whether the statute of limitation barred the Coes’ claims, the trial court concluded that it did and granted summary judgment in favor of Proskauer, and the Court of Appeals affirmed. The Georgia Supreme Court concluded the Court of Appeals erred in determining that the Coes failed, as a matter of law, to exercise reasonable diligence to discover Proskauer’s allegedly fraudulent acts. Judgment was reversed and the matter remanded to the trial court for further proceedings. View "Coe, et al. v. Proskauer Rose, LLP" on Justia Law

David Sholy appealed a district court order dismissing his appeal from the Cass County Commission’s (“Commission”) decision to deny his applications for abatement or refund of taxes. Sholy argued the court misapplied the law in ordering him to file a certificate of record. The Commission argued Sholy failed to timely file his notice of appeal with the court. The North Dakota Supreme Court concluded the district court’s reasoning for dismissing Sholy’s appeal was incorrect but that dismissal was nonetheless appropriate because the court lacked jurisdiction over Sholy’s untimely appeal. The Court therefore affirmed the order dismissing Sholy’s appeal. View "Sholy v. Cass Cty. Comm'm" on Justia Law

The United States appeals the district court’s summary judgment rulings rendered in this federal income tax refund action filed by Plaintiffs. The Fifth Circuit reversed the district court’s ruling and found that the district court erred in its jurisdictional determination. The court remanded with instructions to dismiss for lack of jurisdiction.     The court explained that determining whether a tax assessment complies with Section 6501’s three-year limitation period necessitates a determination of whether Section 6229 has extended that period, as is true here, our decisions have repeatedly concluded that a “partnership item” is presented for determination. And Section 7422(h) prohibits refund action courts from deciding partnership items in the first instance or re-evaluating a tax court’s determination of those items. Thus, in this instance, the district court lacked subject matter jurisdiction over Plaintiffs’ Section 6501 refund claims and reversibly erred in concluding the contrary. Further, the court wrote that Plaintiffs’ argument that notice was required—because their deficiency was attributable to a violation of their Section 6501 assessment deadline—misunderstands the meaning of “deficiency” as that term is defined by Section 6211(a). View "Baxter v. USA" on Justia Law