Justia Tax Law Opinion Summaries

The appeal involves the tax consequences of Petitioners' participation in a complex tax avoidance scheme. Petitioners expected to realize an $80.9 million capital gain as a result of selling a portion of his company. The scheme, which involved a set of tiered partnerships, allowed Petitioners to claim a $77.6 million artificial loss to offset his legitimate capital gains. A federal district court found the scheme to be an abusive tax shelter and upheld the IRS’s disallowance of the benefits of the shelter in a partnership-level proceeding, and a prior panel of the Eleventh Circuit affirmed. As a result of the partnership-level proceeding, the IRS issued a notice of deficiency to Petitioners disallowing the $77.6 million loss deduction they reported on their joint tax return. Petitioners sought review in the U.S. Tax Court, which rejected their various challenges.   The Eleventh Circuit affirmed. The court explained that the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”), the governing scheme in effect during the relevant period, established uniform audit and litigation procedures for the resolution of partnership tax items. The filing of the final partnership administrative adjustment (FPAA), the timeliness of which Petitioners do not contest, suspended the limitations period for assessment of tax attributable to affected items until January 11, 2017. The 2016 notice asserts a deficiency that is attributable to an affected item. Accordingly, the statute of limitations had not expired when the IRS issued the September 9, 2016 notice of deficiency, as the Tax Court correctly found. View "Raghunathan Sarma, et al v. Commissioner of Internal Revenue" on Justia Law

The Supreme Court held that the exemption from the referendum power for law "for the support and maintenance of the departments of the state government and state institutions," see Ariz. Const. art. 4, pt. 1, 1(3), apples to tax measures and that a revenue measure is exempt from referendum provided that it is for the support and maintenance of existing departments of the state government and state institutions.SB 1828 was signed by the Governor as a tax bill for the 2022 fiscal year and imposes a "flat" tax of 2.5 percent on taxable revenues but becomes effective only if the state General Fund revenues reach specific targets. Invest in Arizona (IIA) sought to prevent implementation of the flat tax by referring SB 1828 to the ballot in the November 2022 general election. Appellants filed a motion for preliminary injunction seeking to enjoin the Secretary of State from accepting or certifying any petition filed in support of a referendum of SB 1828, including IIA's petition. The trial court ruled that SB 1828 is referable and denied the preliminary injunction request. The Supreme Court reversed, holding that the exemption from the referendum power for laws "for the support and maintenance of the departments of the state government and state institutions" applies to tax measures. View "Arizona Free Enterprise Club v. Hobbs" on Justia Law

Wisconsin assessed property taxes on lands within four Ojibwe Indian reservations. The tribal landowners have tax immunity under an 1854 Treaty, still in effect, that created the reservations on which they live. Supreme Court cases recognize a categorical presumption against Wisconsin’s ability to levy its taxes absent Congressional approval. The parcels in question are fully alienable; their current owners can sell them at will because the parcels were sold by past tribal owners to non-Indians before coming back into tribal ownership. Wisconsin argued that the act of alienating reservation property to a non-Indian surrendered the parcel’s tax immunity. No circuit court has considered whether the sale of tax-exempt tribal land to a non-Indian ends the land’s tax immunity as against all subsequent tribal owners, nor does Supreme Court precedent supply an answer.The district court ruled in favor of the state. The Seventh Circuit reversed. Once Congress has demonstrated a clear intent to subject land to taxation by making it alienable, Congress must make an unmistakably clear statement to render it nontaxable again but these Ojibwe lands have never become alienable at Congress’s behest. Congress never extinguished their tax immunity. The relevant inquiry is: who bears the legal incidence of the tax today--all the relevant parcels are presently held by Ojibwe tribal members. View "Lac Courte Oreilles Band of Lake Superior Chippewa Indians of Wisconsin v. Evers" on Justia Law

The Fairbanks North Star Borough partially revoked a local ministry’s charitable property tax exemption after learning that the ministry was renting lodging to the general public. The ministry appealed the Borough’s decision to the superior court. The court remanded the issue to the Borough’s assessor for more detailed findings, instructed the ministry that any appeal following remand should be made to the Board of Equalization rather than superior court, and closed the case. The assessor issued new findings justifying the partial revocation of the tax exemption, and the ministry appealed to both the Board and the superior court (in a different case). The ministry also filed a motion in the first appeal asking the superior court to enforce its order instructing that appeals be made to the Board. The superior court issued a sua sponte order granting the ministry’s first appeal on the merits, finding “that the assessor [did not] rely on sufficient evidence to revoke [the ministry’s] tax exempt status.” The Borough appealed. The Alaska Supreme Court concluded that following remand, supplemental Board findings, and a new appeal from those findings, the superior court lacked the subject matter jurisdiction to decide the ministry’s first appeal on the merits. The Supreme Court therefore vacate its decision granting Victory’s appeal. View "Fairbanks North Star Borough v. Victory Ministries of Alaska, Inc., et al." on Justia Law

Plaintiff formed the Enelre Foundation as a Stiftung under the laws of Liechtenstein. Stiftung is a German word meaning, roughly, “foundation” or “endowment.” Enelre’s purpose is to provide education and general support for Plaintiff and his children. Plaintiff transferred $3 million to Enelre’s bank accounts. He later learned the IRS would consider Enelre a “foreign trust,” triggering certain reporting requirements. Plaintiff belatedly filed the reports, and the IRS assessed penalties. Plaintiff paid the penalties and then filed this refund action. The district court granted summary judgment for the government.The Fifth Circuit affirmed. The court explained that the district court correctly found that Enelre qualifies as a foreign trust. Its organizing documents explain that Enelre’s purpose is to support its beneficiaries and limit its transactions to pursuing and realising its purpose. This is characteristic of an ordinary trust. The documents also prohibit Enelre from conducting commercial trade. Liechtensteinian Public Registry filings confirm this prohibition. Enelre’s familial purpose, lack of business objective, and bar on commercial activity render it a trust. Enelre’s form of organization confirms it is a trust. Enelre is subject to Liechtenstein’s “Act on Trust Enterprises.” View "Rost v. USA" on Justia Law

The Supreme Court affirmed the judgment of the court of appeal in this dispute , holding that Oakland did not show on demurrer that its challenged fees at issue in this case were exempt from the voter approval requirements set forth in article XIII C of the California Constitution.In 2012, the City of Oakland approved two contract granting private waste haulers the right to operate a public utility for waste collection services. As consideration for the "special franchise right," the waste haulers agreed to pay certain fees to Oakland. In question was how such fees should be treated under article XIII C, which sets forth voter approval requirements that apply to taxes imposed by local government. The court of appeals concluded that the fees were not exempt from the requirements of section XIII C. The Supreme Court affirmed, holding that Oakland failed to show, as a matter of law, that article XIII C applied to the franchise fees at issue in this case. View "Zolly v. City of Oakland" on Justia Law

The Supreme Court vacated the judgment of the circuit court that the solar energy system owned by Springfield Solar 1, LLC was tax-exempt as a "solar energy system not held for resale" pursuant to Mo. Rev. Stat. 137.100(10), holding that the statute is unconstitutional because the Missouri Constitution does not grant the legislature the power to exempt solar energy systems not help for resale from taxation.Springfield Solar appealed the Assessor for Greene County's 2017 assessment of its solar energy system (the equipment), arguing that the equipment was tax-exempt under section 137.100(10), which states that solar energy systems not help for resale are exempt from taxation for state, county, and local purposes. The Commission concluded that the equipment was exempt from taxation under section 137.100(10). The Assessor filed a petition for judicial review, arguing that the Commission's decision was unlawful. The circuit court entered judgment in favor of Springfield Solar, finding that the statute was constitutional. The Supreme Court reversed, holding that the tax exemption created by section 137.100(10) is unconstitutional. View "Johnson v. Icet" on Justia Law

Chairman of the Committee on Ways and Means (“the Chairman”) invoked Section 6103(f)(1) in a writing to the Commissioner of Internal Revenue (“the 2019 Request”). The Chairman requested the federal income tax returns of then-President Donald J. Trump and that of his related companies and organizations (collectively “the Trump Parties”). The Department of the Treasury responded that it did not intend to comply with the 2019 Request because it was not supported by a legitimate legislative purpose. Later the Treasury informed the district court and the Trump Parties that it intended to comply with the 2021 Request and provide the Committee with the requested materials. The Trump Parties alleged that Section 6103(f)(1) is facially unconstitutional and that compliance with the Request would be a violation of the First Amendment.The DC Circuit affirmed. The court explained that the 2021 Request seeks information that may inform the United States House of Representatives Committee on Ways and Means as to the efficacy of the Presidential Audit Program, and therefore, was made in furtherance of a subject upon which legislation could be had. Further, the Request did not violate the separation of powers principles under any of the potentially applicable tests primarily because the burden on the Executive Branch and the Trump Parties is relatively minor. Finally, Section 6103(f)(1) is not facially unconstitutional because there are many circumstances under which it can be validly applied, and Treasury’s decision to comply with the Request did not violate the Trump Parties’ First Amendment rights. View "Committee on Ways and Means, United States House of Representatives v. TREA" on Justia Law

Donna Fisher lived in a mobilehome located in The Groves mobilehome residential community in Irvine, California. In 2011, Fisher filed a verified assessment appeal application with the Assessment Appeals Board No. 3 (the Board) for the County of Orange (the County) contesting the County Assessor’s assessment of the value of the land upon which her mobilehome was sitting for the 2011-2012 fiscal year. She argued the property had suffered a decline in value. Following extensive hearings, the Board issued its findings of fact and determination denying Fisher’s application. Fisher filed suit against the County to challenge the Board’s decision and sought a refund for overpayment of taxes in the amount of $739 for the underlying real property of her mobilehome. Following trial, the trial court issued a statement of decision rejecting Fisher’s challenges to the Board’s findings of fact and determination and entered judgment in favor of the County. Fisher again appealed, but the Court of Appeal affirmed, finding no reversible error. View "Fisher v. County of Orange" on Justia Law

The Alaska Department of Revenue audited a non-resident corporation doing business in Alaska. The Department issued a deficiency assessment based in part on an Alaska tax statute requiring an income tax return to include certain foreign corporations affiliated with the taxpaying corporation. The taxpayer exhausted its administrative remedies and then appealed to the superior court, arguing that the tax statute the Department applied was facially unconstitutional because: (1) it violated the dormant Commerce Clause by discriminating against foreign commerce based on countries’ corporate income tax rates; (2) it violated the Due Process Clause by being arbitrary and irrational; and (3) it violated the Due Process Clause by failing to provide notice of what affiliates a tax return must include, and therefore is void for vagueness. The superior court rejected the first two arguments but ruled in the taxpayer’s favor on the third argument. The Department appealed, claiming the superior court erred by concluding that the statute was void for vagueness in violation of the Due Process Clause. The taxpayer cross-appealed, asserting that the court erred by concluding that the statute did not violate the Commerce Clause and was not arbitrary. After review, the Alaska Supreme Court reversed the superior court’s decision that the statute was facially unconstitutional on due process grounds, and affirmed the court’s decision that it otherwise was facially constitutional. View "Alaska Dept. of Revenue v. Nabors International Finance, Inc. et al." on Justia Law