Justia Tax Law Opinion Summaries

The Supreme Judicial Court reversed the decision of the Appellate Tax Board in this case concerning the constitutional restraints on the Commonwealth's ability to tax a nondomiciliary corporation on the capital gain it repealed from the sale of its fifty percent membership interest in an in-State limited liability company, holding that the tax in question was invalid.On appeal, the Commissioner of Revenue conceded that, under the unitary business principle as applied to the facts of this case, the capital gain at issue in this case was not taxable in the Commonwealth, but that the capital gain may nonetheless be taxed because it reflects the in-State entity's growth in the Commonwealth. The Supreme Judicial Court disagreed, holding (1) the capital gain could be subject to the Commonwealth's tax; but (2) the Commissioner lacked the requisite statutory authority to tax the capital gain. View "VAS Holdings & Investments LLC v. Commissioner of Revenue" on Justia Law

Reserve Mechanical Corp. appealed a Tax Court judgment affirming the decision of the Commissioner of Internal Revenue that it did not qualify for an exemption from income tax as a small insurance company and that the purported insurance premiums it received must therefore be taxed at a 30% rate under I.R.C. section 881(a). After review, the Tenth Circuit held that the record supported the Tax Court’s decision that the company was not engaged in the business of insurance. The court had two grounds for deciding that Reserve was not an insurance company: (1) Reserve had not adequately distributed risk among a large number of independent insureds; and (2) the policies issued by Reserve were not insurance in the commonly accepted sense. In addition, Reserve argued that if it was not an insurance company, the premiums it received should have been treated as nontaxable capital contributions. The Tenth Circuit also rejected that argument. View "Reserve Mechanical Corp. v. CIR" on Justia Law

The Supreme Court affirmed the judgment of the district court finding that Plaintiff did not qualify for an extended redemption period under Neb. Rev. Stat. 77-1827 and that the tax certificate sale process at issue in this case did not violate Plaintiff's constitutional rights, holding that there was no error.Because Plaintiff did not pay her 2013 property taxes the Lancaster County treasurer to a private party. Three years later, the tax certificate holder applied for and obtained a tax deed to the property. Plaintiff subsequently brought this action seeking to quiet title to the property in her name, arguing that the issuance of the tax deed had violated her rights under the state and federal constitutions and that she had a statutory right to a five-year redemption period under Neb. Rev. Stat. 77-1827. The district court dismissed all claims. The Supreme Court affirmed, holding that the district court did not err when it determined that Plaintiff was not entitled to the statutory extended redemption period or when it dismissed her constitutional claims. View "Nieveen v. TAX 106" on Justia Law

Seaview believed it filed its 2001 partnership tax return (Form 1065) in July 2002, but the Internal Revenue Service (“IRS”) stated they had no record of receiving it. Seaview faxed an agent a signed copy of Form 1065. During an audit interview, the IRS noted that Seaview’s accountant had previously provided a signed tax return and introduced Form 1065 as an exhibit. Seaview’s counsel mailed another signed copy of the 2001 Form 1065 to an IRS attorney.   The IRS issued Seaview a Final Partnership Administrative Adjustment (“FPAA”) for 2001. In that notice, the IRS stated that it had no record of a tax return filed by Seaview for 2001. Seaview filed a petition in the Tax Court challenging the adjustment of losses. The Tax Court held that Seaview did not “file” a tax return when it faxed a copy to the IRS agent or mailed a copy to the IRS counsel.   The Ninth Circuit reversed the Tax Court’s summary judgment in favor of the government. The court held that when (1) an IRS official authorized to obtain and receive delinquent tax returns informs a partnership that a tax return is missing and requests that tax return, (2) the partnership responds by giving the IRS official the tax return in the manner requested, and (3) the IRS official receives the tax return, then the partnership has “filed” a tax return for purposes of Section 6229(a). Further, under the Beard v. Commissioner, 82 T.C. 766 (1984) factors, the Form 1065 was a “return.” View "SEAVIEW TRADING, LLC, AGK INVE V. CIR" on Justia Law

The Debtors filed a Chapter 13 bankruptcy petition. The IRS filed a proof of claim for unpaid taxes and interest, including a $927.00 shared responsibility payment the Debtors owed for failing to maintain health insurance in 2018 as required by the Patient Protection and Affordable Care Act’s (ACA) “Individual Mandate,” 26 U.S.C. 5000A(a). The IRS’s proof of claim characterized the payment as an “EXCISE” tax entitled to priority. The Debtors argued that the shared responsibility payment was a penalty not entitled to priority. The Bankruptcy Court confirmed the Debtors’ repayment plan and subsequently held that the shared responsibility payment is a tax, not a penalty, for bankruptcy purposes and is entitled to priority under 11 U.S.C. 507(a)(8), as either an income or an excise tax.The district court and Third Circuit affirmed. The shared responsibility payment is a tax “measured . . . by income” entitled to priority under Section 507(a)(8)(A). The court noted that the statute describes the payment as a “penalty,” but it is collected by the IRS along with one’s federal income tax return. In 2012, the Supreme Court held that the shared responsibility payment is a tax for constitutional purposes but is not a tax for purposes of the Anti-Injunction Act. View "In re: Szczyporski" on Justia Law

In 2001, Presbyterian, a nonprofit, organized a partnership to operate an affordable housing community under the Low-Income Housing Tax Credit (LIHTC), 26 U.S.C. 42, program. SunAmerica, the limited partner, contributed $8,747,378 in capital for 99.99% of the $11,606,890 LIHTC credit. The partnership agreement gave Presbyterian (for one year following the 15-year LIHTC Compliance Period) a right of first refusal (ROFR) to purchase the property for less than the fair market value and a unilateral option to purchase for fair market value under specific circumstances. Before the end of the Compliance Period, Presbyterian expressed its desire to acquire the Property. After the Compliance Period, the General Partners told SunAmerica that they had received a bona fide offer from Lockwood and that Presbyterian could exercise its ROFR. SunAmerica filed suit.The district court granted SunAmerica summary judgment, reasoning that the Lockwood offer did not constitute a bona fide offer because it was solicited for the purpose of triggering the ROFR. The Sixth Circuit reversed and remanded for trial. The ROFR provision must be interpreted in light of the LIHTC’s goals, including making it easier for nonprofits to regain ownership of the property and continue the availability of low-income housing. The district court erred in concluding that the evidence “overwhelming[ly]” showed that the General Partners did not intend to sell. View "SunAmerica Housing Fund 1050 v. Pathway of Pontiac, Inc." on Justia Law

The First Circuit affirmed the judgment of the district court ruling for the government on its complaint seeing to obtain a judgment against Monica Toth for failing to pay an ordered penalty holding that there was no error.In 2013, the IRS assessed a civil penalty against Toth in consequence of her failure to comply with the reporting requirements of the Bank Secrecy Act in connection with her Swiss bank account. Toth refused to pay the penalty of the maximum allowable set forth in the Act, and the government filed suit. The district court granting summary judgment in favor of Toth. The First Circuit affirmed, holding that Toth was not entitled to relief on any of her proffered grounds for overturning the summary judgment against her. View "United States v. Toth" on Justia Law

Hudye Group LP (“Hudye”) appealed a district court judgment affirming the Ward County Board of Commissioners’ decision to deny Hudye’s applications for abatement or refund of taxes as untimely. Hudye filed applications for abatement or refund of taxes relating to 85 acres of property that had been divided into 92 parcels which were located in Ward County, North Dakota. Hudye argued the failure to consider abatement requests received by the City Assessor’s Office on the first business day following the November first deadline resulted in an unjust outcome. Finding no reversible error, the North Dakota Supreme Court affirmed. View "Hudye Group v. Ward Cty. Bd. of Commissioners" on Justia Law

The Supreme Court held that the Indian Reorganization Act did not expressly preempt Mohave County's ad valorem property tax on a power plant owned by non-Indian lessees of land purportedly acquired by the federal government under the Act and held in trust for the benefit of an Indian tribe.Plaintiff initiated these consolidated lawsuits seeking a refund of payments for property taxes imposed from 2010 to 2018 to the extent they were based on valuations of the power plant at issue, arguing that section 5 of the Act, 25 U.S.C. 5108, expressly preempts states from imposing property taxes on any real property improvements located on land held in trust by the federal government for the benefit of Indian tribes or individuals. The tax court granted summary judgment for the County, but the court of appeals reversed. The Supreme Court vacated the judgment in part, holding that section 5 of the Act expressly preempts taxing permanent improvements constructed on tribal lands acquired under that section when those improvements are owned by non-Indians. View "South Point Energy Center LLC v. Arizona Department of Revenue" on Justia Law

Appellant, an asphalt-paving company incorporated under Iowa law, had not paid dividends since the 1970s but has paid its shareholders “management fees” for at least twenty years. There were no written agreements between Appellant and its shareholders regarding fees paid for management services, nor was there an employment contract between Appellant and its president. Appellant claimed deductions on its tax returns for management fees for tax years 2012 through 2014. The Commissioner denied these deductions on the ground that Appellant failed to establish that it had incurred or paid the management fees for ordinary and necessary business purposes. At the tax-court proceeding, each party proffered expert witnesses. The tax court excluded the testimony of Appellant’s experts and sustained the Commissioner’s decision on the ground that the fees were not paid as compensation for services but were instead disguised distributions of corporate earnings.   The Eighth Circuit affirmed the judgment of the tax court, affirming the Commissioner’s denial of the Appellant’s claimed tax deductions and management fees paid to its shareholders. The court reviewed the tax court’s decision to exclude expert testimony for an abuse of discretion and held that the expert witness would not help the trier of fact understand the evidence or determine a fact in issue. Further, the court concluded that the tax court did not err in finding that Appellant failed to meet its burden to show that any of the management fees paid were reasonable. View "Aspro, Inc. v. CIR" on Justia Law