Justia Tax Law Opinion Summaries

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

The Court of Appeals held that a determination of whether to order reimbursement of attorney's fees under Md. Code Ann., Tax-Property (TP) 14-843(a)(4)(i) after a complaint has been filed is discretionary and that a circuit court may consider whether the tax sale certificate holder (TSCH) impeded the property owner's exercise of the right of redemption in making a determination as to reimbursement.After a tax sale at which the TSCH purchased property, the TSCH billed the owner for attorney's fees and expenses for a complaint that had not yet been filed and did not promptly notify the owner that an expired release could be used to redeem the property. The owner reimbursed the TSCH for the attorney's fees owed at the time, but before the redemption process was completed the TSCH filed a complaint to foreclose the owner's right of redemption. The owner later paid all amounts necessary to redeem the property. At issue was whether the owner was required to reimburse the TSCH for attorney's fees incurred after the complaint was filed. The Court of Appeals held that the circuit court did not abuse its discretion in declining to order reimbursement of the TSCH's attorney's fees under TP 14-843(a)(4)(i) or in declining reimbursement of attorney's fees in exceptional circumstances under TP 14-843(a)(4)(iii). View "Thornton Mellon LLC v. Adrianne Dennis Exempt Trust" on Justia Law

The owners and operators of six boutique hotels sued San Francisco, seeking refunds of about $1.7 million in penalties that had been assessed for failure to timely file returns and pay certain hotel taxes. The plaintiffs contended they were entitled to refunds because, exercising ordinary care, they had hired and then relied on an employee to file the returns and make the payments, only to learn after the taxes were past due that the employee was dishonest and had never filed the returns or paid the taxes. Section 6.17-4 of the ordinance required the waiver of certain penalties when “[f]ailure to make timely payment or report of tax liability . . . occurred notwithstanding the exercise of ordinary care by the taxpayer.”The court of appeal affirmed a judgment in favor of the plaintiffs. The court rejected San Francisco’s arguments that as a matter of law, reliance on an employee cannot constitute ordinary care under section 6.17-4, no matter how careful the plaintiffs were in hiring and supervising the employee, and that even if the plaintiffs were entitled to refunds of some penalties under section 6.17-4, other penalties had been assessed under section 6.11-3, a Code section to which the refund provision of section 6.17-4 does not apply. View "Gajanan v. City and County of San Francisco" on Justia Law

Downstream fuel producers pay an excise tax, 26 U.S.C. 4081(a)(1)(A). Revenues from the tax fund the Highway Trust Fund. In 2004, Congress sought to incentivize renewable fuels without undermining highway funding. Under the American Jobs Creation Act, a fuel producer can earn the “Mixture Credit” by mixing alcohol or biodiesel into its products. The Mixture Credit applies “against the [excise] tax imposed by section 4081,” section 6426(a)(1). Under section 6427(e), a producer can also receive the Mixture Credit as direct, nontaxable payments, to the extent the Mixture Credit exceeds the excise tax liability. The Highway Revenue Act now appropriates the full amount of a producer’s section 4081 excise tax to the Highway Trust Fund “without reduction for credits under section 6426,” section 9503(b)(1).In 2010-2011, Delek claimed $64 million in Mixture Credits and subtracted that amount from its cost of goods sold, increasing Delek’s gross income and its income tax burden. In 2015, Delek filed a refund claim (more than $16 million), arguing that its Mixture Credits were “payments” that could only satisfy, but not reduce, the excise tax amount, so that subtracting the Mixture Credit from its cost of goods sold was a mistake. The IRS denied the claim. The Sixth Circuit affirmed summary judgment in the government’s favor, rejecting Delek’s “novel theory: The credit is a “payment” that satisfies, but does not reduce, its excise tax liability.” View "Delek US Holdings, Inc. v. United States" on Justia Law

In 2016, nearly 80% of Illinois voters voted to amend the Illinois Constitution; section 11, titled “Transportation funds,” was added to the state revenue article and provides that money generated from taxes, fees, excises, and license taxes on transportation infrastructure or operations shall only be spent on transportation purposes. Plaintiffs, contracting firms in the public transportation construction and design industry, sought declaratory and injunctive relief, alleging that Cook County, a home-rule unit, was violating the Amendment by diverting “revenue from transportation-related taxes and fees to the County’s Public Safety Fund” and impermissibly spending the revenue on non-transportation related purposes.The circuit court dismissed the complaint, finding that the plaintiffs lacked standing and that the complaint failed to state a violation of the Amendment. The appellate court reversed on the issue of standing but affirmed that no violation of the Amendment had been stated. The Illinois Supreme Court reversed the dismissal. The plaintiffs have associational standing and the money derived from the Cook County Transportation Taxes is subject to the Amendment. The Amendment did not create an exemption for home-rule units, home-rule taxes, or home-rule expenditures. The court found no issue with the manner in which home-rule units have had their power limited in the transportation context. View "Illinois Road and Transportation Builders Association v. County of Cook" on Justia Law

The IRS notified Boechler, a North Dakota law firm, of a discrepancy in its tax filings. When Boechler did not respond, the IRS assessed an “intentional disregard” penalty and notified Boechler of its intent to levy Boechler’s property to satisfy the penalty, 26 U.S.C. 6330(a), 6721(a)(2), (e)(2)(A). The IRS’s Independent Office of Appeals sustained the proposed levy. Under section 6330(d)(1), Boechler had 30 days to petition the Tax Court for review. Boechler filed its petition one day late. The Tax Court dismissed the petition. The Eighth Circuit affirmed, finding the 30-day filing deadline jurisdictional.The Supreme Court reversed. Section 6330(d)(1)’s 30-day time limit to file a petition for review of a collection due process determination is a non-jurisdictional deadline subject to equitable tolling. Whether Boechler is entitled to equitable tolling should be determined on remand. Jurisdictional requirements cannot be waived or forfeited, must be raised by courts “sua sponte,” and do not allow for equitable exceptions. A procedural requirement is jurisdictional only if Congress “clearly states” that it is. Section 6330(d)(1) provides that a “person may, within 30 days of a determination under this section, petition the Tax Court for review of such determination (and the Tax Court shall have jurisdiction with respect to such matter).” The text does not clearly mandate the jurisdictional reading; multiple plausible, non-jurisdictional interpretations exist. Non-jurisdictional limitations periods are presumptively subject to equitable tolling and nothing rebuts the presumption here. View "Boechler v. Commissioner of Internal Revenue" on Justia Law

The Supreme Court affirmed the decision of the Board of Tax Appeals (BTA) upholding the decision of the tax commissioner denying Colonial, Inc.'s application for a tax refund, holding that there was no error.In its application, Colonial argued that it was entitled to a refund of $269,432 in resort-area taxes that it paid from 2011 through 2016. Specifically, Colonial sought to recover a locally-imposed resort-area gross receipts excise tax that the village of Put-in-Bay originally enacted in 1995, arguing that, under Ohio Rev. Code 5739.101, the village must react the resort-area tax after each decennial census. The tax commissioner denied the refund claim, and the BTA affirmed. The Supreme Court affirmed, holding that the BTA correctly affirmed the tax commissioner's denial of Colonial's application for a refund. View "Colonial, Inc. v. McClain" on Justia Law

Petitioner, a Russian scientist, held a J-1 exchange visitor visa as a researcher sponsored by his employer. In 2010 and 2011, Petitioner received W-2 in the amount of $76,729 and $79,061, respectively. Petitioner filed 1040-NR forms, taking the position that all his earnings were exempt from taxation under the United States-Russia Tax Treaty (“Tax Treaty”). In 2014, the IRS sent Petitioner a notice of deficiency and Petitioner sought relief at the Tax Court.The Tax Court found in favor of Petitioner, holding that his W-2 income was properly considered “a grant, allowance, or similar payments” under the Tax Treaty. The court reasoned that “wages may be eligible for exemption so long as they are similar to a grant or allowance.”The Fourth Circuit reversed. The Tax Treaty provides that salaries, wages, and other similar remuneration are taxable; however, a grant, allowance, or similar payments payable to a person who is studying or doing research is exempt. Adopting the reasoning in Bingler v. Johnson, 394 U.S. 741 (1969), the court held the relevant question is “whether there is a “requirement of any substantial quid pro quo” that distinguishes compensation for employment from a “relatively disinterested, ‘no-string’” grant.” The Fourth Circuit remanded the case to the Tax Court for further proceedings. View "Vitaly Baturin v. Commissioner, Internal Revenue" on Justia Law

Corporate taxpayer Raytheon Company's 2012 income tax return was due on March 15, 2013. Raytheon filed its return on September 27, 2013, after securing an authorized extension of the deadline. Raytheon later discovered that the return overstated the company's annual income based upon the inadvertent inclusion of Arizona property sales. The company filed an amended 2012 return on September 27, 2016, claiming a refund of $321,444.00. The Oklahoma Tax Commission denied the refund claim, reasoning taxpayer submitted its demand more than three years after paying the taxes. An administrative law judge found the claimed refund was time barred under 68 O.S.2011, section 2373, and the Commissioners affirmed this finding. The company appealed, and after review the Oklahoma Supreme Court reversed, finding the taxpayer timely brought the claim for refund, having paid taxes to the Oklahoma Tax Commission upon filing its amended original return with a proper extension. View "In the matter of the Income Tax Protest of Raytheon Company" on Justia Law

The Supreme Court affirmed in part and reversed in part the judgment of the tax court dismissing Counts I through III of the Attorney General's complaint and granting summary judgment on Count IV, holding that the tax court erred in part.At issue was the scope of three statutes the Attorney General (AG) invoked to challenge an agreement between the Arizona Board of Regents (ABOR) and a private company for the company to construct and operate a hotel and conference center on property owned by ABOR. The Supreme Court held (1) to initiate an action under Ariz. Rev. Stat. 42-1004(E) there must be an applicable tax law to enforce; (2) the AG may bring a quo warranto action pursuant to Ariz. Rev. Stat. 12-2041 to challenge the unlawful usurpation or exercise of a public franchise; and (3) the AG's public-monies claim was subject to the five-year statute of limitations set forth in Ariz. Rev. Stat. 35-212(E). View "State v. Arizona Board of Regents" on Justia Law