Justia Tax Law Opinion Summaries

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

Several individuals who allegedly owed debts to Kentucky public institutions—either for medical services at the University of Kentucky or for educational services at the University of Kentucky, Morehead State University, or the Kentucky Community & Technical College System—challenged the referral of their debts to the Kentucky Department of Revenue for collection. The plaintiffs argued that the statutes used to justify these referrals did not apply to their debts and that the Department unlawfully collected the debts, sometimes without prior court judgments or adequate notice. The Department used its tax collection powers, including garnishments and liens, to recover these debts, and in some cases, added interest and collection fees.In the Franklin Circuit Court, the plaintiffs sought declaratory and monetary relief, including refunds of funds collected. The Circuit Court ruled that the Department was not authorized by statute to collect these debts and held that sovereign immunity did not protect the defendants from the plaintiffs’ claims. The court also certified the medical debt case as a class action. The Court of Appeals reviewed these interlocutory appeals and held that while sovereign immunity did not bar claims for purely declaratory relief, it did bar all claims for monetary relief, including those disguised as declaratory relief.The Supreme Court of Kentucky reviewed the consolidated appeals. It held that sovereign immunity does not bar claims for purely declaratory relief or for a refund of funds that were never due to the state, nor does it bar constitutional takings claims. However, the court held that sovereign immunity does bar claims for a refund of funds that were actually due to the state, even if those funds were unlawfully or improperly collected. The court affirmed in part, reversed in part, and remanded for further proceedings to determine which funds, if any, were never due to the state and thus subject to refund. The court also found that statutory changes rendered prospective declaratory relief in the medical debt case moot, but not retrospective relief. View "LONG V. COMMONWEALTH OF KENTUCKY" on Justia Law

After Congress enacted the Tax Cuts and Jobs Act in 2017, which capped the federal deduction for state and local taxes (SALT) at $10,000, New Jersey, New York, Connecticut, and the Village of Scarsdale created or planned programs allowing residents to make contributions to state-administered charitable funds in exchange for significant state or local tax credits. These programs were designed to help residents recover some of the lost federal tax benefit by allowing them to claim a federal charitable deduction for the full amount contributed, despite receiving a state or local tax credit in return. In response, the Internal Revenue Service (IRS) and Treasury Department issued a regulation (the “Final Rule”) requiring taxpayers to reduce their federal charitable deduction by the amount of any state or local tax credit received for the contribution.The States and Scarsdale sued the IRS and Treasury in the United States District Court for the Southern District of New York, arguing that the Final Rule exceeded the IRS’s statutory authority under 26 U.S.C. § 170 and was arbitrary and capricious under the Administrative Procedure Act. The district court granted summary judgment for the government, finding the IRS’s interpretation reasonable under Chevron deference and holding the rule was not arbitrary or capricious.On appeal, the United States Court of Appeals for the Second Circuit determined that New York and Scarsdale had Article III standing, and that the Anti-Injunction Act did not bar the suit because there was no alternative procedure for the plaintiffs to challenge the rule. Applying the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, which overruled Chevron, the Second Circuit independently interpreted § 170 and concluded that the IRS’s rule was consistent with the statute’s quid pro quo principle. The court also found the rule was not arbitrary or capricious. The Second Circuit affirmed the district court’s judgment. View "New Jersey v. Bessent" on Justia Law

A limited partnership operating a timber farm in Monroe County, Ohio, purchased a Mercedes-Benz Geländewagen in 2018 for use on its rugged, 1,100-acre property, which is primarily forested. The farm, with a history dating back to 1902, had transitioned from fruit and dairy to timber production. The vehicle was acquired to facilitate forest management activities, including traversing difficult terrain to apply chemicals and equipment for the removal of invasive species, inspect timber, and support sustainable harvesting practices. The farm had not reported timber sales or income since 2011, but had invested in forest management and hired consultants to implement long-term plans for sustainable timber production.The Ohio Tax Commissioner issued a use-tax assessment on the vehicle, finding that the farm was not actively engaged in the business of farming due to the absence of recent sales or income, and that the vehicle was not used directly or primarily in farming activities. The Board of Tax Appeals affirmed the assessment, concluding that the vehicle was used mainly for transportation around the property rather than for direct farming purposes, and that the farm had not demonstrated the vehicle’s primary use was for farming.The Supreme Court of Ohio reviewed the case and reversed the Board of Tax Appeals’ decision. The court held that the statutory exemption for use tax on items used in farming does not require “direct” use, and that the farm’s activities—including forest management and preparation for future timber sales—constituted engagement in the business of farming. The court found that the vehicle was used in farming and primarily for that purpose, based on uncontradicted testimony. The case was remanded for cancellation of the tax assessment. View "Claugus Family Farm, L.P. v. Harris" on Justia Law

A company constructed and operated a large interstate natural gas pipeline running through Ohio, which was completed in late 2018. The project’s actual construction costs significantly exceeded initial estimates due to unusually heavy rainfall causing delays and an environmental incident that led to regulatory actions and further delays. During construction, an investment firm acquired a substantial indirect ownership interest in the pipeline’s parent company, paying a price that implied a high valuation for the pipeline.For the 2019 tax year, the Ohio Tax Commissioner assessed the taxable value of the Ohio portion of the pipeline using a statutory cost-based method, resulting in a valuation that the company believed was excessive. The company challenged the assessment, arguing that the pipeline’s true value was much lower, citing alternative appraisal methods and the impact of construction delays and overruns. The Tax Commissioner rejected these arguments, maintaining that the statutory method produced the correct value.The company appealed to the Ohio Board of Tax Appeals, where both parties presented expert appraisals. The company’s appraiser used a unit appraisal approach and arrived at a lower value, while the Tax Commissioner’s appraiser, using both cost and income approaches, opined a higher value. The Board found the Tax Commissioner’s appraisal more credible, especially in light of the investment firm’s transaction and the actual construction costs, and ordered the pipeline to be valued according to that appraisal.On further appeal, the Supreme Court of Ohio reviewed whether the Board’s decision was reasonable and lawful. The court held that the Board has broad discretion in weighing competing appraisals and evidence, and that its adoption of the Tax Commissioner’s appraisal was supported by the record. The court affirmed the Board’s decision, upholding the higher valuation for tax purposes. View "Rover Pipeline, L.L.C. v. Harris" on Justia Law

In this case, an individual provided the Internal Revenue Service (IRS) with information about tax-avoidance schemes involving two corporations, based on his work at a foreign bank. The information included credit applications that indicated the bank had made loans, not factoring transactions, to the corporations, which was relevant to whether the companies could claim certain tax deductions. The IRS used this information to issue a summons to the bank, gather further evidence, and ultimately settle with both corporations for underpaid taxes. The whistleblower sought an award for his contribution under the statutory whistleblower program.The United States Tax Court reviewed the whistleblower’s appeal after the IRS Whistleblower Office denied his claim. The Tax Court granted summary judgment to the IRS, holding that the administrative record was sufficient and that the Whistleblower Office had not applied the wrong legal standard. The Tax Court also found that the whistleblower’s information did not substantially contribute to the IRS’s actions against the corporations, relying on the record as designated by the Whistleblower Office.The United States Court of Appeals for the District of Columbia Circuit reversed the Tax Court’s decision. The appellate court held that the Tax Court erred by applying the correct legal standard itself, rather than remanding the case to the Whistleblower Office after finding that the Office had applied an incorrect, overly restrictive standard. The court also found that the Tax Court abused its discretion by refusing to supplement the administrative record with relevant documents that were omitted but material to the whistleblower’s claim. The case was remanded to the Whistleblower Office to apply the correct “substantial contribution” standard to a complete administrative record. View "Estate of Insinga v. Commissioner of the Internal Revenue Service" on Justia Law

An American accountant and financial executive, who worked extensively in Russia, was investigated for failing to timely file U.S. tax returns and for concealing substantial assets in Swiss bank accounts. He received millions of dollars in compensation, which he deposited in Swiss accounts held under nominee names. After being notified by Swiss banks of compliance requirements, he transferred accounts and listed his then-wife as the beneficial owner. He did not file timely tax returns or required Foreign Bank Account Reports (FBARs) for several years, later attempting to participate in the IRS’s Streamlined Foreign Offshore Procedures by certifying his failures were non-willful. However, he omitted at least one account from his 2014 FBAR.A grand jury in the Middle District of Florida indicted him on multiple tax-related charges. At trial, the jury convicted him on four counts: failure to file income tax returns for 2013 and 2014, making false statements on his Streamlined certification, and failure to file a compliant 2014 FBAR. The district court sentenced him to 86 months’ imprisonment and ordered over $4 million in restitution to the IRS.The United States Court of Appeals for the Eleventh Circuit reviewed the case. It held that the district court erred in tolling the statute of limitations for the 2013 and 2014 failure-to-file tax return charges because the government’s application for tolling did not specifically identify those offenses, nor did the court make the required findings. As a result, the convictions on those counts were reversed as time-barred. The court affirmed the denial of the motion to suppress evidence from the email search, finding no abuse of discretion in deeming the motion untimely. The court also found no constructive amendment or material variance regarding the FBAR charge. The sentence and restitution order were vacated and remanded for resentencing and further findings on restitution. View "United States v. Gyetvay" on Justia Law