Justia Tax Law Opinion Summaries

The Supreme Court held that Brown County's sales and use tax ordinance was consistent with Wis. Stat. 77.70 and therefore lawful and that there was no error in the proceedings below.Brown County Taxpayers Association (BCTA) argued that Brown County's sales and use tax was invalid because it did not dollar-for-dollar directly reduce the County's property tax levy, in violation of section 77.70, but instead was impermissibly used to fund new capital projects. The circuit court granted Brown County's motion for summary judgment. The Supreme Court affirmed, holding (1) nothing in section 77.70 requires the dollar-for-dollar offset sought by BCTA; and (2) because the Brown County sales and use tax ordinance does, in fact, directly reduce the property tax levy, the ordinance is permissible. View "Brown County v. Brown County Taxpayers Ass'n" on Justia Law

Property owners (Appellants) paid nearly $12 million in transfer taxes, penalties, and interest based on a 2014 merger that changed their parent companies. Both before and after the merger, Appellants directly owned two properties; only indirect ownership changed. They sought a refund of the sums paid under the San Francisco Business and Tax Regulations Code (SFBTRC).The court of appeal affirmed the dismissal of the suit, rejecting arguments that the tax exceeded San Francisco's authority under Revenue and Taxation Code section 11911 because it uses a higher tax rate and an expanded tax base. San Francisco, as a charter city and a “city and county,” is not bound by the limitations of section 11911. The purported failure to comply with notice and hearing requirements does not entitle Appellants to a refund. At the time of the merger, SFBTRC was triggered as to Appellants’ real property by the transfer of ownership interests in Appellants’ parent entity, consistent with Revenue and Taxation Code section 64(c)(1). SFBTRC 1108 applied due to the termination of Appellants’ parent, a partnership. Appellants are not entitled to a refund based on their argument that San Francisco assessed the wrong entities View "CIM Urban REIT 211 Main Street (SF), L.P. v. City and County of San Francisco" on Justia Law

IRS Notice 2007-83, entitled “Abusive Trust Arrangements Utilizing Cash Value Life Insurance Policies Purportedly to Provide Welfare Benefits” designates certain employee-benefit plans featuring cash-value life insurance policies as listed “tax avoidance" transactions. A cash-value life insurance policy combines life insurance coverage with a cash-value investment account. The IRS believes these transactions run the risk of allowing small business owners to receive cash and other property from the business “on a tax-favored basis.” The regulation requires reporting of transactions involving cash-value life insurance policies connected to employee-benefit plans.Taxpayers claimed that the IRS skipped the notice-and-comment process before promulgating this legislative rule as required by the Administrative Procedure Act, 5 U.S.C. 551, 553–59, 701–06. The Sixth Circuit reversed the district court and found the regulation invalid. The Notice was a “legislative rule,” with the “force and effect of law,” not a policy statement or interpretation. Congress did not expressly exempt the IRS from the APA’s requirements. View "Mann Construction, Inc. v. United States" on Justia Law

The Ninth Circuit reversed the district court's Federal Rule of Civil Procedure 12(b)(6) dismissal of plaintiffs' complaint in a tax refund action in which they sought to deduct mortgage interest that their lender received at the short sale of taxpayer's home. The panel held that, on the facts as pleaded, plaintiffs are entitled to deduct the mortgage interest paid in connection with the short sale of their home in 2011. In this case, the district court erred in applying Estate of Franklin v. Commissioner, 544 F.2d 1045 (9th Cir. 1976), to the very different circumstances presented here. The panel also rejected the IRS's alternative argument that I.R.C. 265(a)(1) precludes plaintiffs' home mortgage interest deduction.Under the settled rules for a short sale involving the extinguishment of nonrecourse debt, the panel stated that the Tufts approach applies, and plaintiffs were entitled to take the corresponding mortgage interest deduction for the interest paid and received at the short sale. The panel explained that the fact that, during an earlier bankruptcy, plaintiffs' mortgage had been converted, through their bankruptcy discharge, from recourse to nonrecourse, provides no basis for declining to apply those rules. View "Milkovich v. United States" on Justia Law

Christopher and Debra James appealed a district court order granting summary judgment in favor of the Idaho State Tax Commission (“Tax Commission”), reversing the decision of the Board of Tax Appeals (“BTA”). The district court affirmed the Tax Commission’s notice of deficiency decision, which disallowed a net operating loss carryback because the Jameses missed the deadline to claim the loss. Finding no reversible error, the Idaho Supreme Court affirmed the district court’s decision: Idaho Code sections 63-3072(e) and 63-3022(c)(2) required the Jameses to file their amended 2012 Idaho tax return by December 31, 2015, to carryback their 2014 NOL to the 2012 tax year. The Jameses failed to do so. View "Idaho State Tax Commission v. James" on Justia Law

Witkemper was the president and sole shareholder of Maximum, which had employees, but in 2004-2006 never withheld and remitted federal income and insurance contribution taxes (FICA taxes). Maximum went bankrupt. Unable to fully collect the unpaid taxes during the bankruptcy proceedings, the IRS lodged an assessment totaling $385,705.54 and recorded a notice of a federal tax lien against Witkemper, who sent the IRS a signed Offer in Compromise. The IRS accepted the Offer. Witkemper began making the required monthly minimum payments, $500. Witkemper successfully sought to rescind the settlement after it had been in effect only 205 days. Witkemper then began making property transfers to his wife and children without any consideration.The IRS viewed the transactions as fraudulent conveyances and filed suit. The Witkempers had no response to the merits of the government’s position but argued that the government could not prove that its initial assessment of the FICA tax penalties fell within the statutory deadline, citing “unreliable government records” containing clerical errors. They claimed that because the government filed its complaint more than 10 years after it assessed the FICA recovery penalties the lawsuit was outside the limitations period, which was not tolled by the Offer, which had “forged signatures.” The Seventh Circuit affirmed a $385,705.54 judgment in the government’s favor, finding the case “not close," the Witkempers’ counsel never should have pressed the appeal. View "United States v. Witkemper" on Justia Law

The Supreme Court reversed the decision of the Tax Commission determining that John and Brooke Buck were domiciled in Utah for the 2012 tax year and therefore owed nearly $400,000 in back taxes and interest, holding that the court erred interpreting Utah Code 59-10-136 to effectively preclude the Bucks from being able to overcome the rebuttal presumption of domicile.On appeal, the Bucks maintained that they were domiciled in Florida in 2012 and that the Commission's decision suffered several constitutional and interpretive deficiencies. The Supreme Court agreed, holding (1) the Tax Commission erred as a matter of law in interpreting section 136, and the plain language of the domicile provision supported the Bucks; and (2) the stipulated facts decisively demonstrated that the Bucks were not domiciled in Utah in 2012 for income tax purposes. View "Buck v. Utah State Tax Commission" on Justia Law

In 2007, CalBio acquired two facilities and began upgrading them to biomass facilities. CalBio secured Authority to Construct permits that allowed construction and allowed the facilities to generate and sell electricity. The permits could be converted into Permits to Operate after the facilities met conditions, including emissions tests. CalBio labeled the facilities “in operation” in 2008. The facilities passed pre-parallel testing under PG&E interconnection agreements and began selling electricity on the spot market and later to PG&E. The facilities operated fairly continuously throughout 2009, occasionally noncompliant with emissions regulations.The 2009 American Recovery and Reinvestment Act, 123 Stat. 115, allowed entities to receive federal grants if they “placed in service” a renewable energy facility during 2009-2010 or began constructing property in 2009-2010. CalBio was experiencing financial difficulties but did not seek grants because its facilities had been placed in service in 2008. CalBio suspended operations in 2010 and sold the facilities. Akeida spent $15 million improving the facilities, which passed emissions tests in 2011. Akeida applied for grants, claiming that the facilities were placed in service when Akeida’s emissions improvements were certified.The Treasury Department largely rejected Akeida’s claims, reasoning that most of the property had been placed in service in 2008. The Claims Court and Federal Circuit agreed, applying Treasury’s regulatory definition of “placed in service,” which required it to determine the “taxable year in which the property is . . . availabil[e] for a specifically assigned function.” View "Ampersand Chowchilla Biomass, LLC v. United States" on Justia Law

The issue this case presented for the Colorado Supreme Court's review centered on the valuation for real property tax purposes of the Lodge at Vail (“the Lodge”), a luxury resort property that included a hotel, privately owned condominiums, and amenities. The Court granted certiorari to consider whether: (1) fees paid by the condominium owners to a third-party company that managed the rental of their condominiums to overnight guests was intangible personal property that had to be excluded from the actual value of the Lodge under the income approach to valuation; and (2) the net income generated from such fees should have been included in the Lodge’s actual value under the income approach. The Supreme Court concluded the net income generated from rentals of the individually and separately owned condominium units was not income generated by the Lodge and therefore should not have been included in the Lodge’s actual value under the income approach to valuation. The Court therefore reversed the judgment of the division below, and did not consider whether the contractual right to net rental management income generated from the condominiums constituted intangible personal property that had to be excluded from the Lodge’s actual value under the income approach to valuation. View "Lodge Properties v. Eagle County" on Justia Law

The Supreme Court reversed in part the judgment of the Board of Tax Appeals (BTA) abating a tax penalty imposed against Appellee by the Tax Commissioner of Ohio, holding that the BTA's abatement of the penalty was clearly erroneous.The tax commissioner assessed unpaid tax in the amount of $4,821 as against Appellee and exercised his statutory discretion to impose a fifteen percent penalty amounting to $723. The BTA upheld the tax assessment against Appellee but found that the tax commissioner had abused his discretion in assessing a penalty. The Supreme Court reversed in part, holding that the BTA's holding that the tax commissioner abused his discretion and that the BTA's order abating the penalty were clearly erroneous. View "Karr v. McClain" on Justia Law