Justia Tax Law Opinion Summaries

Verisign, Inc. claimed large net operating loss deductions on its 2015 and 2016 Delaware income tax returns, which reduced its bill to zero in both years. The Division of Revenue reviewed the returns and found that Verisign’s use of net operating losses violated a longstanding, but non-statutory, Division policy. Under the policy, a corporate taxpayer that filed its federal tax returns with a consolidated group was prohibited from claiming a net operating loss deduction in Delaware that exceeded the consolidated net operating loss deduction on the federal return in which it participated. The Division applied the policy, determined that Verisign had underreported its income, and assessed the company $1.7 million in unpaid taxes and fees. After Verisign’s administrative protest of the assessment was denied, it appealed to the Superior Court. The Superior Court held that the policy violated the Uniformity Clause of Article VIII, section 1 of the Delaware Constitution. The Delaware Supreme Court agreed with the Superior Court that the Division’s policy was invalid, but it affirmed on alternate grounds: the policy exceeded the authority granted to the Division by the General Assembly in 30 Del. C. sections 1901– 1903. As a result, the Court declined to reach Verisign’s constitutional claims. View "Director of Revenue v. Verisign, Inc." on Justia Law

Appellee Greenwood Gaming & Entertainment Inc. (“Greenwood”) operated Parx Casino (“Parx”), located in Bensalem, Pennsylvania. During 2014, as part of its efforts to encourage slot machine and table game play, Greenwood distributed to patrons of Parx who played its slot machines and table games various “promotions, giveaways and direct player development:” items given away included cash, department store gift cards, and items of personal property. Parx also gave away tickets to attend live concerts and entertainment performances. In 2016, Greenwood filed a petition for refund with the Board of Appeals of the Department of Revenue (“Board of Appeals”) for the calendar year 2014, contending that it was entitled under Section 1103 of the Pennsylvania Gaming Act to exclude from the taxable revenue attributable to its table games and slot machines the value of all cash and personal property it distributed to the players of those games. The Pennsylvania Supreme Court concluded that concert tickets were not services within the meaning of Section 1103, and so were excludible from these taxable revenues. View "Greenwood Gaming v. Pennsylvania" on Justia Law

The Supreme Court denied the writ of mandamus sought by Pike County Convention and Visitor's Bureau (Relator) against Pike County Board of Commissioners and the Pike County auditor ordering them to disburse to the bureau the proceedings of a "bed tax," a county-imposed sales tax on hotel lodging, holding that Relator was not entitled to the writ.In 2020, the county commissioners for Pike County enacted a resolutions that redirected the bureau's portion of the bed-tax proceeds to the chamber "acting as a Convention and Visitors Bureau, as defined by law," stating as justification the bureau's "financial mismanagement." The bureau brought this action seeking disbursement of bed-tax proceeds that had been withheld by the county. The Supreme Court denied the writ, holding that the county commissioners' action lay within their discretion. View "State ex rel. Pike County Convention & Visitor's Bureau v. Pike County Board of Commissioners" on Justia Law

The primary issue in this case was whether imposing sales tax on in-state lessors of business equipment to a title insurer violated Article XIII, section 28(f) of the California Constitution. The California Department of Tax and Fee Administration (Department) contended it did not because the lessor, not the title insurer/lessee, was the taxpayer. In the Department’s view, whether the lessee reimburses the lessor for its sales tax obligation was strictly a matter of contract and did not implicate the constitutional limit on taxing insurers. Conversely, First American Title Insurance Company (First American) pointed out that in equipment leases not involving an insurer, the state assesses a use tax, not a sales tax. But where, as here, the lessee is constitutionally exempt from paying use tax, Regulation 1660(c)(1) solved that problem by providing that the sales tax applied instead. First American argued that as a result, Regulation 1660(c)(1) imposed a de facto use tax on title insurers in violation of Article XIII, section 28(f). The trial court agreed with First American and ordered the Department to “remove, strike out and otherwise give no force or effect to that portion of Regulation 1660(c)” providing that when the lessee is not subject to use tax, the sales tax applies. The Court of Appeal reversed: “Article XIII, section 28(f) does not prohibit a sales tax whose legal incidence is on a lessor, even though the economic burden of the tax is ultimately borne by the title insurer/lessee.” View "First American Title Insurance Co. v. Cal. Dept. of Tax and Fee Admin." on Justia Law

The Supreme Court affirmed the final decree of the superior court foreclosing Respondent's right of reception for property sold at a tax sale, holding that there was no error.Petitioner purchased the property at issue in this case at a tax sale. More than one year after the tax sale and the recording of the deed, Petitioner filed a petition seeking to foreclose Respondent's right of redemption. The superior court held a hearing on the petition and determined that Respondent was in default and that Petitioner was entitled to its requested relief. The Supreme Court affirmed, holding that Respondent waived all of the arguments that he raised on appeal. View "E.T. Investments, LLC v. Riley" on Justia Law

In these consolidated appeals, the Supreme Court reversed two judgments of the superior court entered in favor of Petitioners, a group of taxpayers who challenged the City of Providence's tax assessments on their properties for tax years 2014 and 2015, holding that the trial justice erred.The trial justice ruled that a revaluation conducted in 2013 of property values was illegal and invalid and that the tax bills for the relevant tax years shall be revised based on the 2012 revaluation. The superior court entered judgment in favor of Petitioners in excess of $1.5 million. The Supreme Court reversed, holding that the trial justice improperly weighed the evidence and erred as a matter of law in finding that the 2013 revaluation was illegal, invalid, selective, arbitrary, and discriminatory. View "Athena Providence Place v. Pare" on Justia Law

The Supreme Court affirmed in part and reversed in part the rulings made by the circuit court determining that (1) home inspectors do not meet the professional services tax exemption in W. Va. Code 11-15-8; (2) home inspection services are not professional services pursuant to West Virginia Code of State Rules section 110-15-8.1.1.1; and (3) the four-part test set forth in section 110-15-8.1.1.1 creates a mandatory four-part test and not a balancing test as determined by the office of Tax Appeals, holding that the circuit court (1) correctly ruled that home inspection services do not qualify as professional services under West Virginia law; (2) did not err in its ruling regarding the four-year degree requirement; but (3) erred in concluding that each part of the four-part test must be met to be classified as professional. View "Keener v. Irby" on Justia Law

Mary and James Nelson, a married couple with daughters, formed Longspar limited partnership in 2008; each had a 0.5% general partner interest. The limited partners were Mary and trusts that had been established for their daughters. The Nelsons also formed a trust in 2008. Mary was the settlor, James was the trustee. James and the daughters were the beneficiaries. In 2008-2009, Mary transferred her Longspar limited partner interests to the trust in a gift (valued at $2,096,000.00) and then a sale for $20,000,000. An accountant valued a 1% Longspar limited partner interest at $341,000. The Nelsons used that value to convert the dollar values in the transfer agreements to percentages of limited partner interests—6.14% for the gift and 58.65% for the sale. Those percentages were then listed on Longspar’s records, included in Longspar’s amended partnership agreement, and listed on the Nelsons’ gift tax returns.The IRS audited the Nelsons’ tax returns. The Nelsons amended their records and reallocated previous distributions. The Commissioner issued Notices of Deficiency listing $611,708 in gift tax for 2008 and $6,123,168 for 2009. The Tax Court found that the proper valuation of a 1% Longspar limited partner interest was $411,235; the transfer documents' language was not a valid formula clause that could support reallocation; Mary had transferred the percentage of interests that the appraiser had determined to have the values stated in the transfer documents; those percentages were fixed once the appraisal was completed. The Fifth Circuit affirmed; the Nelsons each owed $87,942 in gift tax for 2008 and $920,340 for 2009. View "Nelson v. Commissioner of Internal Revenue" on Justia Law

Under the 1982 Tax Treatment of Partnership Items Act, 26 U.S.C. 6221–6232, partnership-related tax matters are resolved in two stages. During the partnership-level proceedings, the IRS may adjust items relevant to the partnership as a whole and determine the “applicability of any penalty.” The partnership can challenge the adjustment. All partners are bound by any final decision in a partnership-level proceeding.On its 2001 partnership tax return, AHG reported a $25,618 total loss. Ginsburg’s individual 2001 tax return reported a $10,069,505 loss from AHG to offset his income. In 2008, the IRS sent Ginsburg notice that it was proposing adjustments to AHG’s returns, alleging that AHG “was formed . . . solely for purposes of tax avoidance.” For Ginsburg, the IRS “disallowed” the $10,069,505 loss and said it would impose a 40 percent penalty for “gross valuation misstatement.”Based on Ginsburg’s concessions that he was not entitled to deduct AHG’s losses because he was not at risk and the partnership’s transactions did not have a substantial economic effect., the tax court found that AHG must be “disregarded for federal income tax purposes,” and adjusted AHG’s 2001 tax return. The court denied Ginsburg’s petition concerning the penalty, rejecting his argument that the government did not get “written approval of the penalty by an immediate supervisor,” as required by 26 U.S.C. 6751(b)(1). The district court agreed that Ginsburg could not have reasonably relied on the advice of his tax, legal, and financial advisors and would not consider Ginsburg’s supervisory approval argument because he did not exhaust it in his IRS refund claim.The Eleventh Circuit affirmed. In partnership tax cases, the supervisory approval issue must be exhausted with the IRS before the partner files his refund lawsuit and must be raised during the partnership-level proceedings. View "Ginsburg v. United States" on Justia Law

Oakland businesses must obtain a business tax certificate and pay business license taxes each year, based on the type of activities in which the business is engaged. A separate business tax certificate is required for each activity of the business unless the activity comprises less than 20 percent of the total gross receipts of the business. City tax authorities determine the appropriate business tax classifications based on the information reported by the taxpayer. Host held Port Department permits to occupy space and operate food, beverage, retail, and duty-free concessions at Oakland International Airport. The permits authorized Host to sublease its space to other parties with consent. In 2015, based on an audit of Host’s financial records, an auditor determined that Host owed Oakland unpaid business taxes, penalties, interest, and fees for rental income from subleases,2006-2015. Host had obtained a business certificate and paid business tax for its retail activities, but not for subleasing.Host unsuccessfully appealed, asserting that it was engaged only in retail sales (not commercial subleasing), that the 20 percent exception applied, and that Oakland could not collect some of the back taxes because of the statute of limitations. The Board, the trial court, and the court of appeal upheld the determination of a $371,195.40 tax liability. View "Host International, Inc. v. City of Oakland" on Justia Law