Justia Tax Law Opinion Summaries

The Supreme Court affirmed the decision of the administrative hearing commission (AHC) determining that John Gott, who owned and operated a sole proprietorship providing portable toilets to customers, was liable for unpaid sales tax, use tax, and additions to tax and statutory interest as assessed by the director of revenue for the period of April 1, 2012 through March 31, 2017, holding that the AHC decision was authorized by law and supported by competent and substantial evidence on the record.Specifically, the Supreme Court held (1) the AHC did not impermissibly extend the reach of the sales tax law to include AHC's portable toilet service, and therefore, Gott's gross receipts were subject to sales tax; (2) Mo. Rev. Stat. 144.010's plain language is clear and resolved this dispute without the Court having to resort to the "true object" test; and (3) the AHC did not violate Mo. Const. art. X, 26 because Gott was not engaged in a service or transaction not subject to sales, use, or transaction-based taxation. View "Gott v. Director of Revenue" on Justia Law

The Eighth Circuit reversed the tax court's grant of appellees' motion for summary judgment in an action where the Commissioner determined that because Judith S. Coffey was not a bona fide resident of the United States Virgin Islands (USVI), she and James L. Coffey owed federal income tax for the 2003 and 2004 tax years. The Coffeys invoked the three-year statute of limitations in 26 U.S.C. 6501(a), and the USVI intervened.The court held that the statute of limitations in section 6501(a) begins only when a return is filed. In this case, because the Coffeys did not meticulously comply with requirements to file with the IRS, the court concluded that the statute of limitations never began. The court rejected the Coffeys' and the USVI's contentions that filing returns solely with the Virgin Islands Bureau of Internal Revenue began the three-year statute of limitations in section 6501(a). The court explained that without a filing, the documents are not an honest and genuine attempt to satisfy the tax law and are not filed returns. View "Coffey v. Commissioner of Internal Revenue" on Justia Law

After the IRS assessed taxpayer in 2014 for tax deficiencies dating back to 2005, taxpayer contends that the assessment is barred by the Internal Revenue Code's three-year limitations period, which runs from the date "the return" is filed. The district court held that the limitations period never began to run because taxpayer never filed "the return."The Fifth Circuit vacated the district court's judgment allowing the tax assessment and held that taxpayer filed "the return" that started the limitations clock when he filed forms containing data sufficient to (1) show that he was liable for the taxes assessed and (2) calculate the extent of his tax liability. In this case, taxpayer's Forms 1040 and 1099 constitute "the return" that begins the running of the Internal Revenue Code's three-year assessment limitations period. Because the IRS assessment came more than three years after taxpayer filed those forms, the court concluded that the assessment is barred by the limitations period. The court remanded to the district court with instructions to remand the case to the bankruptcy court for entry of judgment in accord with the opinion. View "Quezada v. Internal Revenue Service" on Justia Law

The trustees of the Amen Family 1990 Revocable Trust challenge the Assessor's reassessment of property the Trust received from a corporation that the Trust had partially owned. Although there were at least five owners of the stock of the transferor corporation (including the Trust) and the transferee was solely the Trust, the Trust contends that the proportional ownership interest exception applied because it had owned all the voting stock in the corporation.The Court of Appeal affirmed the trial court's judgment in favor of the Assessor and upholding the reassessment. The Assessor argues that "stock" in Revenue & Taxation Code section 62(a)(2) means exactly what it says—stock—and applies to all classes of stock, including for present purposes both voting and non-voting stock. Under this interpretation, the Assessor was right to reassess the property after the transfer because the proportional ownership interests, as measured by all the stock of the transferor corporation, had changed. Finally, the "Primary Economic Value" test in section 60 also supports that all stock is considered in applying section 62(a)(2). View "Prang v. Amen" on Justia Law

A city-owned utility charges rates to its customers that do not "exceed the reasonable costs" of providing the utility service, but at the end of each fiscal year, the city routinely invokes its power under the city's charter to, via multiple steps, transfer the "surplus" in the utility's revenue fund—the amount left over after paying all "outstanding demands and liabilities" which, if transferred, will not have a "material negative impact" on the utility's "financial condition" (L.A. Charter, section 344(b))—to the city's general fund. Plaintiff filed suit against the city defendants, alleging that this routine practice by the city constitutes a "tax" that requires voter approval.The Court of Appeal affirmed the trial court's dismissal of the action challenging the practice as being an unlawful "tax." The court held that the city's alleged, ongoing practice of transferring a “surplus” from the DWP's revenue fund to the city's General Fund where, as also alleged, the rates charged by the DWP to its customers nevertheless do not exceed the costs of providing electricity to them, does not constitute a "tax" for three reasons. First, the practice does not satisfy the definition of a "tax" under the plain language of the California Constitution. Second, this conclusion is the one that best accords with the purpose behind the Constitution's restrictions on local taxation, namely to stop local governments from extracting even more revenue from California taxpayers. Third, Citizens for Fair REU Rates v. City of Redding (2018) 6 Cal.5th 1, strongly suggests that the city's yearly transfers of surplus funds do not constitute a "tax" when they do not cause the DWP's rates to exceed its costs of providing electricity. In this case, because plaintiff will be bound in any future amended complaints by the same verified allegations that doom his claims now, the court concluded that he cannot cure these defects by amendment and the trial court properly sustained the demurrer without leave to amend. View "Humphreville v. City of Los Angeles" on Justia Law

The Supreme Court reversed the judgment of the circuit court affirming the Pulaski County Assessor's denial of the Little Rock Municipal Airport Commission's tax exemption for three land parcels, holding that because the Airport used the unleased properties exclusively for public purposes, they were exempt from taxation.After the Assessor denied the Airport's application for tax exemptions the Airport filed four amended complaints. The circuit court granted the Assessor's motion for summary judgment, concluding that the properties were not exempt from taxation. The Supreme Court reversed, holding (1) the Airport directly used the subject properties exclusively for public purposes when the properties were unleased; and (2) therefore, the properties exempt from taxation during the periods were they were unleased. View "City of Little Rock v. Ward" on Justia Law

The Supreme Court reversed in part the judgment of the circuit court denying the motion for summary judgment filed by Appellant Bear Chaney, in his official capacity as the Director of the Arkansas Assessment Coordination Division (AACD) of the State of Arkansas, holding the the circuit court erred as a matter of law in finding that Appellant was not entitled to sovereign immunity.Appellees appealed the county court's rulings denying their claims challenging the assessed values of their working interests as determined by the county assessor and added claims for injunctive relief against Chaney in his official capacity as the director of the AACD. Chaney moved for summary judgment, arguing that the claims against him were barred. The circuit court denied the motion. The Supreme Court reversed in part and dismissed in part, holding (1) the circuit court erred as a matter of law in finding that Chaney was not immune from suit; and (2) Chaney's argument that the circuit court lacked subject matter jurisdiction to award injunctive relief against him was outside the scope of this interlocutory appeal. View "Chaney v. Union Producing, LLC" on Justia Law

Plaintiff filed suit against Fresno Unified and the Contractor, alleging that they violated California's competitive bidding requirements, the statutory and common law rules governing conflicts of interest, and Education Code sections 17406 and 17417. Based on the Court of Appeal's review of the four corners of the construction agreements and resolution of Fresno Unified’s board, the court concluded that plaintiff properly alleged three grounds for why Education Code section 17406's exception to competitive bidding did not apply to the purported lease-leaseback contracts. The court also concluded that California's statutory and common law rules governing conflicts of interest extended to corporate consultants and plaintiff alleged facts showing Contractor participated in creating the terms and specifications of the purported lease-leaseback contracts and then became a party to those contracts. After remand, the further proceedings included defendants' motion for judgment on the pleadings, which argued the lawsuit had become moot because the construction was finished and the contracts terminated. The trial court agreed.The Court of Appeal reversed, holding that defendants and the trial court erroneously interpreted plaintiff's lawsuit as exclusively an in rem reverse validation action. Rather, plaintiff is pursuing both a validation action and a taxpayer action. In this case, plaintiff asserts violations of California's competitive bidding laws and Education Code sections 17406 and 17417 along with conflicts of interest prohibited by Government Code section 1090 and common law principles. The remedy of disgorgement is available under these counts asserted in plaintiff's taxpayer's action even though the Construction Contracts are fully performed. Therefore, the counts in plaintiff's taxpayer's action seeking disgorgement are not moot. The panel remanded for further proceedings. View "Davis v. Fresno Unified School District" on Justia Law

The Supreme Court affirmed the decision of the Administrative Hearing Commission (AHC) determining that SEBA, LLC was liable for unpaid state sales tax, statutory interest, and a five percent addition to tax owed as assessed by the director of revenue, holding that the AHC's decision was supported by substantial and competent evidence on the record.The AHC determined that SEBA was liable for unpaid sales tax in the amount of $38,540, minus the sales tax assessed on $26,567 in income generated from SEBA's exempt sales to three organizations the auditor initially included. The AHC found SEBA liable for five percent statutory interest because it was was negligent in reporting its taxable sales. The Supreme Court affirmed, holding that substantial and competent evidence supported the AHC's decision. View "SEBA, LLC v. Director of Revenue" on Justia Law

In 2011, Folajtar pled guilty to a federal felony: willfully making a materially false statement on her tax returns, which is punishable by up to three years’ imprisonment and a fine of up to $100,000, 26 U.S.C. 7206(1). She was sentenced to three years’ probation, including three months of home confinement, a $10,000 fine, and a $100 assessment. She also paid the IRS over $250,000 in back taxes, penalties, and interest. Folajtar was then subject to 18 U.S.C. 922(g)(1), which prohibits those convicted of a crime punishable by more than one year in prison from possessing firearms.Folajtar sued, asserting that applying section 922(g)(1) to her violated her Second Amendment right to possess firearms. The district court dismissed, finding that Folajtar did not state a plausible Second Amendment claim because she was convicted of a serious crime. The Third Circuit affirmed, noting the general rule that laws restricting firearm possession by convicted felons are valid. There is no reason to deviate from this long-standing prohibition in the context of tax fraud. View "Folajtar v. Attorney General of the United States" on Justia Law