Justia Tax Law Opinion Summaries

For more than a decade, Van Den Heuvel received cash payments from VHC, a company founded by his father and owned by his family. These payments primarily supported Ron’s business ventures but also helped him pay personal taxes and cover other personal expenses. Ron did not pay VHC back. The company wrote down these payments as “bad debts” for which it received tax deductions. After a years-long audit, the IRS concluded that VHC never intended to be paid back and that these payments were not bona fide debts qualifying for the deduction under either 26 U.S.C 166 or 162.The Tax Court upheld this determination and rejected VHC’s alternative theories as to why the payments qualified for a deduction. The Seventh Circuit affirmed.VHC bears the burden of demonstrating that its payments to Ron were bona fide debts that arose from a debtor-creditor relationship in which it expected Ron to pay VHC back in full. VHC has not shown that it presented such evidence to the Tax Court or that the Tax Court made grave errors in its evaluation of the evidence. View "VHC, Inc. v. Commissioner of Internal Revenue" on Justia Law

Petitioners PeaceHealth St. Joseph Medical Center and PeaceHealth St. John Medical Center (PeaceHealth) argued that, under RCW 82.04.4311’s plain language, qualifying Washington hospitals were entitled to a business and occupation (B&O) tax refund and deduction on compensation they receive from any state’s Children’s Health Insurance Programs (CHIP) or Medicaid programs, not just Washington’s. Alternatively, PeaceHealth contended that by excluding compensation that qualifying Washington hospitals receive from other states’ CHIP and Medicaid programs, the Washington Department of Revenue (Department) unlawfully penalized those hospitals that served out-of-state patients, thus violating the dormant Commerce Clause of the United States Constitution. In holding that RCW 82.04.4311’s deduction excluded compensation that qualifying hospitals receive from other states’ CHIP and Medicaid programs, the Court of Appeals used the "series-qualifier" rule of statutory construction in lieu of the last antecedent rule. To this, the Washington Supreme Court held the Court of Appeals properly applied the series-qualifier rule to delimit the scope of RCW 82.04.4311’s deduction, thus affirming the Court of Appeals’ reasoning on this issue. Additionally, because the Supreme Court found that RCW 82.04.4311 supported a traditional government function without any differential treatment favoring local private entities over similar out-of-state interests, the Supreme Court held that RCW 82.04.4311 was constitutional under the government function exemption to the dormant Commerce Clause. View "Peacehealth St. Joseph Med. Ctr. v. Dep't of Revenue" on Justia Law

The Supreme Court affirmed but on different grounds the summary judgment granted by the district court ruling that the equitable doctrine of unjust enrichment precluded the claim brought by Mountain Water Company for a general property tax refund on taxes that accrued during the pendency of a condemnation action initiated by the City of Missoula, holding that Mountain Water contractually waived its right to property tax proration and reimbursement from or against the City under Mont. Code Ann. 70-30-315.Specifically, the Supreme Court held (1) the district court erred in concluding that the doctrine of unjust enrichment precluded relief on Mountain Water's claim for property tax proration and relief under Mont. Code Ann. 70-30-315; (2) the district court erred in concluding that, but for application of equitable unjust enrichment, section 70-30-315 would entitle Mountain Water to a general property tax refund under Mont. Code Ann. 15-1-402(1)-(2), (6)(b)(i) and -406(1)-(3); (3) Mountain Water contractually waived its right to property tax proportion and reimbursement from the City under section 70-30-315; and (4) the district court correctly concluded that Mountain Water's subsequent assertion of a general property tax refund claim did not breach the parties' 2017 condemnation action settlement agreement. View "Mountain Water v. Department of Revenue" on Justia Law

The DC Circuit denied petitions for review challenging FERC's orders concerning SFPP's tariffs. SFPP challenges FERC's decisions to deny SFPP an income tax allowance, to decline to reopen the record on that issue, and to deny SFPP's retroactive adjustment to its index rates. Shippers challenge FERC's disposition of SFPP's accumulated deferred income taxes (ADIT) and its temporal allocation of litigation costs.The court held that FERC's denial of an income tax allowance to SFPP was both consistent with the court's precedent and well-reasoned, and that FERC did not abuse its discretion or act arbitrarily in declining to reopen the record on that issue. Furthermore, FERC reasonably rejected retroactive adjustment to SFPP's index rates. The court also held that FERC correctly found that the rule against retroactive ratemaking prohibited it from refunding or continuing to exclude from rate base SFPP's ADIT balance, and that FERC reasonably allocated litigation costs. View "SFPP, LP v. Federal Energy Regulatory Commission" on Justia Law

The New Jersey Business Employment Incentive Program provides cash grants for companies willing to relocate or expand to New Jersey. A company receiving the grant must maintain a minimum number of employees and remain at the new location for a certain time period but there are no restrictions on how the company can use the grant, which is calculated as a percentage of state income taxes withheld from the wages of the company’s employees at the new location. In 2011, Garban’s offices in the World Trade Center were destroyed, and First Brokers’ nearby offices were rendered uninhabitable. Both companies, subsidiaries of BrokerTec, entered into agreements for 10-year Incentive Program grants. From about 2004-2013, the state paid BrokerTec about $170 million, which was used to purchase stock to expand into other trading markets.In 2010-2013, the companies' consolidated tax returns excluded $56 million in grant payments as non-taxable, non-shareholder contributions to capital under 26 U.S.C. 118. The IRS issued a deficiency notice. The Tax Court held that the grants were capital contributions. The Third Circuit reversed. Because the state did not restrict how BrokerTec could use the cash and because the grants were calculated based on the amount of income tax revenue that the new jobs would generate—the grants were taxable income, not contributions to capital. View "Commissioner of Internal Revenue v. Brokertec Holdings Inc" on Justia Law

The Eighth Circuit affirmed the district court's dismissal of Boechler's petition for review of a notice of determination from the Commissioner of the IRS based on lack of jurisdiction. Under 26 U.S.C. 6330(d)(1), a party has 30 days to file a petition for review. In this case, Boechler filed one day after the filing deadline had passed.The court held that the statutory text of section 6330(d)(1) is a rare instance where Congress clearly expressed its intent to make the filing deadline jurisdictional. The court also held that Boechler failed to demonstrate that the filing deadline is arbitrary and irrational. Rather, given the rational reasons for the calculation method, and Boechler's inability to identify any actual discrimination or discriminatory intent, the court held that the 30-day filing deadline from the date of determination does not violate the Fifth Amendment. Therefore, Boechler's petition was untimely and thus properly dismissed. View "Boechler, P.C. v. Commissioner" on Justia Law

Rafaeli, LLC, and Andre Ohanessian brought an action against Oakland County, Michigan, and its treasurer, Andrew Meisner, alleging due-process and equal-protection violations as well as an unconstitutional taking of their properties. Rafaeli owed $8.41 in unpaid property taxes from 2011, which grew to $285.81 after interest, penalties, and fees. Defendants foreclosed on Rafaeli’s property for the delinquency, sold the property at public auction for $24,500, and retained all the sale proceeds in excess of the taxes, interest, penalties, and fees. Ohanessian owed approximately $6,000 in unpaid taxes, interest, penalties, and fees from 2011. Like Rafaeli’s property, defendants foreclosed on Ohanessian’s property for the delinquency, sold his property at auction for $82,000, and retained all the proceeds in excess of Ohanessian’s tax debt. Plaintiffs specifically alleged that defendants, by selling plaintiffs’ real properties in satisfaction of their tax debts and retaining the surplus proceeds from the tax-foreclosure sale of their properties, had taken their properties without just compensation in violation of the Takings Clauses of the federal and Michigan Constitutions. The circuit court granted summary disposition to defendants, finding that defendants did not “take” plaintiffs’ properties because plaintiffs forfeited all interests they held in their properties when they failed to pay the taxes due on the properties. The court determined that property properly forfeited under the General Property Tax Act (GPTA), MCL 211.1 et seq., and in accordance with due process is not a “taking” barred by either the United States or Michigan Constitution. In an unpublished per curiam opinion, the Court of Appeals affirmed. The Michigan Supreme Court reversed, finding that defendants’ retention of those surplus proceeds was an unconstitutional taking without just compensation under Article 10, section 2 of the Michigan 1963 Constitution. View "Rafaeli, LLC v. Oakland County" on Justia Law

The Second Circuit affirmed the tax court's determination that petitioners held Wrentham House, a historic mansion in Newport, Rhode Island, as a capital asset eligible for capital loss deduction rather than as real property used in a taxpayer's trade or business eligible for ordinary loss deduction.The court held that the tax court did not err in determining that (i) petitioners held Wrentham House as a capital asset at the time of its sale and were therefore eligible upon its sale to deduct the loss only as a capital loss, and that (ii) petitioners were liable for late-filing additions to tax and accuracy-related penalties. View "Keefe v. Commissioner" on Justia Law

The San Mateo County Assessment Appeals Board invalidated escape assessments imposed by the County Assessor based on the value of machinery and equipment (M&E) at Genentech’s San Mateo County facility. The fair market value of the M&E on which property tax is imposed is determined with reference to either the cost of equipment purchased in a finished state or, if the equipment is not purchased in a finished state, costs incurred to bring the equipment to a finished state. The Board determined that Genentech purchased all of the M&E in a finished state and that the assembly of the equipment into a production line did not render the equipment “self-constructed property” justifying the inclusion of the additional costs in determining fair market value. The trial court determined that none of the equipment was in a finished state until put to use in a functioning production line and that the additional costs capitalized for accounting purposes add to the value of the property for purposes of the property tax.The court of appeal reversed. The trial court adopted a standard for determining when equipment is in a finished state for which there is no justification, and erroneously rejected Board findings that are supported by substantial evidence. Fair market value and net book value are separate concepts with separate purposes; the assessor may not rely on Genentech’s capitalization of expenses for accounting purposes to establish that those expenses increase the value of the equipment and are subject to assessment. View "Church v. San Mateo County Assessment Appeals Board" on Justia Law

Blake, who has an MBA, engaged in a fraudulent tax scheme but claims unnamed users in internet chat rooms persuaded him to pursue his hidden federal “legacy trusts.” Blake filed eight different individual tax returns using fraudulent information, at one point faking his own death. He was convicted of presenting a false or fictitious claim to a U.S. agency, 18 U.S.C. 287, and theft of government money, 18 U.S.C. 641. Blake’s base offense level was six; 16 levels were added for an intended loss in excess of $1.5 million (U.S.S.G. 2B1.1(b)(1)(I)). Two more levels were added for obstruction of justice (3C1.1). Blake’s guidelines range was 51–63 months' imprisonment. Blake objected to including in the loss calculation $900,000 in claimed refunds in the 2008–2010 filings, arguing he was not responsible for those filings. He also claimed $300,000 should be the intended loss amount because he intended to obtain only his “legacy trust” funds which he believed were about that amount. Under Blake’s calculations, his guidelines range was 33–41 months.The district court rejected his arguments. The Seventh Circuit affirmed his sentence of 36 months in prison plus restitution. The district court did not commit reversible error. Blake's ineffective assistance of counsel claim was dismissed without prejudice as “better raised on collateral review.” View "United States v. Blake" on Justia Law