Justia Tax Law Opinion Summaries

The Commission issued the Estate a notice of deficiency, determining that the Estate had a $491,750.00 tax liability which differed from the Estate's tax return valuation. The Fifth Circuit affirmed the tax court's decision sustaining the Commission's determinations. The court held that the Estate holds a substituted limited partnership interest in SILP.The court also held that the Notice of Deficiency (including its attachments) fulfills the statutory requirement under 28 U.S.C. 6212. However, even assuming arguendo that the notice description was inadequate, the court could not invalidate it on that basis because Internal Revenue Code 7522(a) explicitly prohibits it from setting aside a notice for lacking the descriptive element. Finally, the court rejected the Estate's argument under the Administrative Procedure Act as without merit. View "Estate of Frank D. Streightoff v. Commissioner" on Justia Law

Torres was a long-time employee at Vitale’s Italian Restaurants located throughout Western Michigan. Although Torres and other Vitale’s employees often worked more than 40 hours per week, they allege that they were not paid overtime rates for those hours. Vitale’s required the workers to keep two separate timecards, one reflecting the first 40 hours of work, and the other, reflecting overtime hours. The employees were paid via check for the first card and via cash for the second. The pay was at a straight time rate on the second card. Torres alleged that employees were deprived of overtime pay and that Vitale’s did not pay taxes on the cash payments.Torres sought damages under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961. The district court dismissed, holding that the remedial scheme of the Fair Labor Standards Act (FLSA), 29 U.S.C. 201, precluded the RICO claim. The Sixth Circuit reversed in part. The claims based on lost wages from the alleged “wage theft scheme” cannot proceed. However, the FLSA does not preclude RICO claims when a defendant commits a RICO-predicate offense giving rise to damages distinct from the lost wages available under the FLSA. The court remanded Torres’s claim that Vitale’s is liable under RICO for failure to withhold taxes. View "Torres v. Vitale" on Justia Law

Oakland requested proposals for franchise contracts regarding garbage and residential recycling services. Following a lawsuit, a settlement provided that WMAC would receive garbage and mixed materials and organics contracts; CWS would receive the residential recycling contract. WMAC and CWS agreed to pay franchise fees to the city, which redesignated part of WMAC’s franchise fee as a fee to compensate the city for the cost of implementing the Alameda County Waste Management Plan, under Public Resource Code 41901. Plaintiffs challenged the fees as improperly imposed taxes under the California Constitution, article XIIIC.The court of appeal affirmed the dismissal of claims concerning the Redesignated Fee as not ripe for adjudication but reversed dismissal as to the franchise fees. A franchise fee, arguably subject to an article XIIIC, section 1(e) exemption, must still be reasonably related to the value of the franchise to be exempt from the “tax” definition. The court cited Proposition 26: To qualify as a nontax ‘fee’ under article XIII C, as amended, a charge must satisfy both the requirement that it be fixed in an amount that is ‘no more than necessary to cover the reasonable costs of the governmental activity,’ and the requirement that ‘the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity. View "Zolly v. City of Oakland" on Justia Law

At issue in this case was the tax status of a 9.9-acre parcel of land containing an 11,500-square-foot garage that was owned and used by Zlotoff Foundation, Inc., a nonprofit charitable organization, for the purpose of storing and maintaining a collection of classic automobiles that it displayed at its nearby museum. The trial court ruled that the garage and the land were tax-exempt because they were used for a public purpose. However, it denied the Foundation’s request for a refund of property taxes paid to the Town of South Hero from 2016 to 2018 because the Foundation did not obtain a certificate of authority allowing it to transact business in Vermont until 2019. The Foundation and the Town both appealed. Finding no reversible error, the Vermont Supreme Court affirmed judgment. View "Zlotoff Foundation, Inc. v. Town of South Hero" on Justia Law

The Supreme Court affirmed the decision of the Administrative Hearing Commission determining that DI Supply I, LLC's room furnishing sales to the Drury Hotels were not exempt from sales tax under the resale exemption in Mo. Rev. Stat. 144.010.1(11), holding that DI Supply failed to meet its burden to prove that the items it sold to Drury Hotels were resold by the hotels.An audit determined that DI Supply failed to remit sales tax on more than $11 million in taxable sales of room furnishings to Drury Hotels during the audit period. DI Supply contested the tax liability, arguing that the items of tangible personal property were purchased for resale to hotel guests and not subject to Missouri local sales or use tax. The Commission upheld $613,159 of the assessment for sales tax and interest. On appeal, DI Supply contested its sales tax liability for sales of room furnishings to Drury Hotels. The Supreme Court affirmed, holding that DI Supply failed to show that Drury Hotels transferred title or ownership of the room furnishings and, therefore, failed to show the applicability of the resale exemption by clear and unequivocal proof. View "DI Supply I, LLC v. Director of Revenue" on Justia Law

Employers Resource Management Company (“Employers”) returned to the Idaho Supreme Court in a second appeal against the Idaho Department of Commerce. In 2014, the Idaho Legislature passed the Idaho Reimbursement Incentive Act (“IRIA”). The Economic Advisory Council (“EAC”), a body created under IRIA to approve or deny tax credit applications, granted a $6.5 million tax credit to the web-based Illinois corporation Paylocity, a competitor to Employers Resource Management Company. Employers claimed Paylocity’s tax credit created an unfair economic advantage. Paylocity, however, had yet to receive the tax credit because it did not satisfy the conditions in the Tax Reimbursement Incentive agreement. Having established competitor standing in Employers Res. Mgmt. Co. v. Ronk, 405 P.3d 33 (2017), Employers argued the Idaho Reimbursement Incentive Act was unconstitutional under the separation of powers doctrine. The district court dismissed Employers’s case upon finding the Act constitutional. Finding no reversible error in that judgment, the Idaho Supreme Court affirmed. View "Employers Resource Mgmt Co v. Kealy" on Justia Law

Plaintiffs filed suit against the Assessor and others, seeking a refund of property taxes and special assessments, and for declaratory relief. The Court of Appeal found no support in statutory or case law for plaintiffs' claim that a nonprofit charter school should be treated as a public school district for purposes of applying the implied exemption, which plaintiffs contend exempts public schools from having to pay both taxes and special assessments.The court explained that the Legislature has specified precisely how, and to what extent, and under which statutory provisions charter schools are deemed to be part of the system of public schools, or deemed to be a school district. Notably absent is any suggestion that charters schools are to be treated like school districts for taxation purposes. The court rejected plaintiffs' claims to the contrary. View "Los Angeles Leadership Academy, Inc. v. Prang" on Justia Law

Holland, a songwriter, sold his song-rights to music companies, in exchange for royalty payments. Holland failed fully to report his income. In 1986-1990, the IRS levied Holland’s royalty assets and recovered $1.5 million. In 1997, the IRS informed him that it intended again to levy those assets. Holland converted his interest in future royalty payments into a lump sum and created a partnership wholly owned by him, to which he transferred title to the royalty assets ($23.3 million). The partnership borrowed $15 million, for which the royalty assets served as collateral. Bankers Trust paid $8.4 million directly to Holland, $5 million in fees, and $1.7 million for Holland’s debts, including his taxes. The IRS did not assess any additional amounts against Holland until 2003. In 2005, the partnership refinanced the 1998 deal, using Royal Bank. In 2012, the IRS concluded that the partnership held the royalty assets as Holland’s alter ego or fraudulent transferee and recorded a $20 million lien against the partnership.In an enforcement suit, the partnership sold the royalty assets. The proceeds ($21 million) went into an interpleader fund, to be distributed to the partnership’s creditors in order of priority. The government’s lien ($20 million), if valid against the partnership, would take priority over Royal Bank’s security interest. The Sixth Circuit affirmed a judgment for Royal Bank. Transactions to monetize future revenue, using a partnership or corporate form, are common and facially legitimate. Holland received adequate consideration in 1998. The IRS’s delay in making additional assessments rather than the 1998 transfer caused the government’s collection difficulties. View "United States v. Holland" on Justia Law

Rogers designed and implemented a scheme to generate artificial but tax‐deductible losses for high‐income U.S. taxpayers. The “DAD” scheme worked through a partnership’s acquisition of highly distressed or uncollectible accounts receivable from retailers located in Brazil and subsequent conveyance of interests in the receivables to U.S. taxpayers, who deemed them uncollectible and used the concocted loss to reduce their tax liability. DAD schemes were outlawed in the American Jobs Creation Act of 2004. Rogers then devised a modified transactional structure employing trusts.The Seventh Circuit agreed with the Tax Court that the structural modifications only perpetuated fraudulent tax avoidance and that the Sugarloaf partnership was a sham before and after purported changes. All of Sugarloaf’s income for 2006, 2007, and 2008 should be allocated to an entity wholly owned by Rogers that served as Sugarloaf’s tax matters partner. The court warned that the IRS, Tax Court, and Seventh Circuit “have devoted substantial resources over multiple proceedings to deciphering foreign and domestic transactions, understanding complex tax structures, and separating the fair from the fraud. None of this has gone well for Rogers or his partnership, the Sugarloaf Fund ... caution to those who persist in pressing claims lacking any merit.” View "Sugarloaf Fund, LLC v. Commissioner of Internal Revenue" on Justia Law

In this tax dispute, the Supreme Court reversed the final decision of the Office of Administrative Hearings (OAH) entering summary judgment in favor of Graybar Electric Company, Inc., holding that dividends deducted on a corporation's federal corporate income tax return under the dividends-received deduction (DRD) of section 243 of the Internal Revenue Code do constitute "income not taxable" for purposes of calculating the corporation's net economic loss (NEL) deduction under N.C. Gen. Stat. 105-130.8(a) for North Carolina corporate income tax purposes.The Department found that the dividends received constituted "income not taxable" and that, therefore, Graybar was required to reduce its NEL deductions by the amount of the dividends apportioned to North Carolina. On appeal, (OAH) entered summary judgment for Graybar, holding that the dividends were taxable as a matter of law and were not "income not taxable." The Supreme Court reversed, holding (1) the dividends deducted pursuant too I.R.C. 243(a)(3) were "income not taxable" under section 105-130.8(a)(3); and (2) therefore, Graybar failed to bring itself within the statutory provisions authorizing the NEL deduction calculation it sought. View "North Carolina Department of Revenue v. Graybar Electric Co." on Justia Law