Justia Tax Law Opinion Summaries

In 2007, the Mississippi Department of Revenue (the Department) notified Caesars Entertainment, Inc. (Caesars), that an examination concerning its past tax returns, including its 2005 tax return, had been initiated and that the statutes of limitation in Mississippi Code Sections 27-7-49 and 27-13-49 were arrested. The Department concluded its examination on in early 2013, finding no overpayment or underpayment by Caesars. In February 2014, the Mississippi Supreme Court issued a decision that concerned a casino’s ability to use gaming license credits to offset its income tax liability. In response, Caesars filed an amended tax return seeking a refund for the period January 1 to June 13, 2005. The Department denied Caesars’ refund claim on the basis that the time to ask for a refund had expired. Both the Board of Review and Board of Tax Appeals affirmed the Department’s denial. Under Mississippi Code Section 27-77-7 (Rev. 2017), Caesars appealed the Department’s denial to the Chancery Court of the First Judicial District of Hinds County. Both parties moved for summary judgment. The chancellor granted the Department’s motion for summary judgment, finding that Caesars’ refund claim was untimely. On appeal to the Mississippi Supreme Court, Caesars argued Section 27-7-49(2) (Rev. 2017) extended the statute of limitations found in Section 27-7-313 (Rev. 2017), which gave a taxpayer additional time to file a refund claim after an audit and gave the Department additional time to determine a taxpayer’s correct tax liability and to issue a refund regardless of when a refund claim was submitted. The Department argued Section 27-7-49(2) applied only to the Department and its time frame to examine and issue an assessment. After review, the Supreme Court found Caesars' time to file an amended tax refund claim was not tolled or extended, and that the Department had three years to examine a taxpayer's tax liability, absent exceptions under Section 27-7-49. Therefore, the Court affirmed the chancellor's grant of summary judgment to the Department. View "Caesars Entertainment, Inc. v. Mississippi Department of Revenue" on Justia Law

The Supreme Court affirmed the decision of the circuit court affirming the assessed value of Appellants' agricultural land by the Meade County Commission sitting as a board of equalization (the Board), holding that the circuit court did not err.Before the Board, Appellants argued that the director of equalization incorrectly applied statutory provisions to determine their land's production value. The Board further adjusted the assessment from an average of $519 per acre down to an average of $512 per acre. Appellants appealed the Board's decision to circuit court. After a trial de novo, the circuit court affirmed the Board's tax assessment of the property. The Supreme Court affirmed, holding that the circuit court did not err when it determined that (1) the Board complied with the statutory provisions for evaluating agricultural land in their assessment of Appellants' property; and (2) the Board's tax assessment of the property did not violate provisions of the South Dakota Constitution that require uniform taxation at no more than its actual value. View "Trask v. Meade County Commission" on Justia Law

The Supreme Court held that Lockheed Martin Corporation's receipts from the sales of F-16 fighter jets to the U.S. government were improperly sourced to Texas for purposes of calculating its Texas franchise tax, holding that Lockheed Martin demonstrated its entitlement to a refund of franchise taxes.The fighter jets at issue were manufactured in Fort Worth and destined for foreign-government buyers. In accordance with federal law, the foreign buyers contracted with the U.S. government to purchase the jets, and the U.S. government contracted with Lockheed Martin. Lockheed Martin filed for a refund of the portion of its franchise taxes for the tax years 2005 through 2007 attributable to the sales of the F-16 aircraft. The Comptroller denied the claim, and Lockheed Martin brought this suit. The trial court rendered judgment for the Comptroller, and the court of appeals affirmed. The Supreme Court reversed, holding (1) Lockheed Martin's "sale" of each F-16 was to the respective foreign-government "buyer" for whom the aircraft was manufactured, and the government's involvement had no bearing on whether to apportion the receipts from that sale to Texas; and (2) the F-16s were delivered to the "buyers" outside of Texas, and therefore, the receipts from the sales of those aircraft were not properly sourced to Texas. View "Lockheed Martin Corp. v. Hegar" on Justia Law

Walby was born in Michigan, and, in 2014-2018, lived and worked in Michigan. For the 2014 taxable year, Walby’s employer, Baker, withheld $9,751.60 in federal income taxes. In 2015, Walby claimed exemption from all withholdings and executed an “Affidavit of Citizenship,” which she submitted to the State Department, declaring that she was a sovereign citizen of the state of Michigan and, “because she was not restricted by the 14th Amendment ... she was not a United States citizen thereunder but rather a nonresident alien not subject to income taxes.” In 2016, at the direction of the IRS, Baker resumed withholding. Walby did not file federal tax returns for 2014–2018 but, in 2019, filed claims for refunds of the taxes withheld from her 2014 and 2016–2018 paychecks.The Federal Circuit affirmed the dismissal of Walby’s tax refund lawsuit concerning her 2014 return as untimely. A timely administrative refund claim must be filed within two years of the taxes being paid. The claims for the years 2016–2018 were timely but were properly dismissed as meritless. Walby could not establish a loss of U.S. nationality and even if she were a nonresident alien, Walby qualified as a U.S. resident for tax purposes under I.R.C. 7701 by virtue of her substantial presence. The court rejected a request for sanctions. View "Walby v. United States" on Justia Law

Inmates in county jails in nine California counties challenged the exorbitant commissions paid by telecommunications companies to the nine counties under contracts giving the telecommunications companies the exclusive right to provide telephone service for the inmates. The inmates contend that the fees are unlawful taxes under Proposition 26.The Court of Appeal affirmed the trial court's decision sustaining a demurrer by the counties without leave to amend, because the inmates do not have standing to contend the commissions are an unconstitutional tax. The court explained that no precedents support the inmates' claim that a consumer who pays charges to a third party vendor—including one that has inflated its prices to recover the cost of a tax it pays to a local government—has standing to seek a refund of those charges from the taxing authority. Finally, the court rejected the inmates' claims under Government Code section 11135 and the Bane Act. View "County Inmate Telephone Service Cases" on Justia Law

Under 26 U.S.C. 2036(a)(1), a grantor's interest in a grantor-retained annuity trust (GRAT) is a sufficient "string" that requires the property interest to be included in the gross estate. The Ninth Circuit affirmed the district court's grant of summary judgment to the IRS in an action brought by plaintiff, challenging the inclusion of her mother's GRAT in a gross estate for purposes of the estate tax. The panel explained that the annuity flowing from a GRAT falls within the class intended to be treated as substitutes for wills by section 2036(a)(1). In this case, the panel held that the grantor retains enjoyment of a GRAT and thus it is properly included in the gross estate. Finally, even if plaintiff's challenges to 26 C.F.R. § 20.2036-1(c)(2), which includes the formula the IRS uses to calculate the portion of the property includable under section 2036(a) were not waived, the formula would not apply in this case. View "Badgley v. United States" on Justia Law

After C&W failed to remit employment taxes, the IRS assessed the balance owed against C&W's former's owner. C&W's former owner filed suit alleging that the IRS misallocated funds it had levied from C&W, leaving him personally liable for the outstanding taxes.The Eighth Circuit affirmed the district court's dismissal of the complaint based on lack of subject matter jurisdiction. The court held that because the owner argued that his payment was made in 2006 when the IRS allegedly misallocated levied funds, his attempted administrative claim in 2015 was more than two years after the tax was paid. Therefore, the owner's claim was untimely and the United States retains its sovereign immunity. View "Barse v. United States" on Justia Law

The IRS served a John Doe summons on the Texas Law Firm, which provides tax-planning advice, seeking documents for “U.S. taxpayers," who, during specified years, used the Firm's services "to acquire, establish, maintain, operate, or control" a foreign financial account, asset, or entity or any foreign or domestic financial account or assets in the name of such foreign entity. A John Doe summons, described in 26 U.S.C. 7609(c)(1), does not identify the person with respect to whose liability the summons is issued. The government made the required showings that the summons relates to the investigation of a particular person or ascertainable group or class, there is a reasonable basis for believing that such person or group or class may fail or may have failed to comply with any provision of internal revenue law, and the information sought and the identity of the person or persons is not readily available from other sources. The Firm moved to quash, claiming that, despite the general rule a lawyer’s clients’ identities are not covered by the attorney-client privilege, an exception exists where disclosure would result in the disclosure of confidential communication.The Fifth Circuit affirmed in favor of the government. Blanket assertions of privilege are disfavored. The Firm's clients’ identities are not connected inextricably with privileged communication. If the Firm wishes to assert privilege as to any responsive documents, it may do so, using a privilege log to detail the foundation for each claim. View "Taylor Lohmeyer Law Firm. P.L.L.C. v. United States" on Justia Law

Wells Fargo, a U.S. corporation, entered into a structured trust advantaged repackaged securities transaction (STARS) with Barclays, a United Kingdom corporation. Wells Fargo asserts its purpose was to borrow money at a favorable interest rate, to diversify its funding sources, to reduce its liquidity risk, and to provide a stable source of funding for five years. The government claimed that STARS was an unlawful tax avoidance scheme, designed to exploit the differences between the tax laws of the two countries and generate U.S. tax credits for a foreign tax that Wells Fargo did not, in substance, pay. Wells Fargo claimed foreign-tax credits on its 2003 federal tax return arising from STARS. The IRS disallowed those credits and notified Wells Fargo that it owed additional taxes. Wells Fargo paid the resulting deficiency and sued to obtain a refund. The government sought to impose a “negligence penalty” as an offset defense because Wells Fargo underpaid its 2003 taxes after claiming this credit.The Eighth Circuit affirmed that Wells Fargo was not entitled to a tax credit and was liable for a “negligence penalty.” The "sham-transaction" or "economic-substance" doctrine allows the IRS and courts “to distinguish between structuring a real transaction in a particular way to obtain a tax benefit, which is legitimate, and creating a transaction to generate a tax benefit, which is illegitimate.” STARS’s trust component had no real potential for profit outside of its tax implications and Wells Fargo had no valid purpose other than tax considerations. View "Wells Fargo & Company v. United States" on Justia Law

GMI is the parent corporation of several partners of General Mills, an LLC that is treated as a partnership for tax purposes (the Partnership). GMI alleges that after certain partnership-level audits of the Partnership’s returns for the 2002–2006 tax years were settled with the IRS, the IRS erroneously collected $5,958,695 in “large corporate underpayments” (LCU) interest (I.R.C. 6621(c)), by selecting incorrect “applicable dates” to start interest accrual. GMI paid the interest and filed unsuccessful administrative refund claims, then sued the government. The Claims Court dismissed for lack of subject matter jurisdiction, concluding that GMI failed to file its claims within the six-month limitations period, I.R.C. 6230(c). GMI argued that the general two-year tax refund limitations period (I.R.C. 6511(a)) applied. Section 6230(c) provides that “[a] partner may file a claim for refund on the grounds that . . . the [IRS] erroneously computed any computational adjustment necessary . . . to apply to the partner a settlement” and that any such claim “shall be filed within 6 months after the day on which the [IRS] mails the notice of computational adjustment to the partner.”The Federal Circuit affirmed. The essence of GMI’s challenge is to the IRS’s computation of the change in its tax liability resulting from the Partnership’s settlement of partnership items; interest was “clearly contemplated” as part of the Partnership settlement agreements. GMI received adequate notice but filed its refund claims well outside the six-month period, View "General Mills, Inc. v. United States" on Justia Law