Justia Tax Law Opinion Summaries

Horsehead is a Delaware corporation, with its primary place of business in Pennsylvania, that has an Illinois manufacturing facility. Tax liability notices were issued due to Horsehead’s failure to pay Illinois use tax (35 ILCS 105/1) on its out-of-state purchases of metallurgical coke in 2007-2011. Horsehead argued that it was exempt from paying use tax on the coke under section 3-5(18) of the Use Tax Act for machinery and equipment used primarily in the manufacturing of tangible personal property, specifically citing the “chemical exemption.” The Illinois Independent Tax Tribunal affirmed the notices and the imposition of use tax, interest, late filing penalties, and late payment penalties totaling $1,521,041. The appellate court affirmed. The Illinois Supreme Court affirmed in part. Based upon the plain language of section 3-50(4), the legislature chose to limit the exemption to only those chemicals that cause a “direct and immediate change” on the final manufactured product. At no time in the described chemical processes and reactions does the coke have a direct and immediate effect on the zinc or iron being manufactured. The broad interpretation of the use tax chemical exemption urged by Horsehead would result in virtually any chemical used in the manufacturing process qualifying for the exemption. View "Horsehead Corp. v. Department of Revenue" on Justia Law

The Supreme Court affirmed the decision of the administrative hearing commission determining that certain pain treatment service items used in compounding medications do not fall under the use tax exemption in Mo. Rev. Stat. 144.054.2 for materials used or consumed in compounding a product, holding that the commission correctly determined that the Interventional Center for Pain Management (Center) did not qualify for the compounding exemption under section 144.054.2.The director of revenue assessed $69,311 in tax liability for a five-year period against Center after discovering that Center did not file a use tax return or pay use tax on certain out-of-state purchases. Center contested use tax liability for certain items used for the injection of prescription drug compounds, asserting that the devices were exempt from use tax as materials used in compounding operation under section 144.054.2. The administrative hearing petition upheld the assessment. The Supreme Court affirmed, holding that Center failed to meet its burden of proof to prove its purchases were used in the compounding of a product for sale, as required for the compounding exemption under section 144.054.2. View "Interventional Center for Pain Management v. Director of Revenue" on Justia Law

The Supreme Court dismissed this appeal from the trial court's conclusion that Plaintiff was entitled to a credit for income taxes that he paid in New York, thus reversing in part the decision of the Commissioner of Revenue Services assessing personal income tax deficiencies against Plaintiff, holding that the appeal was moot because the Commissioner failed to challenge an independent basis for the trial court's ruling.Plaintiff was a general partner who lived in Connecticut and managed intangible property owned by limited partnerships operating in New York. The Commission concluded that Plaintiff's income consisted income derived from trading intangible property for Plaintiff's own account, and thus it was taxable in this state. The trial court disagreed, concluding that Plaintiff was not trading intangible property for his own account but was trading intangible property owned by the limited partnerships and thus was entitled to a credit for the income tax that he paid in New York. The Commissioner appealed, challenging only one of the two independent bases for the trial court's decision. The Supreme Court dismissed the appeal as moot as a consequence of the Commissioner's failure to challenge both grounds for the trial court's decision. View "Sobel v. Commissioner of Revenue Services" on Justia Law

First Student, Inc., a school bus contractor, sought to reverse a Court of Appeals decision to affirm dismissal of its business and occupation ("B&O") tax refund action. At issue was whether First Student's transporting of students qualified as transporting persons "for hire" such that it made First Student subject to the public utility tax ("PUT") rather than the general B&O tax. The Washington Supreme Court found the meaning of "for hire" was ambiguous as used in the PUT, but resolved the ambiguity in favor of the long-standing interpretation that school buses were excluded from the definitions of "motor transportation business" and "urban transportation business" under RCW 82.16.010(6) and (12). The Court found that WAC 458-20-180 was a valid interpretation of the statute, and affirmed the Court of Appeals. View "First Student, Inc. v. Dep't of Revenue" on Justia Law

Insurance executive Menzies sold over $64 million in his company’s stock but did not report any capital gains on his 2006 federal income tax return. He alleges that his underpayment of capital gains taxes (and related penalties and interest imposed by the IRS) was because of a fraudulent tax shelter peddled to him and others by a lawyer, law firm, and financial services firms. Menzies brought claims under the Racketeer Influenced and Corrupt Organizations Act (RICO) and Illinois law. The district court dismissed all claims. The Seventh Circuit affirmed in part. Menzies’s RICO claim falls short on the statute’s pattern-of-racketeering element. Menzies failed to plead not only the particulars of how the defendants marketed the same or a similar tax shelter to other taxpayers, but also facts to support a finding that the alleged racketeering activity would continue. A fraudulent tax shelter scheme can violate RICO; the shortcoming here is one of pleading and it occurred after the district court authorized discovery to allow Menzies to develop his claims. Menzies’s Illinois state law claims were untimely as to the lawyer and law firm defendants. The claims against the remaining financial services defendants can proceed. View "Menzies v. Seyfarth Shaw LLP" on Justia Law

Norman, a school teacher, opened a “numbered” Swiss bank account with UBS in 1999. Statements for the account list only the account number, not Norman’s name or address. From 2001-2008, her balance ranged between $1.5 million-$2.5 million. Norman was actively involved in managing and controlling her account. She gave UBS investment instructions and prohibited UBS from investing in U.S. securities on her behalf, which helped prevent disclosure of her account to the IRS. She took withdrawals in cash. In 2008, Norman expressed displeasure when she was informed of UBS’s decision to “no longer provide offshore banking” and to work “with the US Government to identify the names of US clients who may have engaged in tax fraud.” Just before UBS publicly announced this plan, Norman closed her UBS account, transferring her funds to another foreign bank. Under 31 U.S.C. 5314(a), U.S. persons who have relationships with foreign financial agencies are required to file a Report of Foreign Bank and Financial Accounts (FBAR) with the Treasury Department. When the IRS discovered her account during an audit, Norman initially expressed shock to learn that she had a foreign account and subsequently tried to claim that she did not control the account. The Federal Circuit affirmed a Claims Court finding that Norman willfully failed to file an FBAR in 2007 and the IRS properly assessed a penalty of $803,530 for this failure. View "Norman v. United States" on Justia Law

The Gaetanos run a cannabis dispensary. After a failed business transaction, a third party sued the Gaetanos and their attorney, Goodman, and filed a disciplinary complaint against Goodman. An ethics inquiry uncovered multiple violations. Goodman lost his license to practice law. The Gaetanos severed their relationship with him. The IRS later audited the Gaetanos’ tax returns and contacted Goodman for assistance. Goodman threatened the Gaetanos that unless they gave him a “significant down-payment” he would see them “take[n] down”. They did not oblige, Goodman sent menacing emails. The Gaetanos contacted the IRS. Goodman assured the IRS that his information was not privileged but was obtained through on-line searches and a private investigator; he discussed several aspects of the Gaetanos’ business. Goodman then taunted the Gaetanos, who again notified the IRS. The Gaetanos filed suit, seeking to stop the government from discussing privileged information with Goodman and requiring it to destroy attorney-client confidences. The IRS asserted that the court lacked jurisdiction, citing the Anti-Injunction Act, 26 U.S.C. 7421(a). The Sixth Circuit agreed that the Act bars the lawsuit; the “Williams Packing” exception does not apply. The exception requires that the taxpayer show that under no circumstances could the government prevail against their claims and that “equity jurisdiction otherwise exists.” The Gaetanos have not identified any privileged information that Goodman provided to the IRS and have adequate remedies at law. View "Gaetano v. United States" on Justia Law

The Institute filed suit under the Freedom of Information Act (FOIA), seeking information related to all records contained in the IRS's Asset Forfeiture Tracking and Retrieval System (AFTRAK). The DC Circuit reversed the district court's grant of summary judgment for the IRS, holding that whether the Open/Closed Report covers all records "contained in" AFTRAK was itself a material, genuinely disputed question of fact, and the answer in turn depended on other disputed and material facts. The court also held that whether AFTRAK was correctly classified as a database, a matter on which the IRS's Manual and other official documents contradict its legal denial here, appeared to be an intermediate fact with potential consequences for resolving the parties' claims. View "Institute For Justice v. IRS" on Justia Law

In this tax assessment dispute the Supreme Court affirmed in part and reversed and remanded in part the trial court's judgments in two cases consolidated for trial, holding that a real estate appraiser need not be licensed in Virginia to offer expert testimony in a tax assessment dispute and that the taxpayer failed to meet its burden of proving that the assessment overvalued the subject property.Virginia International Gateway, Inc.'s (VIG) believed the assessments for its real and personal property were above fair market value and filed separate applications to correct the 2015-16 real estate and personal property assessments. At trial, VIG offered expert testimony to support its position that the actual fair market value of the real property was lower than the City of Portsmouth's assessment. The trial court did not recognize the appraiser as an expert because he lacked Virginia licensure at the time of trial. The trial court ultimately dismissed both of VIG's applications. The Supreme Court reversed the real estate case but affirmed the personal property case, holding (1) the trial court's exclusion of the appraiser's testimony was an abuse of discretion; but (2) the trial court did not err in ruling that VIG failed to overcome the presumption of the personal property assessment's correctness. View "Virginia International Gateway v. City of Portsmouth" on Justia Law

Defendant County of Placer sold plaintiff Patrick Hodges’s real property at a tax sale. The County later paid plaintiff the excess proceeds remaining from the sale less payments made to others. Plaintiff contended the County, its board of supervisors, and its treasurer breached a fiduciary duty they owed him, and converted his personal property, when they did not audit a payment made from the proceeds to others and did not pay him interest or earnings on its investment of the proceeds while it held them in trust. The trial court sustained the County’s demurrer to plaintiff’s second amended complaint without leave to amend and entered a judgment of dismissal. The trial court determined plaintiff could not state a claim for breach of a fiduciary relationship because no such relationship existed between him and the County. Even if a fiduciary relationship existed, plaintiff did not allege any breach or any damages arising from a breach. The court also found plaintiff could not state a claim for conversion. He did not allege the County committed a wrongful act in withholding the excess proceeds or that it interfered with his possession of the proceeds. After the Court of Appeal concurred with the trial court and affirmed its judgment. View "Hodges v. County of Placer" on Justia Law