Tax Law - Justia Case Law Summaries

USA v. Aumiller

2026-07-01T09:00:12-08:00

Between 2011 and 2017, the Internal Revenue Service sought to collect unpaid taxes from an individual and his business. The individual was indicted on two counts of tax evasion. The indictments alleged that, among other acts, he attempted to evade the collection of taxes by using a bank account that was not disclosed to the IRS, and specifically by submitting financial disclosure forms that omitted these accounts when disclosure was required. The case was first heard in the United States District Court for the Middle District of Pennsylvania. The defendant moved to dismiss the indictments, arguing that the government had not alleged or proven an affirmative act of evasion within the applicable six-year statute of limitations. The District Court denied these motions. At trial, the government presented evidence that the defendant had knowingly failed to disclose certain bank accounts on forms submitted to the IRS within the limitations period. After the government’s case, the defendant’s motion for judgment of acquittal was denied. The jury found him guilty on both counts. On appeal, the United States Court of Appeals for the Third Circuit reviewed the District Court’s denials. The Third Circuit held that intentionally filing forms with the IRS that omitted required disclosure of bank accounts constitutes an affirmative act of tax evasion under 26 U.S.C. § 7201. The court found that the indictments, together with the bill of particulars, sufficiently identified this conduct within the statute of limitations. It also held that there was sufficient evidence for a rational jury to find guilt beyond a reasonable doubt. The Third Circuit affirmed the judgment of the District Court. View "USA v. Aumiller" on Justia Law

Estate of Walsh v. Commissioner of Revenue

2026-07-01T05:10:05-08:00

Caroline H. Walsh passed away in January 2012, and her son, John H. Walsh, was appointed executor of her estate. He was responsible for filing the Massachusetts estate tax return and paying the taxes by October 2012. Walsh hired an accountant who died unexpectedly, then worked with two other accountants over several years, but delays persisted due to Walsh’s failure to provide necessary documents and dissatisfaction with property appraisals. Ultimately, the estate tax return was filed nearly seven years late, along with the tax owed and a request for abatement of interest and penalties. No extension to file or pay had ever been requested. The Commissioner of Revenue assessed over $145,000 in interest and $112,327.10 in penalties for late filing and late payment. The estate’s abatement request was denied, and it appealed to the Massachusetts Appellate Tax Board. After a hearing, the Board found that Walsh did not demonstrate reasonable cause for the delays, citing evidence that Walsh had failed to provide requested information and noting the absence of credible justification for the late filing. The Board affirmed the Commissioner’s decision. The Supreme Judicial Court of Massachusetts reviewed the appeal, addressing constitutional and statutory arguments. The Court held that the interest assessed was remedial, not punitive, and thus not a “fine” under the excessive fines clauses of the Eighth Amendment or Article 26. Even assuming the penalties were fines, the Court found they were not grossly disproportional to the offense. The Court also rejected claims that the Board’s structure violated separation of powers or that a jury trial was required. Finally, it held that statutory caps on penalties did not limit the accrual of interest. The Court affirmed the Board’s decision. View "Estate of Walsh v. Commissioner of Revenue" on Justia Law

PENN Entertainment, Inc. v. Department Of State Revenue

2026-06-29T13:35:07-08:00

A corporation operating casinos in multiple states deducted both apportioned state income taxes and unapportioned wagering excise taxes on its federal tax returns. For Indiana tax years 2015–2017, it added back to its Indiana adjusted gross income the deduction for state-level apportioned net income taxes, as required by Indiana law, but did not add back approximately $2 billion in unapportioned wagering taxes paid to other states. The Indiana Department of State Revenue audited the corporation and determined it should also add back these wagering taxes, resulting in an additional tax assessment of nearly $8.75 million. The corporation protested, arguing the statute only required add-back of apportioned income taxes, not unapportioned excise taxes. The Indiana Department sustained the protest as to penalties but not as to the tax and interest, leading the corporation to appeal to the Indiana Tax Court. Both parties moved for summary judgment. The Indiana Tax Court granted summary judgment to the Department, holding that precedent required the addition of wagering taxes to the tax base under both state and federal law. Upon review, the Indiana Supreme Court considered whether Indiana Code section 6-3-1-3.5(b)(3) required the corporation to add back unapportioned wagering excise taxes. The Court held that the statute only requires add-back of direct income taxes and their functional equivalents—taxes subject to apportionment requirements under the federal constitution. It does not cover unapportioned excise taxes, such as the wagering taxes at issue, because they are not income taxes nor their functional equivalents. The Indiana Supreme Court reversed the Tax Court’s judgment and remanded for entry of summary judgment in favor of the corporation. View "PENN Entertainment, Inc. v. Department Of State Revenue" on Justia Law

Garst v. Tehama County Flood Control & Wat. Conservation Dist.

2026-06-29T12:03:11-08:00

The case centers on a charge imposed by a local water district in Tehama County, California. In 2022, the district adopted a resolution requiring all landowners in the county to pay an annual “well registration charge” of $0.29 per acre for three years, regardless of whether their property used groundwater or had a well. The stated purpose was to fund the administrative costs of a groundwater well registration program. The district later adopted additional resolutions to implement waivers for certain parcels and continued collecting the charge for noncompliant parcels. David Garst, trustee of a trust owning 40 parcels in the county, paid the charge and subsequently challenged its validity, arguing it violated California constitutional provisions adopted by Propositions 218 and 26. The Superior Court of Tehama County reviewed the case and conducted a bench trial. The court found that the district acted in good faith and imposed the charge for a legitimate purpose, but concluded the charge was not related to any specific government service or benefit provided to the landowners. The court determined the well registration charge amounted to a tax rather than a regulatory fee. The trial court issued a writ of mandate directing the district to rescind the charge, refund all collected sums, and cease further collection. The California Court of Appeal, Third Appellate District, reviewed the district’s appeal. The appellate court affirmed the trial court’s judgment as modified, holding that the well registration charge was an unconstitutional tax under Article XIII C of the California Constitution because it was imposed broadly without a nexus to regulated activity or specific government service. The court struck the provision requiring the district to refund the charge, finding Garst had not complied with the procedural requirements of the Government Claims Act. The remainder of the trial court’s judgment was affirmed. View "Garst v. Tehama County Flood Control & Wat. Conservation Dist." on Justia Law

Besicorp v. Commissioner of Internal Revenue

2026-06-29T07:00:03-08:00

Several related corporate taxpayers engaged in transactions that the Internal Revenue Service determined were tax shelter schemes intended to avoid federal taxes. After audits, the IRS found that each taxpayer owed substantial deficiencies, penalties, and interest. The United States Tax Court previously adjudicated the liabilities for all six taxpayers, either through contested proceedings or stipulated decisions, and those determinations are now final and not at issue in this appeal. When the IRS sought to collect the assessed amounts by filing tax liens and issuing notices of intent to levy, each taxpayer requested a collection due process (CDP) hearing with the IRS Appeals Office, as provided by statute. At each CDP hearing, the Appeals Officer sustained the IRS’s liens and proposed levies, indicating that all necessary legal and procedural requirements had been met. The taxpayers challenged these determinations in the Tax Court, arguing that the Appeals Officer failed to verify that the penalties had received written supervisory approval as required by 26 U.S.C. § 6751(b)(1). The Tax Court, following its decision in Warner Enterprises, Inc. v. Commissioner, held that when penalties had already been conclusively determined in prior proceedings, the Appeals Officer was not required to verify compliance with the supervisory approval requirement during the CDP process, and granted summary judgment for the Commissioner. On appeal, the United States Court of Appeals for the Second Circuit held that the verification obligation imposed by 26 U.S.C. § 6330(c)(1) on Appeals Officers in CDP hearings includes the requirement to verify written supervisory approval for penalties under § 6751(b)(1), regardless of whether the penalties were previously adjudicated. The court concluded that failure to perform this verification invalidates the Appeals Officer’s determination that the liens and proposed levies were proper, although it does not affect the underlying tax liabilities or penalties themselves. The Second Circuit reversed the Tax Court’s orders on this issue and remanded for further proceedings. View "Besicorp v. Commissioner of Internal Revenue" on Justia Law

RiverSouth Auth. v. Harris

2026-06-26T05:31:48-08:00

A roughly 600-space parking garage on the Scioto Peninsula in Columbus was owned by RiverSouth Authority, which is a “new community authority” and a “body corporate and politic.” RiverSouth owned the garage, which sat on city-owned land, and leased it to the City of Columbus under a long-term ground lease. The city then entered into a management agreement with Capitol South, a private nonprofit entity, to manage and operate the garage. Capitol South, in turn, hired LAZ Parking Midwest, a private for-profit operator, to handle day-to-day operations. The agreements required Capitol South to operate the garage in a manner consistent with city obligations, with many operational decisions ultimately subject to city oversight. The Ohio Tax Commissioner denied RiverSouth’s request for a real property tax exemption, concluding that the garage was not entitled to exemption because it was managed by a private, for-profit entity, LAZ. RiverSouth appealed to the Ohio Board of Tax Appeals, which affirmed the denial, but for a different reason: the Board found the garage was under the direction and control of Capitol South, the nonprofit manager, rather than the city. This basis for denial was raised by the Board on its own initiative, without prior notice to the parties. On further appeal, the Supreme Court of Ohio held that the Board of Tax Appeals erred by affirming the Tax Commissioner’s decision based on a new issue not raised below and without following statutory remand procedures. The Court further held that the city’s use of a management company to operate the garage did not deprive the city of direction or control over the property for exemption purposes. The decision of the Board of Tax Appeals was vacated, and the case was remanded to the Tax Commissioner to grant the exemption and calculate the appropriate refund. View "RiverSouth Auth. v. Harris" on Justia Law

O'Brien v. MT Dept. of Revenue

2026-06-23T13:36:48-08:00

This case involves a dispute regarding the proper method for appraising three commercial condominium units in Kalispell, Montana, owned by the estate of Maxine O’Brien and the Hash Family Trust. The central issue was whether the Montana Department of Revenue (MDOR) should use the income approach or the cost approach to value the units for the 2023/24 tax cycle. O’Brien provided detailed income information from the subject property and a nearly identical adjacent property, contending this information was sufficient to mandate the income approach under Montana law. MDOR instead used the cost approach, arguing that the available data was insufficient for an income-based valuation, particularly due to limitations in its mass-appraisal data pool. After O’Brien condominiumized the property in 2021, MDOR switched from the income approach to the cost approach for the 2023/24 appraisal. CTAB accepted O’Brien’s income-based valuation and found that the basements of the units were not separately rentable and their value was reflected in the overall rents. MDOR appealed CTAB’s ruling to the Montana Tax Appeal Board (MTAB), which reversed CTAB, concluding that MDOR lacked sufficient income information and was justified in using the cost approach. O’Brien then sought judicial review in the Montana Eleventh Judicial District Court, which affirmed MTAB’s decision. The Supreme Court of Montana reviewed the case and held that MTAB erred by misinterpreting the statutory standard for sufficient, relevant income information. The Court found that O’Brien had provided adequate income information, triggering the requirement for MDOR to use the income approach. The Court reversed MTAB’s February 2025 merits decisions and reinstated CTAB’s April 2024 decisions, ordering MDOR to appraise the units using O’Brien’s income-approach valuations. View "O'Brien v. MT Dept. of Revenue" on Justia Law

Daniels v. Commissioner of Revenue Services

2026-06-17T11:04:55-08:00

The decedent in this case maintained residences in Connecticut, Arizona, and Florida, dividing his time among them. After his death, his estate’s executor filed a Connecticut domicile declaration, which triggered an audit by the Department of Revenue Services. The audit division, weighing several factors, determined the decedent was domiciled in Connecticut, making his estate subject to Connecticut estate tax. The commissioner’s appellate division affirmed this determination, and the executor appealed to the Superior Court, arguing the decedent was a Florida domiciliary and raising claims of procedural due process violations during the audit process. Upon de novo review, the Superior Court heard testimony and admitted numerous exhibits regarding the decedent’s personal, social, and property ties to Connecticut and Florida. The court found these connections to be generally equal but concluded that the executor failed to show by clear and convincing evidence that the decedent was not a Connecticut domiciliary. Thus, it upheld the tax assessment. The court also rejected the executor’s claim of procedural due process violations, holding that any such errors were cured by subsequent review and the de novo trial. The Connecticut Supreme Court reviewed the case and held that, under General Statutes § 12-391 (h) (1), the proper standard for an estate challenging a domicile determination in an estate tax appeal is the preponderance of the evidence, not clear and convincing evidence. The court concluded that the Superior Court erred by applying the higher standard, reversed the judgment upholding the commissioner’s assessment, and remanded for a new trial limited to the issue of domicile under the correct standard. The Supreme Court affirmed the trial court’s rejection of the procedural due process claim, finding that the de novo review cured any procedural deficiencies. View "Daniels v. Commissioner of Revenue Services" on Justia Law

Trongone v. Cmsnr. IRS

2026-06-12T07:01:50-08:00

The appellant submitted a whistleblower application to the Internal Revenue Service (IRS) alleging that two taxpayers had underpaid taxes from 2004 to 2012 and requested that the IRS also consider similar conduct for 2013 through 2017 when determining any award. The IRS had already begun investigating much of the reported conduct and ultimately collected proceeds from the taxpayers. However, the IRS’s Whistleblower Office denied the claim, reasoning that the information provided was either previously known or “tainted”—meaning it was unlawfully obtained or privileged—and asserted it did not rely on this information when auditing the later years. After receiving this denial, the appellant sought review in the United States Tax Court. The appellant requested to supplement the administrative record or conduct discovery regarding the audits for 2013 through 2017, arguing that the record did not adequately show whether her information was used. The Tax Court denied these requests, citing procedural deficiencies in how discovery was sought, and granted summary judgment to the IRS, finding the administrative record sufficient to support the IRS’s determination. The United States Court of Appeals for the District of Columbia Circuit reviewed the case. The court held that the IRS’s rationale for denying the whistleblower award for tax years 2013 through 2017 was not supported by the administrative record, which was largely silent regarding those years. The court concluded that the IRS’s decision was arbitrary and capricious because it did not reasonably investigate or explain whether the whistleblower’s application contributed to the audits for those years. The court reversed the Tax Court’s decision and remanded the case for further proceedings consistent with its opinion. View "Trongone v. Cmsnr. IRS" on Justia Law

LHL Realty Company DC LLC v. District of Columbia

2026-06-11T09:01:42-08:00

A Virginia-based partnership owned a property in the District of Columbia. In 2002, this partnership and a limited liability company (LLC), both related entities, executed a merger under Virginia law, with the LLC surviving and acquiring the property. The merger documents referenced Virginia statutes governing mergers, and the transaction resulted in the property being transferred from the partnership to the LLC. No deed was recorded at the time, and no recordation or transfer taxes were paid. In 2019, when the LLC sought to sell the property, it attempted to record a deed reflecting the 2002 transfer as a no-consideration event, claiming the transaction was a non-taxable conversion rather than a taxable merger. The Recorder of Deeds (ROD) determined the 2002 transaction was a merger, requiring payment of recordation and transfer taxes based on the property’s 2019 fair market value, since no consideration was paid. LHL, the taxpayer, paid the taxes under protest and pursued an administrative refund, which was denied. The taxpayer then challenged the decision in the Superior Court of the District of Columbia. The Superior Court granted summary judgment to the District, finding the transfer was a taxable merger, not a conversion, and upholding the calculation of taxes based on the 2019 value. The District of Columbia Court of Appeals reviewed the case de novo and affirmed the Superior Court’s judgment. The appellate court held that the 2002 transaction was a merger between two distinct entities, making the property transfer taxable, and that taxes on no- or nominal-consideration transfers are properly based on the property’s fair market value at the time of recordation. The court also upheld the trial court’s finding of excusable neglect regarding the District’s untimely filing of its answer. View "LHL Realty Company DC LLC v. District of Columbia" on Justia Law

United States v. Chollet

2026-06-09T10:30:39-08:00

Three individuals—two tax attorneys, who were partners in a Missouri law firm, and an insurance broker from North Carolina—created and marketed a “Gain Elimination Plan” (GEP) to clients across various states, including North Carolina. The plan purported to enable clients to reduce taxable income by paying business expenses to limited partnerships largely owned by charities. In practice, the government established that these partnerships never actually existed, no services were provided, and the deductions claimed were based on fabricated transactions. The attorneys and the broker helped clients file tax returns with false deductions, resulting in over $22 million in unpaid taxes. The insurance broker also supplied false information to obtain life insurance policies for the plan, sharing commissions with the attorneys. One of the attorneys used the plan to reduce her own reported income, and the attorneys prepared tax returns for the broker that underreported his income. A jury in the United States District Court for the Western District of North Carolina convicted all three defendants of conspiracy to defraud the government and multiple counts related to the preparation and filing of false tax returns. The district court sentenced them to imprisonment, supervised release, and restitution. The defendants appealed, challenging the prosecution’s authorization, venue, evidentiary rulings, jury instructions, and sufficiency of the evidence. The United States Court of Appeals for the Fourth Circuit affirmed the convictions and sentences. The court held that the prosecution was properly authorized under the Appointments Clause and relevant statutes, venue in the Western District of North Carolina was proper because conduct elements of the offenses occurred there, and the “literal truth” defense did not apply to false totals derived from fabricated deductions. The appellate court also found no reversible error regarding evidentiary rulings, jury instructions, or the sufficiency of the evidence supporting the conspiracy and false return charges. View "United States v. Chollet" on Justia Law

Fields v. CIR

2026-06-08T09:30:30-08:00

An elderly businesswoman, after being diagnosed with Alzheimer’s disease, had her great-nephew act as her agent pursuant to a power of attorney. As her condition deteriorated, the agent managed her finances and addressed two instances of financial elder abuse. In the final months of her life, following further health declines, her agent—on the advice of attorneys—created a limited partnership and transferred nearly $17 million of her assets into it. The businesswoman died within weeks of these transfers, leaving her with only about $2.15 million outside the partnership. When the executor filed the estate tax return, he reported only the value of the partnership interest—appraised at approximately $11 million—rather than the value of the assets transferred into the partnership. This resulted in a substantial reduction in the estate’s tax liability. The Internal Revenue Service audited the return, determined that the gross estate should include the full value of the transferred assets under I.R.C. § 2036(a), and assessed a 20% penalty for underpayment. The executor disputed these findings before the United States Tax Court. The United States Tax Court upheld the IRS’s deficiency notice and penalty. It found that the transfers were not made pursuant to a bona fide sale for a legitimate non-tax purpose, and that the estate had been negligent in its reporting. The executor appealed. The United States Court of Appeals for the Fifth Circuit affirmed the Tax Court’s decision. It held that the estate failed to demonstrate any substantial non-tax reason for the asset transfers, so the bona fide sale exception to § 2036(a) did not apply. The court also upheld the 20% penalty, finding no clear error in the Tax Court’s determination that the estate lacked reasonable cause and did not act in good faith. View "Fields v. CIR" on Justia Law

The Providence Community Health Centers, Inc. v. Dupuis

2026-06-05T08:49:19-08:00

A nonprofit healthcare organization, which operates numerous facilities in Providence and one property in Warwick, acquired the Warwick property in 2020. The Warwick site is used primarily for administrative functions and virtual patient services. The organization treats a large number of low-income patients, but not exclusively, as some patients may have higher incomes. In 2021, the Rhode Island General Assembly enacted a statute that exempts from property tax “real and tangible personal property of [the nonprofit], a Rhode Island domestic nonprofit corporation, located in Providence, Rhode Island.” The organization applied to the Warwick tax assessor for an exemption based on this statute and an alternate general exemption for entities serving the poor. The Warwick tax assessor denied the request, concluding the statutory exemption applied only to properties in Providence. The organization appealed to the Warwick Tax Board of Review, which also denied the exemption. It then filed an appeal in the Kent County Superior Court, asserting both the specific and general exemptions applied to its Warwick property. The Superior Court granted summary judgment for the tax assessor, finding the statutes unambiguous and holding the property was not exempt because it was not located in Providence, and because the organization did not exclusively serve the poor. On appeal, the Supreme Court of Rhode Island reviewed the summary judgment de novo. The Court held that the specific statutory exemption only applies to properties owned by the nonprofit in Providence, not Warwick. Additionally, the general exemption for entities aiding the poor requires exclusive service to the poor, which the nonprofit does not meet. The Court affirmed the Superior Court’s judgment, ruling the Warwick property is not exempt from taxation under either statute. View "The Providence Community Health Centers, Inc. v. Dupuis" on Justia Law

Chickasaw County Board of Review v. Property Assessment Appeal Board

2026-06-05T06:05:51-08:00

Growmark, Inc., an agricultural cooperative, owns eleven large propane storage tanks at its New Hampton fuel terminal in Iowa. The tanks, each holding 90,000 gallons, rest unattached on concrete saddles and have been at the site since 1977. The Chickasaw County assessor included the tanks’ value—nearly $2 million—in Growmark’s property tax assessment, classifying them as taxable “improvements” to real property. Growmark argued that the tanks are equipment, not improvements, and should be nontaxable personal property under Iowa law. The Chickasaw County Board of Review affirmed the assessor’s classification and assessment, finding the tanks to be taxable improvements under Iowa Code section 427A.1(1)(c). Growmark appealed to the Iowa Property Assessment Appeal Board (PAAB), which reversed the Board of Review’s decision, concluding that the tanks were unattached equipment under section 427A.1(1)(d) and not taxable. The Board of Review then sought judicial review in the Iowa District Court for Chickasaw County, which affirmed the PAAB’s ruling, agreeing that the tanks were equipment rather than improvements. The Supreme Court of Iowa reviewed the case to determine whether the tanks should be classified as taxable improvements or nontaxable equipment under Iowa Code section 427A.1. The court held that the tanks are equipment, not improvements, because they are implements used for a specific business purpose, are not permanently affixed to the land or a structure, can be moved without damage, and their utility lies in Growmark’s operations rather than the land itself. The court declined to defer to non-rule administrative guidance and overruled prior precedent requiring tax statutes to be construed in favor of taxpayers. The court affirmed the district court’s decision, holding that the tanks are not assessable as real property. View "Chickasaw County Board of Review v. Property Assessment Appeal Board" on Justia Law

MLB Advanced Media v. Nebraska Dept. of Rev.

2026-06-05T05:06:39-08:00

A taxpayer entered into an agreement with the Nebraska Tax Commissioner for a data center project under the Nebraska Advantage Act, which required a minimum investment in exchange for tax incentives. The taxpayer later sought to transfer the project and its associated incentives to another company. The Department of Revenue denied the transfer request, stating the project had not been transferred in its entirety as required by statute. The Department notified the taxpayer of its intent to deny the transfer, gave it an opportunity to respond, and later issued a final denial. After this denial, the Department determined the taxpayer had failed to maintain required investment levels, issued a notice of deficiency determination by first-class mail, and sought to recapture tax incentives. The taxpayer protested both the denial of the transfer and the deficiency notice, but its protest was filed after the statutory deadline. In the District Court for Lancaster County, the court dismissed the taxpayer’s petition regarding the transfer dispute, finding it was untimely and that the court lacked jurisdiction. In the deficiency dispute, the district court found the Department could provide notice of the deficiency by first-class mail without requesting a return receipt, but remanded for a hearing to resolve whether the taxpayer’s protest was timely. The Supreme Court of Nebraska addressed both appeals. It held that the Department’s denial of the transfer was a “proposed determination” under the Nebraska Advantage Act, which the taxpayer had sixty days to protest; because no timely protest was filed, the determination became final and the district court lacked jurisdiction. The court further held that statutes did not require a return receipt for notices sent by first-class mail. Because there was no factual dispute about the date of mailing, the district court erred by remanding for a hearing on timeliness. The dismissal in the transfer dispute was affirmed, and the judgment in the deficiency dispute was affirmed as modified to eliminate the remand. View "MLB Advanced Media v. Nebraska Dept. of Rev." on Justia Law

USA v. Niksich

2026-06-04T12:01:06-08:00

The case involves an individual who, following advice from his accountant, opened and maintained several foreign bank accounts in Switzerland and Panama between 2006 and 2012. He did not timely file the required Reports of Foreign Bank and Financial Accounts (FBARs) disclosing these accounts to the United States government. The accounts were significant in value and were sometimes held under an alias. The individual self-prepared his tax returns during this period, and while he reported domestic investment income, he did not disclose his foreign accounts. In 2014, after learning of the FBAR requirements, he entered an IRS voluntary disclosure program, filed untimely FBARs, and attempted to resolve his liabilities with the IRS through a settlement, which was ultimately not honored by the IRS. The United States initiated a civil suit in the United States District Court for the Northern District of Georgia to collect penalties for the willful failure to file timely FBARs. The individual moved for summary judgment, asserting affirmative defenses of accord and satisfaction and equitable estoppel, based on his attempted settlement with the IRS. The United States also moved for summary judgment, seeking a finding of willfulness as a matter of law. The district court granted summary judgment to the United States, finding the failure to file was willful, rejecting the affirmative defenses, and holding that the Eighth Amendment's Excessive Fines Clause did not apply to FBAR penalties. The United States Court of Appeals for the Eleventh Circuit reviewed the case. It affirmed the district court’s rulings on willfulness and rejection of the affirmative defenses, holding that the failure to file FBARs was willful under an objective standard and that the IRS agents lacked authority to bind the government to a settlement. However, the Eleventh Circuit reversed the district court’s determination regarding the Excessive Fines Clause, holding that FBAR penalties are subject to the Eighth Amendment and remanding for factual development on whether the penalties were unconstitutionally excessive. View "USA v. Niksich" on Justia Law

TYSON CHICKEN, INC. V. HUDSON

2026-06-04T07:02:51-08:00

Three subsidiaries of a major poultry company sought refunds for sales taxes paid on the rental of wooden shipping pallets used to deliver their food products. The pallets were rented from a supplier who retains ownership and reuses them after each delivery. The company argued that these pallets were an integral part of the products it sold, claiming that the pallet rentals should be exempt from sales tax under Arkansas’s sales-for-resale exemption, since the pallets were essential in delivering their goods to distributors and retailers. The Department of Finance and Administration denied the refund request. The company then sought review in the Washington County Circuit Court, which granted summary judgment in favor of the Department. The circuit court concluded that the pallet rentals did not qualify for the sales-for-resale exemption, determining that the pallets were merely a mechanism for delivery and not an integral part of the food products themselves. The Supreme Court of Arkansas reviewed the circuit court’s summary judgment de novo. It examined the relevant statutory provisions, including Ark. Code Ann. § 26-52-401(12), and prior case law addressing when items used in manufacturing or delivery become a recognizable integral part of the final product. Applying these standards, the Supreme Court held that the pallets are not an integral part of the chicken or other food products sold, as they do not become part of the product itself but are only used for delivery. The court affirmed the circuit court’s decision, holding that the pallet rentals are not tax-exempt sales for resale and denying the company’s refund claim. View "TYSON CHICKEN, INC. V. HUDSON" on Justia Law

PASCP Inc. v. Commissioner of Revenue

2026-06-04T01:19:01-08:00

The case concerns PASCP Inc., a retail liquor store, which was audited by the Minnesota Commissioner of Revenue for sales and use taxes covering January 2015 through June 2020. During the audit, PASCP failed to provide sufficient and accurate sales records, supplying only incomplete documentation for a limited period. As a result, the Commissioner conducted an indirect audit using 2019 as a representative sample year, reconstructing sales based on vendor purchase records and PASCP’s retail price list. This method revealed that PASCP had significantly underreported taxable sales. Consequently, the Commissioner extended the statute of limitations for assessment from 3½ years to 6½ years, imposed additional taxes, and applied a 10 percent negligence penalty. After the Commissioner issued a Tax Order assessing the additional tax, penalties, and interest, PASCP administratively appealed, contesting both the audit methodology and the extension of the statute of limitations. The Commissioner affirmed the Tax Order upon review, and PASCP then appealed to the Minnesota Tax Court. The Tax Court granted summary judgment for the Commissioner, finding that there were no disputed material facts. The court determined that PASCP’s failure to maintain records justified the use of indirect audit methods, supported the extension of the statute of limitations under Minn. Stat. § 289A.38, subd. 6, and warranted the imposition of the negligence penalty under Minn. Stat. § 289A.60, subd. 5. The Supreme Court of Minnesota reviewed the case. It held that the Tax Court did not err in concluding that the Commissioner properly extended the statute of limitations to 6½ years due to PASCP’s underreporting of more than 25 percent of its tax liability. The Supreme Court further held that the negligence penalty was appropriate because PASCP admitted to not keeping required records, which constitutes a failure to meet the standard of a reasonably prudent taxpayer. The Supreme Court affirmed the Tax Court’s decision. View "PASCP Inc. v. Commissioner of Revenue" on Justia Law

Committee to Protect and Preserve v. State

2026-06-01T13:36:03-08:00

A group of organizations and individuals challenged the constitutionality of Idaho’s parental choice tax credit, which provides a refundable tax credit for parents, legal guardians, or foster parents who incur certain educational expenses, including private school tuition, for their dependent children. The tax credit is capped annually, prioritizes lower-income applicants, and cannot be claimed for a student enrolled in public school during the relevant semester. Petitioners argued that the credit violated Article IX, section 1 of the Idaho Constitution by creating a publicly funded, nonpublic education system distinct from the public school system, and further violated the public purpose doctrine by primarily benefiting private interests. The case was brought directly to the Idaho Supreme Court through a Verified Petition for Writ of Prohibition, seeking to stop the Idaho State Tax Commission from implementing the tax credit. The petitioners included advocacy groups, a school district, the state education association, a former superintendent, a legislator, an educator, and parents of public school students. The State of Idaho and the Idaho State Legislature (which intervened) opposed the petition, disputing both standing and the claim of unconstitutionality. The Supreme Court of the State of Idaho first held that the petitioners lacked traditional standing but relaxed standing requirements due to the urgent constitutional question and the unlikelihood that another party would bring the challenge. The Court then held that Article IX, section 1 imposes a duty to establish a public school system but does not prohibit the legislature from supporting additional educational initiatives such as the tax credit. The Court also found the tax credit did not violate the public purpose doctrine, as education serves a public purpose even if private actors incidentally benefit. The petition was denied, and the Tax Commission was awarded attorney fees against the school district; costs were awarded to both the Tax Commission and the Legislature. View "Committee to Protect and Preserve v. State" on Justia Law

NEV. HEALTH AND BIOSCIENCE ASSET CORP. VS. STATE

2026-05-28T11:07:48-08:00

A nonprofit organization was formed to privately fund, design, develop, and construct a state-of-the-art medical education building for a public university’s medical school in Nevada. The organization, established by a coalition of charitable foundations and individuals, entered into an agreement with the university and the Nevada System of Higher Education to manage the project using private donations. The arrangement included transferring land to the nonprofit, which would oversee construction and, upon completion, lease the facility back to the university for a nominal fee before transferring ownership outright. The nonprofit received federal and state property tax-exempt status and then applied to the Nevada Department of Taxation for a state sales and use tax exemption, initially as an educational organization, later clarifying it was seeking exemption as a charitable organization. The Nevada Department of Taxation denied the application, reasoning that the nonprofit did not meet the criteria for an educational organization and, under its interpretation of NRS 372.340, was ineligible as a charitable organization because it was a government contractor. The Nevada Tax Commission upheld this denial, and the Eighth Judicial District Court affirmed, agreeing with the Department’s reliance on NRS 372.340 to deny tax-exempt status. The Supreme Court of Nevada reversed and remanded, holding that the Department erred by failing to evaluate the application under the statutory criteria for charitable organizations in NRS 372.3261. The court clarified that NRS 372.340 does not disqualify otherwise-eligible charitable organizations from receiving tax-exempt status merely because they contract with the government. The court directed that the nonprofit qualifies for the sales and use tax exemption as a charitable organization and ordered the district court to instruct the Department to approve the application and issue a letter of exemption. View "NEV. HEALTH AND BIOSCIENCE ASSET CORP. VS. STATE" on Justia Law

US v. Gentner

2026-05-28T10:31:24-08:00

Two executives of a Charlotte-based software company, serving as Chief Executive Officer and Chief Operating Officer, were responsible for the company’s financial affairs, including filing required IRS forms and paying over trust-fund taxes withheld from employees’ wages. Over multiple years, the company failed to pay over these taxes, despite repeated IRS interventions, warnings from advisors, and assurances from the executives that steps were being taken to resolve their liabilities. Despite participation in an IRS Voluntary Disclosure Program and substantial company revenues, the executives continued to pay themselves significant salaries while the unpaid trust-fund tax debt accumulated, ultimately exceeding $500,000. After the company ceased operations, the IRS imposed personal liability and penalties on both executives, who also failed to use available funds to pay overdue taxes. A federal grand jury in the United States District Court for the Western District of North Carolina indicted both executives in January 2023 for five counts of willful failure to pay over trust-fund taxes, in violation of 26 U.S.C. § 7202. After a joint jury trial in March 2024, both were convicted on these counts, though acquitted of filing false tax returns and tax evasion. Their post-trial motions for acquittal and a new trial—based on insufficiency of the evidence and the alleged weight of evidence favoring their cooperation with the IRS—were denied by the district court. The United States Court of Appeals for the Fourth Circuit reviewed the convictions and denial of the new trial motion. The court applied an abuse of discretion standard to the jury instruction and Rule 33 new trial issues, and reviewed legal questions de novo. The Fourth Circuit held that the district court did not abuse its discretion in allowing the jury to review the indictment, providing instructions regarding willfulness and the good faith defense, or denying a new trial, finding that the evidence of willful failure to pay over taxes was overwhelming. The criminal judgments were affirmed. View "US v. Gentner" on Justia Law

Flight Options, LLC v. United States

2026-05-27T13:00:38-08:00

Flight Options, a company providing fractional-share private jet services, charged its clients both fixed monthly management fees (covering overhead, maintenance, and administrative costs) and usage fees based on actual flight time. For years, Flight Options, consistent with industry practice and IRS guidance, collected federal excise tax only on the usage fees, not the fixed fees. This approach was based on the understanding that the excise tax under 26 U.S.C. § 4261 applied only to payments for actual air transportation, not general overhead. The Internal Revenue Service later changed its position and assessed approximately $39 million in taxes, interest, and penalties against Flight Options for the period between 2009 and 2012, claiming the excise tax should also have been collected on the fixed management fees. Flight Options challenged the assessment in the United States District Court for the Northern District of Ohio. The magistrate judge ruled in favor of the government, holding that the fixed fees were subject to the excise tax and imposing penalties for failure to collect. Upon appeal, the United States Court of Appeals for the Sixth Circuit reviewed the statutory language, context, and relevant regulations. The court found that the excise tax applies only to amounts paid for specific flights (usage fees) and not to fixed overhead or management charges. The court emphasized the need for "precise and not speculative" notice to third-party tax collectors before imposing withholding obligations, which the IRS had not provided regarding fixed fees. The court also rejected the government's argument that informal IRS guidance or internal memoranda could create such an obligation. Accordingly, the Sixth Circuit reversed the judgment of the district court, holding that Flight Options was not liable for the assessed taxes, interest, or penalties on the fixed fees. View "Flight Options, LLC v. United States" on Justia Law

United States v. Ulibarri

2026-05-27T09:08:10-08:00

A Colorado dentist operated his practice using an abusive trust-based tax scheme promoted by a third party. Over seven years, he funneled earnings through a series of sham trusts to disguise income and claim personal expenses as tax deductions. The scheme involved assigning most of his business to a trust, which distributed income through family and charitable trusts, ultimately allowing him to retain control over his earnings without paying taxes. Despite repeated warnings from professionals, the defendant persisted. He continued the scheme even after being notified of a criminal investigation, resulting in over $1.6 million in tax losses to the government. A federal grand jury indicted him for six counts of tax evasion, one for each year from 2017 to 2022. He pleaded guilty to all counts in the United States District Court for the District of Colorado. At sentencing, the court calculated the total loss—including uncharged conduct from 2016 and 2023—and determined the base offense level under the U.S. Sentencing Guidelines. The court added a two-level enhancement for the use of sophisticated means and considered mitigating factors such as acceptance of responsibility and zero-point offender status. The advisory guidelines range was set at 33–41 months, and the court imposed a sentence at the top end: 41 months’ imprisonment, supervised release, restitution, and a fine. The United States Court of Appeals for the Tenth Circuit reviewed the sentence for procedural and substantive reasonableness under a deferential abuse of discretion standard. The court held that including the 2023 tax loss and applying the sophisticated means enhancement were proper under the Guidelines. It also found the sentence substantively reasonable in light of the § 3553(a) factors and affirmed the district court’s judgment. View "United States v. Ulibarri" on Justia Law

Costanzo v. Currituck County

2026-05-22T07:41:36-08:00

A group of property owners and a civic association challenged a North Carolina county’s use of occupancy tax revenues. The county, which experiences a large seasonal influx of tourists, imposed a tax on lodging rentals. The proceeds from this tax, by statute, could only be spent on activities that promote travel and tourism or on tourism-related expenditures. The county’s commissioners decided to allocate a significant portion of these funds to public safety services, such as law enforcement, emergency medical services, and fire response—especially in areas most frequented by tourists. The plaintiffs argued that such services are not direct tourist attractions and, therefore, not valid uses of the occupancy tax revenue under the enabling statute. After the plaintiffs filed suit, the Superior Court in Currituck County granted summary judgment in favor of the county, holding that the challenged expenditures were tourism-related. On appeal, the North Carolina Court of Appeals reversed that decision, concluding that the statute did not permit the use of occupancy tax revenues for general public safety services. The Court of Appeals relied in part on the legislative history, noting that earlier versions of the statute had explicitly referenced police and emergency services, but those references were later removed. Upon discretionary review, the Supreme Court of North Carolina held that the occupancy tax statute did not categorically bar the county from spending tax revenue on enhanced public safety services that are connected to area tourism. The court determined that the county commissioners, vested with statutory discretion, could reasonably conclude that such expenditures are tourism-related, given the substantial increase in demand for public safety during tourist season and the importance of safety to attracting visitors. The court reversed the decision of the Court of Appeals and remanded the case for entry of summary judgment in favor of the county on this claim. View "Costanzo v. Currituck County" on Justia Law

PAXTON v. THE CITY OF AUSTIN

2026-05-22T06:17:14-08:00

The dispute arose after the City approved a light rail project and formed a corporation, Austin Transit Partnership (ATP), to implement it. Voters approved a tax increase to fund the endeavor, and ATP—not the City—planned to issue municipal bonds. Taxpayers challenged ATP’s authority to issue these bonds, leading the City and ATP to seek a declaratory judgment confirming their power to assess taxes and issue bonds. The Attorney General, participating as permitted by statute, filed a plea to the jurisdiction, contending neither the City nor ATP qualified as an “issuer” under the statute governing expedited declaratory judgment actions. In the District Court, the City and ATP sought a quick resolution so the project could proceed, while the taxpayers and Attorney General desired delay. ATP’s counsel advised the court not to rule on the Attorney General’s plea to the jurisdiction, thus avoiding an interlocutory appeal and the associated automatic stay. The court accepted this suggestion, explicitly refusing to rule on the plea and moving forward toward trial. The Attorney General then filed a notice of interlocutory appeal, arguing the court’s actions amounted to an implicit denial. The trial court reiterated it had not ruled, and the Court of Appeals for the Fifteenth District dismissed the appeal, finding no order granting or denying the plea and therefore no appellate jurisdiction. The Supreme Court of Texas reviewed the case, holding that a trial court must rule on jurisdictional challenges before proceeding to the merits and cannot strategically avoid issuing a ruling to frustrate the government’s appellate rights. Because the absence of a ruling deprived the State of its statutory right to interlocutory appeal, and no adequate remedy by appeal existed, the Court treated the Attorney General’s petition as a request for mandamus and conditionally granted relief, directing the trial court to rule on the plea to the jurisdiction. The judgment of the Court of Appeals was left undisturbed. View "PAXTON v. THE CITY OF AUSTIN" on Justia Law

Bloomberg, Inc. v. District of Columbia Office of Tax & Revenue

2026-05-21T06:43:51-08:00

Bloomberg, Inc., an S-Corporation, owned interests in Bloomberg L.P. (BLP), a partnership that for tax years 2015-2017 self-certified as a Qualified High Technology Company (QHTC) under District of Columbia law. QHTC status conferred certain tax benefits, including exemptions and preferential rates, aimed at encouraging high technology companies to operate in the District. While BLP’s QHTC status exempted it from the unincorporated business franchise tax, Bloomberg was required to report its share of BLP’s income on its District of Columbia corporate franchise tax returns. Bloomberg claimed QHTC-related tax benefits on its own returns, arguing those benefits should flow through from BLP. The District of Columbia Office of Tax and Revenue (OTR) issued audit notices for tax years 2015-2017, disallowing Bloomberg’s claims to QHTC benefits for BLP-derived income and assessing tax deficiencies. OTR asserted that QHTC exemptions and credits apply only to entities directly engaging in qualified activities, not to corporate partners such as Bloomberg. Bloomberg appealed to the District of Columbia Office of Administrative Hearings (OAH), which granted summary judgment to OTR, holding that Bloomberg was not entitled to claim QHTC tax benefits based on BLP’s status. OAH denied Bloomberg’s subsequent motion for reconsideration. On review, the District of Columbia Court of Appeals affirmed OAH’s orders. The court held that District law does not permit the QHTC tax benefits or exemptions to flow through from a QHTC partnership to a corporate partner, distinguishing District of Columbia partnership tax principles from federal law. The court found no statutory or regulatory basis for Bloomberg’s claims and concluded that the plain language of the relevant statutes precluded the flow-through of QHTC benefits. The court affirmed the denial of summary judgment to Bloomberg and the granting of summary judgment to OTR. View "Bloomberg, Inc. v. District of Columbia Office of Tax & Revenue" on Justia Law

EQT Production Co. v. County of Wise

2026-05-21T05:09:03-08:00

EQT Production Company and related entities owned mineral lands containing natural gas reserves in Wise County, Virginia. In 2018, EQT sold these lands to Diversified Production, LLC. The County taxed only the physical infrastructure—gas wells, pipelines, and compressors—for the 2018, 2019, and 2020 tax years, using the cost approach for valuation, but did not assess the value of the gas reserves themselves. The Taxpayers objected, arguing that this method did not reflect fair market value because the well infrastructure cannot be valued independently from the gas reserves. They also argued that the County failed to properly consider the income and market approaches to valuation. The County maintained that it was allowed to exclude the gas reserves and had properly rejected alternative valuation methods. After a trial in Wise County Circuit Court, the court found in favor of the County, holding that it had statutory discretion to value only the improvements and to exclude the reserves. The court also found that the County properly considered and rejected use of the income and market approaches. The Court of Appeals of Virginia affirmed, agreeing that because the County had imposed a license tax on gas extraction under Code § 58.1-3712, it was excused from assessing the gas reserves under Code § 58.1-3286. The Court of Appeals further held the County’s assessment was entitled to a presumption of correctness because it considered and rejected the other valuation methods. The Supreme Court of Virginia reversed. It held that, under Virginia law, imposing a license tax under Code § 58.1-3712 does not excuse the County from also assessing the fair market value of mineral lands—including gas reserves—under Code § 58.1-3286. The Court concluded the County’s assessment was incomplete and therefore plainly wrong. The judgments of the lower courts were reversed and the case was remanded. View "EQT Production Co. v. County of Wise" on Justia Law

LaRosa v. Commissioner of Internal Revenue

2026-05-18T10:30:33-08:00

Catherine LaRosa and her late husband filed joint tax returns for several years. Following IRS assessments for underpayment for the years 1981–1983, and overpayment for 1984–1985, the parties reached a settlement in which both owed each other money. The LaRosas paid the IRS the net amount, including interest and penalties, but later sought a refund, arguing the IRS had miscalculated the interest. In 1994, the IRS issued a refund after recalculating the interest, but later determined that the refund was incorrect and sued to recover it. The United States District Court for the District of Maryland granted summary judgment to the government, ordering repayment, and the United States Court of Appeals for the Fourth Circuit affirmed. The LaRosas did not repay the refund for over twenty years. In 2019, the government attempted to foreclose on the LaRosas’ home to collect the judgment. At this point, LaRosa sought “innocent spouse” equitable relief from the IRS under 26 U.S.C. § 6015(f)(1), which allows the IRS to relieve a taxpayer from liability for any unpaid tax in certain circumstances. The IRS refused to process her request, asserting that no amount was currently owed and that Section 6015(f) did not authorize relief for erroneous refunds. LaRosa then sought review in the United States Tax Court, which granted summary judgment to the IRS, holding that the erroneous refund did not create an “unpaid tax” or “deficiency” eligible for relief under Section 6015(f). On appeal, the United States Court of Appeals for the Fourth Circuit held that an erroneous refund of underpayment interest does create a liability for “unpaid tax” eligible for equitable relief under Section 6015(f)(1). The court vacated the Tax Court’s judgment and remanded for further proceedings. The holding was limited to underpayment interest and did not address other issues, which were left for the Tax Court to consider on remand. View "LaRosa v. Commissioner of Internal Revenue" on Justia Law

Barlow v. District of Columbia

2026-05-14T06:33:10-08:00

A trust was established for the primary benefit of an individual, with his family members as secondary beneficiaries. The trustee, Austin Trust Company, purchased a residential property in the District of Columbia for the trust in 2007, paying the required transfer and recordation taxes at that time. Fourteen years later, the trust was dissolved and the trustee transferred the property, without consideration, to the primary beneficiary, who then recorded the deed and paid additional transfer and recordation taxes. The beneficiary later sought a refund, claiming that the deed was exempt under District of Columbia law as either a supplemental deed or under regulations for nominal grantees. The Office of Tax and Revenue denied the refund, finding that the deed did not qualify for an exemption. The beneficiary appealed to the Superior Court of the District of Columbia. The Superior Court granted summary judgment to the District, concluding that the trust and the beneficiary were legally distinct entities and that District law imposes transfer and recordation taxes on each change in legal ownership of real property. The court also determined that the applicable exemptions did not apply. Reviewing the case, the District of Columbia Court of Appeals affirmed the Superior Court’s decision. The Court of Appeals held that the supplemental deed exemptions do not apply when property is conveyed between two distinct legal entities, even if one is the beneficiary of the other. The court further held that the nominal grantee regulations did not apply, as the trustee held and managed the property as more than a nominal grantee and owed duties to multiple beneficiaries. Accordingly, the grant of summary judgment to the District was affirmed. View "Barlow v. District of Columbia" on Justia Law

DILLON TRUST COMPANY LLC v. US

2026-05-14T06:32:30-08:00

A group of family trusts, managed by a corporate trustee, owned two C corporations with significant appreciated assets, including farmland and investment portfolios. In the early 2000s, the trusts sought to sell these corporations. To maximize after-tax proceeds, they pursued a stock sale rather than an asset sale, aiming to avoid double taxation on built-in gains. The trusts conducted an auction and ultimately sold the corporations’ stock to a newly formed entity, Humboldt Shelby Holding Corporation (HSHC), which financed the purchase with substantial loans. After the transaction, HSHC promptly liquidated the corporations’ assets and engaged in tax shelter transactions to offset the resulting gains, resulting in no taxes paid. The IRS later determined these losses were artificial and assessed taxes, penalties, and interest against HSHC, which went unpaid. The IRS then sought to hold the trusts liable as transferees of HSHC under federal law. The United States Court of Federal Claims found that, under New York’s Uniform Fraudulent Conveyance Act, the trusts could be held liable as transferees. The court determined that the stock sale and subsequent asset sales should be treated as a single transaction and that the trusts had constructive knowledge of the entire scheme to avoid taxes. The court also held the trusts liable for the full amount of HSHC’s unpaid taxes, penalties, and interest, and rejected the trusts’ argument that their liability should be limited to the value received. On appeal, the United States Court of Appeals for the Federal Circuit affirmed the Court of Federal Claims’ rulings. The Federal Circuit held that the trusts had constructive knowledge of the fraudulent scheme, upheld the imposition of transferee liability for the full amount owed, including penalties, and rejected the claim for refund of interest accrued after a deposit was made with the IRS, finding the IRS did not act unlawfully or abuse its discretion in handling the deposit. View "DILLON TRUST COMPANY LLC v. US " on Justia Law

Butts v. Mace

2026-05-13T06:18:06-08:00

Two groups of plaintiffs challenged the road maintenance fees imposed by Orangeburg and Georgetown Counties, arguing these fees constituted invalid taxes under South Carolina law as interpreted in a prior decision. Both counties had long-standing ordinances requiring an annual fee from vehicle owners for road and bridge maintenance, which were increased over time. After this Court’s decision in Burns v. Greenville County Council found similar fees invalid unless they provided a benefit distinct from that received by the general public, the plaintiffs filed suit seeking declaratory and monetary relief. The Orangeburg County action was reviewed by Judge Edgar W. Dickson, who dismissed all monetary claims but allowed the request for declaratory relief to proceed. The Georgetown County action was reviewed by Judge William H. Seals, Jr., who denied a motion to strike but did not address the motion to dismiss. After the legislature amended the relevant statute via Act No. 236 of 2022—explicitly allowing retroactive application to fees imposed after 1996—the cases were assigned to Judge Roger M. Young, Sr. He found section 2(E) of the Act unconstitutional under the Separation of Powers Clause, granted summary judgment for the plaintiffs in Butts, and denied summary judgment for the defendants in Brown, certifying the constitutional question for appeal. The Supreme Court of South Carolina reviewed the consolidated appeals. The Court held that the General Assembly has the constitutional authority to retroactively amend statutes following judicial interpretation, so long as final judgments are not disturbed and express constitutional limitations are not violated. The Court overruled prior precedent that categorically barred such retroactive legislation under the Separation of Powers Clause. Accordingly, the trial court’s orders were reversed and the cases remanded for further proceedings consistent with this opinion. View "Butts v. Mace" on Justia Law

Waterford Property Co. v. County of Orange

2026-05-11T14:01:21-08:00

A company serving as the project administrator for several partially income-restricted apartment complexes operated with the aim of providing affordable housing for middle-income tenants maintained constructive possession and control over the properties, which are owned by a local Joint Powers Authority (JPA) and thus exempt from ad valorem property taxation under the California Constitution. The company received significant fees and bond revenues from its administration of the complexes. The county assessor determined that the company’s exclusive control and financial benefits met the statutory criteria for a taxable “possessory interest,” and assessed property taxes accordingly. The company initially contested the tax assessments before the Orange County Assessment Appeals Board but filed a separate action for declaratory relief in superior court before the administrative proceedings concluded, seeking a declaration that neither it nor its tenants were liable for these taxes. The Superior Court of Orange County denied the county’s special motion to strike the complaint under California’s anti-SLAPP statute (Code of Civil Procedure section 425.16), finding that the company’s declaratory relief claim did not arise from the county assessor’s protected activity under the statute’s first prong. The court did not reach the question of whether the company could show a likelihood of success on the merits under the statute’s second prong. The California Court of Appeal, Fourth Appellate District, Division Three, conducted a de novo review and held that the claim for declaratory relief did arise from the assessor’s protected speech, petitioning, and advocacy activities under section 425.16. The appellate court reversed the order denying the anti-SLAPP motion and remanded the matter with instructions for the trial court to determine whether the company can demonstrate a probability of prevailing on the merits under the second prong of the anti-SLAPP statute. View "Waterford Property Co. v. County of Orange" on Justia Law

BUSSE v. SOUTH TEXAS INDEPENDENT SCHOOL DISTRICT

2026-05-08T06:19:02-08:00

A group of individual taxpayers residing in Willacy County and a local school district challenged the ongoing collection of an ad valorem tax by the South Texas Independent School District (STISD). The tax was originally authorized in 1974 by a vote of Willacy County residents for a rehabilitation district serving persons with disabilities. Over time, STISD’s mission expanded, and the plaintiffs alleged that it no longer primarily serves disabled persons, which they claim deviates from the original purpose approved by voters. The individual taxpayers asserted they were directly harmed by the collection of this tax, while the local school district argued that the tax created financial disadvantages and competitive harm due to double taxation and unequal funding. The case was first heard by a trial court, which denied STISD’s plea to the jurisdiction, allowing the plaintiffs’ claims to proceed. On interlocutory appeal, the Court of Appeals for the Thirteenth District of Texas reversed, holding that both the taxpayers and the local school district lacked standing. The appellate court reasoned that the taxpayers’ claims, if allowed, risked significant disruption of government operations and did not meet the requirements for taxpayer standing. It also found that the school district failed to allege a concrete or particularized injury. The Supreme Court of Texas reviewed the case and determined that the appellate court erred in dismissing the individual taxpayers’ claims for lack of standing. The Supreme Court held that the individual taxpayers had standing under the traditional constitutional test because they alleged a particularized, personal financial injury traceable to STISD’s actions, and their requested relief would redress that injury. However, the Court affirmed the dismissal of the local school district’s claims, finding its alleged injuries too speculative and not directly traceable to STISD. The case was remanded to the appellate court to consider other unresolved jurisdictional issues. View "BUSSE v. SOUTH TEXAS INDEPENDENT SCHOOL DISTRICT" on Justia Law

HANCOCK v. RJR VAPOR CO., LLC

2026-05-08T06:19:01-08:00

RJR Vapor, a company selling oral nicotine products in Texas, including VELO nicotine pouches, sought a tax refund after paying the Texas Cigars and Tobacco Products Tax under protest. VELO pouches consist of a porous material filled with a dry mixture of microcrystalline cellulose (a plant-based substance) and nicotine isolate, along with flavorings and preservatives. Unlike traditional tobacco pouches, which use ground tobacco leaf, VELO uses non-tobacco plant matter combined with nicotine extracted from tobacco leaves. The key legal question was whether these pouches qualify as “tobacco products” under Texas Tax Code, specifically as products “made of tobacco or a tobacco substitute.” After RJR paid the tax and filed suit, the trial court ruled in RJR’s favor, finding that VELO pouches are not taxable tobacco products and granting a refund. The trial court also found the statutory phrase “made of tobacco or a tobacco substitute” unconstitutional, both facially and as applied. The Court of Appeals for the Third District of Texas affirmed, agreeing that VELO pouches are neither “made of tobacco” nor “made of . . . a tobacco substitute,” and declined to reach RJR’s constitutional challenges, considering them moot because the products were not taxable. The Supreme Court of Texas reviewed the case and reversed the decision of the court of appeals. The Supreme Court held that VELO pouches are “made of . . . a tobacco substitute” because their primary ingredients—plant matter and nicotine—take the place and function of tobacco in products expressly taxed by the statute, such as snus or moist snuff. The Court rendered judgment that VELO pouches are taxable tobacco products under Texas law and remanded the case to the court of appeals to consider RJR’s equal-and-uniform constitutional challenge to the tax. View "HANCOCK v. RJR VAPOR CO., LLC" on Justia Law

TWENTY-NINE PALMS BAND OF MISSION INDIANS V. BLANCHE

2026-05-06T08:01:11-08:00

A federally recognized tribe in southern California operated a wholesale tobacco distribution business, selling cigarettes exclusively to other California tribes. These tribal businesses, in turn, sold the cigarettes to individual consumers on their respective reservations. Neither the distributing tribe nor its customers held state licenses to distribute or sell cigarettes, and no state cigarette taxes were collected at any point in the distribution chain. The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) placed the tribe on the Prevent All Cigarette Trafficking (PACT) Act’s noncompliant list, which restricts delivery of cigarettes by common carriers, due to violations of California’s cigarette tax and licensing laws. After the California Department of Justice notified the tribe of noncompliance, the state asked ATF to add the tribe to the noncompliant list. The tribe responded by arguing the PACT Act did not apply to its sales, but continued to make sales without appropriate licenses or tax payments. ATF issued notices of violations and, after considering the tribe’s responses, confirmed its decision to list the tribe. The tribe then filed suit in the United States District Court for the Central District of California, challenging ATF’s actions as contrary to law and procedurally deficient. The district court granted summary judgment to ATF, finding that the agency’s decision was adequately reasoned and procedurally proper. The United States Court of Appeals for the Ninth Circuit affirmed the district court’s judgment. The court held that the tribe’s remote cigarette sales to other tribes constituted “off-reservation” activity subject to California’s licensing and tax laws. The court found that the tribe’s customers were “consumers” under the PACT Act, rendering the tribe a “delivery seller” required to comply with state law. The court also held that ATF did not violate the Administrative Procedure Act’s procedural requirements. The decision of the district court was affirmed. View "TWENTY-NINE PALMS BAND OF MISSION INDIANS V. BLANCHE" on Justia Law

WAFD, Inc. v. Idaho State Tax Commission

2026-05-04T14:02:13-08:00

A Washington corporation that operates as a holding company and files combined corporate tax returns in Idaho calculated its 2021 Idaho corporate income tax using a “blended rate.” This rate prorated Idaho’s former and newly reduced corporate tax rates across its fiscal year, which ran from October 1, 2020, to September 30, 2021. The company adopted this approach because the Idaho Legislature amended the relevant statute in 2021, lowering the corporate tax rate effective January 1, 2021, but left statutory language stating the new rate applied to all “taxable years commencing on and after January 1, 2001.” The Idaho State Tax Commission rejected the blended rate and instead applied the higher, pre-amendment rate to the company’s entire fiscal year. After the company’s administrative appeal was denied, it filed suit in the District Court of the Fourth Judicial District of Idaho, Ada County. The district court granted summary judgment for the taxpayer, concluding that the statutory text unambiguously required application of the lower, amended rate to all taxable years commencing on or after January 1, 2001, including the company’s 2021 fiscal year. The district court rejected the Tax Commission’s position that only tax years starting after January 1, 2021, should qualify for the new rate and denied the Commission’s cross-motion for summary judgment. On appeal, the Supreme Court of the State of Idaho affirmed the district court’s decision. The Court held that, based on the statute’s plain language, the 6.5% corporate tax rate applied to all taxable years beginning on or after January 1, 2001, and thus to the taxpayer’s entire 2021 fiscal year. The Court also found that subsequent legislative amendments did not render the 2021 statute ambiguous or retroactively curative. The Supreme Court affirmed the district court’s judgment and awarded costs on appeal to the taxpayer. View "WAFD, Inc. v. Idaho State Tax Commission" on Justia Law

Torrington Tax Collector, LLC v. Riley

2026-05-01T14:41:50-08:00

A business in Connecticut was assessed personal property taxes from 2008 to 2016. The defendant, who had moved to California years earlier and claimed to have left the business by 2007, was never notified of these tax assessments at her California address, despite having provided it to the tax collector in 2011 and 2016. Over the years, the city’s tax collector took funds from the defendant’s bank accounts multiple times via bank executions to satisfy the tax debt, without ever sending her a tax bill or notice at her actual residence. In 2021, the tax collector initiated another bank execution against the defendant. The defendant challenged this action, arguing she had not received due process or required statutory notice. The Superior Court for the judicial district of Litchfield held an evidentiary hearing and agreed with the defendant, finding the tax collector failed to provide required notice under General Statutes § 12-155 (a) and that the lack of notice deprived her of the opportunity to challenge the tax assessment. The court granted the defendant’s exemption motion, rendering the execution “of no effect.” The tax collector initially appealed but then withdrew the appeal. After sending a written demand to the defendant’s California address, the tax collector initiated a new bank execution, again without providing a new tax bill or an opportunity to challenge it. The trial court found the new action was a collateral attack on the earlier judgment and barred by collateral estoppel. The Appellate Court affirmed, concluding the issue of notice and opportunity to challenge had been actually litigated and necessarily determined in the 2021 action. The Connecticut Supreme Court affirmed the Appellate Court’s judgment. It held that, under Connecticut law, collateral estoppel applies to all independent, alternative grounds actually litigated and determined in a prior judgment, making them preclusive in subsequent actions. Thus, the tax collector was barred from relitigating the notice and due process issues already decided. The Court declined to recognize a public policy exception for municipal tax collection cases. View "Torrington Tax Collector, LLC v. Riley" on Justia Law

Statoil USA Onshore Properties, Inc. v. Irby

2026-05-01T12:14:15-08:00

A natural gas producer in West Virginia, operating under the name Equinor USA Onshore Properties Inc. (formerly Statoil USA Onshore Properties Inc.), entered into contracts with a third-party processor, MarkWest, for the processing and sale of natural gas liquids (NGLs) extracted from its raw gas. Under these contracts, Equinor transferred title of its raw gas to MarkWest, which then processed, fractionated, and sold the NGLs to third parties. MarkWest paid Equinor a “Net Value” after deducting various fees from the gross sales (“Product Value”). Equinor initially reported the “Product Value” as its gross proceeds for severance tax purposes, but later amended its returns to claim the “Net Value” as the proper measure and sought significant refunds, also claiming a fifteen percent deduction (safe harbor) for transportation and transmission costs. The State Tax Commissioner partially granted Equinor’s refund requests but denied the remainder, arguing that Equinor could not deduct both actual and safe harbor costs from the gross proceeds and that the “Product Value” should be the starting point for tax calculation. The Office of Tax Appeals (OTA) affirmed the Commissioner’s decisions. Equinor appealed to the Intermediate Court of Appeals (ICA), which reversed the OTA, holding that the “Net Value” represented the gross proceeds Equinor actually received, and that Equinor was entitled to the fifteen percent safe harbor deduction since it had not already deducted actual transportation costs. The Supreme Court of Appeals of West Virginia reviewed both the substantive tax dispute and a separate timeliness issue regarding Equinor’s petition for reassessment of a 2015 tax refund. The Court affirmed the ICA’s ruling that the “Net Value” was the correct basis for gross proceeds and that the safe harbor deduction was allowable. On the timeliness issue, the Court reversed the ICA, holding that Equinor’s petition for reassessment was timely filed. The case was remanded with directions for refunds to be issued consistent with these holdings. View "Statoil USA Onshore Properties, Inc. v. Irby" on Justia Law

Garcia-Rojas v. Franchise Tax Board

2026-05-01T11:33:40-08:00

A Texas resident, who works as a radiologist, entered into an independent contractor agreement with a California-based medical corporation. From his home in Texas, he analyzed medical images sent from facilities both in California and other states, using equipment, software, and support provided by the corporation. He was required to maintain medical licenses in multiple states and was compensated monthly by the corporation based on the number of images reviewed. After being prompted by California’s Franchise Tax Board, he filed California tax returns for the relevant years and later sought a refund, which was not granted. The Superior Court of the City and County of San Francisco granted summary judgment in favor of the Franchise Tax Board. The court concluded that the radiologist operated a sole proprietorship carrying on a “unitary business” within and without California, and thus was properly taxed under California Code of Regulations, title 18, section 17951-4(c). The trial court found that his activities constituted a unitary business because he performed the same business function across state lines without sufficiently distinct separation. The Court of Appeal of the State of California, First Appellate District, Division Three, reviewed the case. It reversed the trial court’s judgment, holding that the Franchise Tax Board failed to demonstrate as a matter of law that the radiologist operated a unitary business as required under regulation 17951-4(c). The appellate court found that the unitary business theory had historically only been applied to multiple business entities that are commonly owned and integrated, and not to a sole proprietorship engaging in a single business activity. The judgment granting summary judgment to the Board was reversed, and the case was remanded for further proceedings. View "Garcia-Rojas v. Franchise Tax Board" on Justia Law

The Boro of W. Chester v. PASSHE

2026-04-30T06:11:18-08:00

A municipality enacted an ordinance imposing a “stormwater charge” on owners of developed properties within its jurisdiction. The amount of this charge was based on the impervious surface area of each property, justified as covering the cost of constructing, operating, and maintaining the municipal stormwater system, as well as ensuring compliance with federal and state environmental mandates. The funds collected were deposited into a dedicated account for stormwater management purposes. The university system, which owns several properties within the municipality, refused to pay the charge, arguing that it constituted a tax from which it was immune under Pennsylvania law. The municipality initiated litigation in the Commonwealth Court of Pennsylvania, seeking a declaration that the stormwater charge was a fee for service rather than a tax, and therefore enforceable against the university system. The university system responded with a preliminary objection and later an application for summary relief, maintaining the charge was a tax or, alternatively, a special assessment, both of which would render it immune from payment. The Commonwealth Court, after reviewing cross-motions for summary relief, ruled in favor of the university system. It concluded the stormwater charge was a tax because it funded projects that delivered general public benefits rather than discrete, individualized services for payors, and there was no voluntary, contractual relationship between the parties. The court also found the charge was not a special assessment. On appeal, the Supreme Court of Pennsylvania affirmed the Commonwealth Court’s judgment. It held that the stormwater charge is a tax because the municipality provided stormwater management services as a public duty, for the general benefit of the community, and not within a voluntary or contractual fee-for-service framework. The court emphasized that, absent a quasiprivate relationship or proportional fee for individualized service, such charges are properly characterized as taxes, from which the university system is immune. View "The Boro of W. Chester v. PASSHE" on Justia Law

Pace Organization of Rhode Island v. Frew

2026-04-28T08:19:15-08:00

A federally certified organization dedicated to providing comprehensive health and social services to elderly individuals, primarily those eligible for Medicaid, relocated its operations to East Providence and sought a property tax exemption for its new location. The organization asserted that nearly all its participants are low-income elderly and claimed eligibility for exemption under a state statute that provides tax-exempt status for property used for the aid or support of the aged poor, among other categories. After purchasing the property, the organization applied for the exemption, arguing that the statutory language supported its claim. The local tax assessor denied the application, finding that the organization was not one of the specifically enumerated entities—such as a library or a nonprofit hospital—under the statute, and that its mission was not limited to supporting only the aged poor. The organization appealed this denial to the East Providence Tax Board of Assessment Review, which affirmed the assessor’s decision. Subsequently, the organization brought the case to the Providence County Superior Court, where both parties filed cross-motions for summary judgment. The Superior Court found the statute ambiguous and, applying principles of statutory construction, concluded that the exemption applied only to the specific types of entities listed in the statute, all of which must use their property exclusively for the designated purposes. The court granted summary judgment in favor of the tax assessor. On appeal, the Supreme Court of Rhode Island reviewed the statutory language and agreed that it was ambiguous but held that, under Rhode Island law, tax exemption statutes must be strictly construed in favor of taxation. Consequently, any ambiguity must be resolved against the taxpayer. The Supreme Court affirmed the Superior Court’s judgment in favor of the tax assessor. View "Pace Organization of Rhode Island v. Frew" on Justia Law

State of Maine v. McCoy

2026-04-28T07:04:51-08:00

A Maine resident was stopped while driving a pickup truck registered to a Montana limited liability company, not to himself personally. The officer confirmed that the company, Brandon McCoy, LLC, was active and properly registered in Montana, and that all of the resident’s vehicles were registered to that company. The officer had previously informed the resident that, as a Maine resident, he would need to register his vehicles in Maine. After observing a non-functioning taillight, the officer stopped the resident, confirmed his Maine residency, and issued him a summons for evasion of registration fees and excise taxes under Maine law, specifically 29-A M.R.S. § 514. The matter was first heard in the Maine District Court in Biddeford. At the hearing, both the officer and the resident testified. The District Court found that the resident had been twice warned about a registration requirement and adjudicated him responsible for the infraction, imposing the statutory minimum fine. The resident appealed this judgment. The Supreme Judicial Court of Maine reviewed the case and examined the statutory language. The Court determined that liability under section 514 attaches only to the “owner” of the vehicle, defined as the person holding title or having the exclusive right to use the vehicle for at least thirty days. The evidence indicated that the Montana LLC, not the resident, held title to the pickup, and there was no evidence that the resident had an exclusive right to its use for thirty days or more. The Court held that the resident was not required to register the vehicle under Maine law and could not be found in violation of section 514. The judgment against the resident was vacated, and the case was remanded for entry of judgment in his favor. View "State of Maine v. McCoy" on Justia Law

WAFD, Inc. v. Idaho State Tax Commission

2026-04-23T08:06:41-08:00

A Washington-based corporation utilized a fiscal year running from October 1, 2020, to September 30, 2021. In 2021, the Idaho Legislature amended the state’s corporate income tax statute to lower the tax rate from 6.925% to 6.5%. The statute stated that the new rate applied to all “taxable years commencing on and after January 1, 2001,” but the legislative act declared the effective date as January 1, 2021. The corporation, whose fiscal year straddled the effective date, applied a prorated, or “blended,” tax rate to its return and claimed a refund. The Idaho State Tax Commission instead applied the higher rate for the entire fiscal year and reduced the refund. After the Tax Commission upheld its administrative division’s decision, the corporation sought judicial review in Ada County district court. Both parties moved for summary judgment. The district court concluded that the statute’s plain language was unambiguous and required application of the lower tax rate to any taxable year beginning on or after January 1, 2001. Because the corporation’s fiscal year began after that date, the court ruled that the 6.5% rate applied to the entire fiscal year and granted summary judgment for the corporation. The Idaho Supreme Court reviewed the district court’s decision de novo. The Court held that Idaho Code section 63-3025(1) unambiguously imposed the 6.5% tax rate for all taxable years commencing on or after January 1, 2001, and that the statute’s effective date did not alter the scope of its application. The Court rejected the Tax Commission’s arguments for ambiguity, proration, or reliance on subsequent statutory amendments as curative. The order granting summary judgment to the corporation was affirmed, entitling it to the full refund. View "WAFD, Inc. v. Idaho State Tax Commission" on Justia Law

US v. Giang

2026-04-22T21:00:03-08:00

The defendant, who immigrated to the United States from Vietnam, operated a staffing agency that provided temporary laborers to various clients in Massachusetts. She managed most of the agency’s operations, including payroll, and worked closely with her daughter, who had accounting training. Between 2015 and 2019, the defendant withdrew over $3.7 million in cash from business accounts, frequently in increments just below the $10,000 federal reporting threshold, and used this cash to pay workers. Evidence at trial showed that the agency paid employees additional cash wages not reported to tax authorities, resulting in unpaid employment taxes and underreported payroll to the company’s workers’ compensation insurer, which led to lower insurance premiums. A federal grand jury in the District of Massachusetts indicted the defendant on four counts of failing to collect or pay employment taxes and one count of mail fraud. After a jury trial, she was convicted on all counts and sentenced to eighteen months’ imprisonment and two years of supervised release. She appealed, challenging the admission of evidence regarding the structuring of cash withdrawals, the district court’s refusal to give a jury instruction on implicit bias, the instructions related to tax obligations and good faith, and the sufficiency of the evidence supporting the mail fraud conviction. The United States Court of Appeals for the First Circuit reviewed the case and affirmed the convictions. The court held that evidence about the structuring of cash withdrawals was properly admitted as intrinsic to the charged offenses and relevant to intent. The refusal to instruct on implicit bias was not an error because the district court’s voir dire and instructions substantially covered the issue. The court found no reversible error in the jury instructions regarding tax law and good faith, and concluded that any error was harmless. Finally, the evidence of mail fraud was found sufficient, as it was reasonably foreseeable that the mail would be used in the insurance audit process. View "US v. Giang" on Justia Law

Hyatt Hotels Corporation & Subsidiaries v. CIR

2026-04-22T08:00:41-08:00

Hyatt Hotels Corporation managed a loyalty program for guests, which was funded by contributions from both Hyatt-owned and third-party-owned Hyatt-branded hotels. These contributions, along with income from direct sales of points and investment returns, were held in a centralized fund managed by Hyatt. When members redeemed points, funds were used to compensate hotels and pay for program-related expenses. The Internal Revenue Service (IRS) asserted that income flowing into this fund from third-party sources, direct sales, and investments should be treated as Hyatt’s income for tax purposes. The United States Tax Court reviewed the IRS’s notice of deficiency and Hyatt’s petition challenging it. Hyatt argued that the fund’s income was not its own under the claim of right and trust fund doctrines, and, alternatively, that if it was, Hyatt should be allowed to use the trading stamp method of accounting to offset the income with estimated costs. The Tax Court rejected both arguments, holding that Hyatt’s benefit from the fund made the income taxable to Hyatt and that the trading stamp method was unavailable because the rewards were not tangible property. On appeal, the United States Court of Appeals for the Seventh Circuit found that the Tax Court’s analysis was incomplete. Specifically, the appellate court held that the Tax Court erred by failing to consider whether the claim of right doctrine provided an independent basis for excluding the fund’s income from Hyatt’s taxable income. The Seventh Circuit clarified that the claim of right doctrine is broader than the trust fund doctrine and may permit exclusion even when the trust fund doctrine does not apply. The court vacated the Tax Court’s decision and remanded the case for further proceedings to determine whether the fund’s income was Hyatt’s under the claim of right doctrine. View "Hyatt Hotels Corporation & Subsidiaries v. CIR" on Justia Law

Liberty Global v. United States

2026-04-21T21:07:12-08:00

A United States corporation, serving as the parent of a group of multinational affiliates, devised a series of four transactions in 2018, codenamed “Project Soy,” to exploit a mismatch in the international tax provisions of the 2017 Tax Cuts and Jobs Act. The transactions, planned with the help of tax professionals, were designed to generate artificial earnings and profits, allowing the corporation to avoid global intangible low-taxed income (GILTI) and capital gain taxes on substantial profits from its interest in a foreign subsidiary. The final transaction in the sequence involved the sale of that interest to a related foreign company, with the corporation claiming a large deduction under 26 U.S.C. § 245A. After the Internal Revenue Service issued a regulation to close the exploited loophole, the corporation filed its 2018 tax return in compliance, but subsequently amended the return, arguing the regulation was invalid and claiming a far larger deduction. Before the IRS completed its review, the corporation sued for a tax refund in the United States District Court for the District of Colorado. The district court first ruled the regulation was procedurally invalid, then addressed whether the codified economic substance doctrine in 26 U.S.C. § 7701(o) applied. The corporation admitted the first three steps of Project Soy lacked economic substance but argued the doctrine was irrelevant to its transactions. The United States Court of Appeals for the Tenth Circuit reviewed the district court’s grant of summary judgment de novo. The court held that the economic substance doctrine codified in § 7701(o) applies to transactions designed solely to obtain tax benefits unintended by Congress, even if the transactions comply with the literal terms of the tax code. The court rejected the argument that certain types of “basic business transactions” are categorically exempt. The judgment of the district court, denying the claimed deduction, was affirmed. View "Liberty Global v. United States" on Justia Law

Cox vs. Grady Hotel Investments, LLC

2026-04-21T10:30:06-08:00

A dispute arose over the 2016 property tax assessment for a hotel located at Kansas City International Airport. Grady Hotel Investments, LLC purchased the hotel improvements but not the land, which remained owned by the City of Kansas City. As the City is exempt from property taxes, Grady was taxed only on its possessory interest in the hotel improvements. The Platte County assessor valued the property at over $11 million, which was raised to more than $13 million by the Platte County Board of Equalization. On appeal, a State Tax Commission (STC) hearing officer reduced the value, and the full STC ultimately valued it at $0, using a method applicable to leaseholds. The assessor challenged this, and the circuit court found the STC’s valuation method inapplicable, determining Grady owned the improvements rather than holding a leasehold. The Missouri Court of Appeals affirmed the circuit court’s conclusion that Grady held an ownership interest, not a mere leasehold, and remanded the case for a new valuation. On remand, the STC valued the property at over $6 million. The assessor and Park Hill School District appealed, raising constitutional challenges to the valuation statute, section 137.115.1, arguing it violated provisions of the Missouri Constitution related to due process, tax exemptions, uniformity, and special privileges. The Supreme Court of Missouri reviewed the case. It held that Park Hill School District lacked standing to challenge the assessment, as its interest in potential funding loss did not confer standing to contest another’s property valuation. The assessor also lacked standing to assert claims under due process and special privilege provisions because, as a political actor, he was not protected by those constitutional rights. However, the assessor did have standing to challenge the statute under the tax exemption and uniformity provisions. The court held that section 137.115.1 neither creates an unconstitutional tax exemption nor violates the uniformity clause. The circuit court’s judgment was affirmed. View "Cox vs. Grady Hotel Investments, LLC" on Justia Law

United States v. Brown

2026-04-21T06:30:04-08:00

The defendant engaged in a scheme from 2017 through 2020 in which he impersonated an attorney to obtain personally identifiable information from prisoners. Using this information, he filed unauthorized tax returns in the names of at least nine prisoners, receiving $136,672 in fraudulent refunds from the Internal Revenue Service. At the time of his arrest, the defendant was already under community supervision for a similar offense and had a significant criminal history, including prior convictions for fraud-related and other offenses. A grand jury in the United States District Court for the Southern District of New York indicted the defendant on multiple fraud and theft charges. He pleaded guilty to fourteen counts of making false claims and one count of theft of government funds. The district court sentenced him to forty-six months in prison, three years of supervised release, and ordered forfeiture and restitution. The supervised release included standard and special conditions, one of which allowed for electronic monitoring of all devices capable of accessing the internet, unannounced examinations of such devices, and monitoring of any work-related devices as permitted by his employer. The defendant did not object to these conditions at sentencing but challenged them on appeal. The United States Court of Appeals for the Second Circuit reviewed the case. It held that the district court did not err in imposing the special condition of electronic monitoring. The appellate court found the condition was reasonable in light of the nature of the offenses and the defendant’s history, was not overbroad, and did not amount to an impermissible occupational restriction under the Sentencing Guidelines. The court concluded that the monitoring requirements did not prohibit the defendant from pursuing any occupation and were necessary to protect the public. The judgment of the district court was affirmed. View "United States v. Brown" on Justia Law

Municipality of Anchorage, formerly v. State of Alaska

2026-04-17T09:01:21-08:00

The dispute centers on how to calculate state tax credits for a municipal utility’s natural gas production. The Municipality of Anchorage owned a one-third interest in a Cook Inlet gas field and used most of its gas to generate electricity for its residents, selling only a small fraction to third parties. Alaska law taxes natural gas production but allows producers to claim tax credits based on production costs. A special statute for municipal producers required the Municipality to pay taxes only on the gas it sold to others, but also provided that it was eligible for tax credits “to the same extent as any other producer.” The Municipality sought tax credits by offsetting the costs of producing all its gas—including gas used for its own utility—against the relatively small amount of gas it actually paid taxes on, resulting in large credits. The Alaska Department of Revenue rejected this calculation, determining that tax credits should be based on the value of all gas produced, as defined by the general tax statutes, rather than only the gas actually taxed under the municipal exception. The Department awarded the Municipality much smaller tax credits. The Municipality challenged this decision. An administrative law judge and the Superior Court of the State of Alaska, Third Judicial District, affirmed the Department’s interpretation, finding it reasonable and not in conflict with applicable statutes or procedures. On appeal, the Supreme Court of the State of Alaska held that the legislature intended municipal gas producers’ tax credits to be calculated according to the value of all gas defined as taxable under the general statutes, not merely the gas actually taxed due to the municipal exception. The court also held that the Department was not required to adopt a formal regulation to implement this interpretation, as it was foreseeable and not a substantive change in policy. The superior court’s judgment was affirmed. View "Municipality of Anchorage, formerly v. State of Alaska" on Justia Law

HUDSON v. UNITED STATES BEEF CORPORATION

2026-04-16T07:08:33-08:00

US Beef Corporation, headquartered and commercially domiciled in Oklahoma, operated restaurant franchises in several states, including Arkansas. In 2018, US Beef sold all its assets—its Taco Bueno and Arby’s franchises, including both tangible and intangible property—after receiving unsolicited offers. This was a complete liquidation and ended the business’s operations. Prior to this sale, US Beef had never engaged in such a transaction. On its 2018 Arkansas corporate income tax return, US Beef treated the gains from the sales of intangible assets as “nonbusiness income,” allocating them to Oklahoma, its commercial domicile, and sought a refund for Arkansas estimated tax payments. The Arkansas Department of Finance and Administration (DFA) denied the refund, classifying the gain as “business income” apportionable to Arkansas. US Beef appealed administratively, but the Office of Hearings & Appeals upheld DFA’s position. US Beef then sought judicial review in Pulaski County Circuit Court, seeking a declaration that the gain was nonbusiness income under the pre-2026 version of Arkansas’s Uniform Division of Income for Tax Purposes Act (UDITPA). The parties agreed only the “functional test” for business income was at issue. The circuit court granted summary judgment to US Beef, holding the gain was nonbusiness income under the statute and thus not taxable in Arkansas. The Supreme Court of Arkansas reviewed the case de novo and affirmed the circuit court’s decision. The court held that under the applicable statute and precedent, the gain from the sale of US Beef’s intangible assets did not satisfy the functional test for business income because US Beef was not in the regular business of disposing of such assets—its regular business was operating franchises, not selling them. Therefore, the gain was nonbusiness income allocable to Oklahoma, and the judgment in favor of US Beef was affirmed. View "HUDSON v. UNITED STATES BEEF CORPORATION" on Justia Law

The Retail Property Trust v. Orange County Assessment

2026-04-15T10:33:26-08:00

A property owner operating a shopping mall in Orange County, California, faced significant restrictions on access and operations due to government orders issued during the COVID-19 pandemic. These restrictions, which included closures and limited entry, led the owner to file applications with the county tax assessor seeking disaster-related property tax relief under Revenue and Taxation Code section 170, subdivision (a)(1), on the basis that the pandemic and resulting government responses had caused a loss in property value through restricted access. The Orange County tax assessor summarily denied the applications, stating there was no physical damage to the property. The owner appealed this decision to the Orange County Assessment Appeals Board No. 1. The Board found it had jurisdiction but determined that relief under section 170(a)(1) required evidence of physical damage to the property, either direct or indirect, and that neither the pandemic nor the associated government orders constituted such damage. The Board’s decision made further proceedings unnecessary. The property owner then sought review in the Superior Court of Orange County, which, after a court trial, agreed with the Board’s interpretation and ruled that the owner was not entitled to relief because there was no physical damage to the property as required by the California Constitution and relevant statutes. On appeal, the California Court of Appeal, Fourth Appellate District, Division Three, reviewed the case de novo. The court held that, to obtain reassessment under section 170(a)(1), physical damage to the property—either direct or indirect—remains a constitutional requirement. The court found that neither the presence of the virus nor government-imposed access restrictions amounted to physical damage. The judgment of the trial court was affirmed, and both parties’ requests for judicial notice were denied. View "The Retail Property Trust v. Orange County Assessment" on Justia Law

United States v. Tew

2026-04-06T10:05:09-08:00

A married couple, Michael and Kimberley, became involved in a fraudulent scheme targeting Michael’s employer, National Air Cargo, a company seeking financial stability after bankruptcy. Michael, initially hired as a contractor and later promoted to CFO, began abusing his position by submitting false invoices, with the help of an internal accomplice, resulting in over $5 million in fraudulent payments. Kimberley, who suffered significant gambling and cryptocurrency losses, played an active role by motivating and coercing the accomplice and leveraging her relationship with Michael. The scheme was uncovered after creditors contacted National, leading to internal investigations and the eventual involvement of federal authorities. After the criminal conduct was exposed, the United States District Court for the District of Colorado became involved. Michael was initially arrested and entered into proffer agreements with the government, as did Kimberley. Both provided statements incriminating the other. The government indicted Michael, Kimberley, and their accomplice, Yioulos, on charges including conspiracy, wire fraud, money laundering, and tax fraud. The couple’s legal representation shifted multiple times, with periods of joint and separate counsel, and both filed motions seeking severance of their trials based on antagonistic defenses. The district court denied these motions, finding either no sufficient prejudice or that the motions were untimely. On appeal, the United States Court of Appeals for the Tenth Circuit reviewed whether the Apple cloud search warrant used to obtain Kimberley’s personal data was sufficiently particular and if the district court erred in denying severance. The court found the search warrant lacked sufficient particularity, but concluded the good faith exception applied, so suppression was not warranted. The court also held that neither defendant was entitled to severance, as their motions were untimely and the legal standards for severance were not met. The Tenth Circuit affirmed both convictions and sentences. View "United States v. Tew" on Justia Law

State Tax Assessor v. Fifth Generation, Inc.

2026-04-02T08:05:30-08:00

Fifth Generation, Inc., a Texas-based liquor manufacturer and subchapter S corporation known for producing Tito’s Vodka, supplied increasing quantities of vodka to Maine between 2011 and 2017 without filing Maine pass-through-entity withholding or income tax returns. The company did not own real estate or hold itself out as doing business in Maine but shipped its products to a Maine state-operated bailment warehouse, as required by state law. Fifth Generation retained title to the goods in the warehouse until they were sold to the Maine Bureau of Alcoholic Beverage and Lottery Operations, and its out-of-state employees and broker occasionally accessed the warehouse. Maine Revenue Services conducted an audit and assessed over $748,000 in withholding, interest, and penalties against Fifth Generation. The company appealed to the Maine Board of Tax Appeals, which found no income tax nexus and canceled the assessment. The State Tax Assessor then sought de novo review in the Maine Superior Court (Kennebec County), which granted summary judgment for the Assessor, reinstating the assessment. Fifth Generation subsequently appealed to the Maine Supreme Judicial Court. The Maine Supreme Judicial Court held that Fifth Generation was not exempt from state income tax during the audit period. The Court found that, under Maine law, Fifth Generation had a sufficient nexus with Maine because it owned tangible property in the state and sold it there. The Court also concluded that neither federal law (15 U.S.C. § 381(a)), the Commerce Clause, nor any constitutional provision barred the tax, as Maine’s regulatory scheme served a legitimate state purpose and was applied equally to in-state and out-of-state businesses. The Court further held that Fifth Generation did not have “substantial authority” to justify waiving penalties. The Superior Court’s judgment was affirmed. View "State Tax Assessor v. Fifth Generation, Inc." on Justia Law

United States v. Ponzo

2026-04-01T12:30:05-08:00

Two brothers operated an energy-conservation contracting business and, beginning in 2013, engaged in a bribery scheme involving the Mass Save program, a state-mandated initiative to promote energy efficiency. One brother owned CAP Electric, Inc., and recruited the other to establish Air Tight Solutions, LLC as a Mass Save contractor with the assistance of a CLEAResult employee, who was responsible for selecting and overseeing contractors. The brothers paid this employee, and later another, regular bribes in cash and gifts to secure contracts, favorable treatment, and advance warning of audits. Air Tight performed little or no work directly, subcontracted projects, and disguised employees and payments to conceal the scheme. Over several years, their companies received multi-million dollar payments from the program. The United States District Court for the District of Massachusetts accepted their guilty pleas to conspiracy, honest-services wire fraud, making false statements, and (for one brother) aiding and assisting false tax returns. The district judge sentenced both to 27 months in prison (above-guidelines for one), and ordered forfeiture of $13.2 million and $3.6 million respectively. The brothers challenged the sentences and forfeitures on several grounds, including alleged errors in calculating tax loss, application of sentencing enhancements, and the process and proportionality of the forfeiture orders. The United States Court of Appeals for the First Circuit reviewed the case. It held that the district court did not err in calculating tax loss or applying sentencing enhancements for sophisticated means, obstruction of justice, and aggravating role. The appellate court also held that the district court correctly found a sufficient connection between the criminal conduct and the forfeited proceeds, and that any procedural errors in the forfeiture process were harmless. Finally, the court determined that the forfeiture orders were not unconstitutionally excessive. The First Circuit affirmed the sentences and forfeiture orders. View "United States v. Ponzo" on Justia Law

Daugerdas v CIR

2026-03-30T07:30:44-08:00

Paul Daugerdas was convicted in federal court for orchestrating a fraudulent tax shelter scheme that defrauded the U.S. Treasury of significant tax revenue. A jury found him guilty of conspiracy to defraud the IRS, mail fraud, client tax evasion, and obstructing the internal revenue laws. The federal district court sentenced him to 15 years in prison, ordered forfeiture of $164.7 million, and imposed $371 million in restitution, to be paid jointly and severally with co-conspirators. The criminal restitution order set a payment schedule of 10% of Daugerdas’s gross monthly income following his release from prison. After the United States Court of Appeals for the Second Circuit affirmed the convictions and sentence, the Internal Revenue Service, relying on 26 U.S.C. § 6201(a)(4)(A), assessed the same $371 million restitution as a civil tax liability, making the entire amount immediately due. The IRS also filed a notice of federal tax lien against Daugerdas’s property in Illinois. Daugerdas challenged the IRS’s authority to impose and collect restitution in this manner, particularly objecting to the acceleration of the payment schedule. The United States Tax Court upheld the IRS’s actions, ruling that the statutory provision authorized the IRS to assess and collect restitution for tax-related offenses, even when the underlying criminal conviction was under Title 18 rather than Title 26. On appeal, the United States Court of Appeals for the Seventh Circuit reviewed the Tax Court’s judgment de novo. The court held that 26 U.S.C. § 6201(a)(4)(A) empowers the IRS to assess and collect restitution ordered under 18 U.S.C. § 3556 for tax-related crimes, including those prosecuted under Title 18, and that the IRS is not bound by the payment schedule set by the criminal court. The Seventh Circuit affirmed the Tax Court’s judgment for the Commissioner. View "Daugerdas v CIR" on Justia Law

Schmidt v. Rhode Island Division of Taxation

2026-03-20T08:01:04-08:00

The taxpayers filed a joint Rhode Island personal income tax return for the 2017 tax year, claiming an overpayment and seeking a refund. The return was filed in July 2020, and the Rhode Island Division of Taxation processed it but denied the refund request. The Division cited Rhode Island General Laws § 44-30-87, stating the claim was not filed within the allowable time period and/or no tax was paid within the allowable period. The taxpayers requested an administrative hearing, after which the hearing officer concluded they were not entitled to the refund, and the tax administrator adopted this decision. Following the administrative denial, the taxpayers appealed to the Rhode Island District Court. The hearing judge considered cross-motions for summary judgment and ruled in favor of the taxpayers. The judge found the statutory language ambiguous and interpreted the three-year limitation period for refunds as referring to taxes paid during the three years immediately preceding the refund request, rather than the three years following the filing of the return. Judgment was entered for the taxpayers, and the case was remanded to the Division of Taxation for further proceedings. The Division then petitioned the Rhode Island Supreme Court for a writ of certiorari. The Supreme Court of Rhode Island reviewed the case de novo, focusing solely on the statutory interpretation of § 44-30-87(a). The Court held that the three-year refund period refers to the three years following the filing of the tax return, and that any refund is limited to the portion of tax paid within those three years. The Court quashed the District Court’s judgment, finding that the lower court erred in its interpretation of the statute, and returned the record to the District Court with its decision. View "Schmidt v. Rhode Island Division of Taxation" on Justia Law

Amazon Services v. SCDOR

2026-03-18T06:46:42-08:00

Amazon Services, LLC operated the online marketplace Amazon.com, which allowed third-party merchants to sell products to South Carolina residents. In 2016, although Amazon Services collected and remitted sales tax for products it and its affiliates sold, it did not do so for sales made by third-party merchants. After an audit, the South Carolina Department of Revenue assessed Amazon Services for $12,490,502.15 in unpaid sales taxes, penalties, and interest, claiming that Amazon Services was legally required to collect and remit sales taxes on third-party merchant sales due to the company's significant involvement in those transactions. Amazon Services contested the assessment before the South Carolina Administrative Law Court, which upheld the Department of Revenue’s determination, finding Amazon Services was “engaged in the business of selling” under the South Carolina Sales and Use Tax Act and thus responsible for remitting the tax. Amazon Services appealed, and the South Carolina Court of Appeals affirmed the Administrative Law Court’s ruling, agreeing with the interpretation that Amazon Services’ role in third-party sales triggered the statutory obligation to collect and remit sales tax. The Supreme Court of South Carolina granted certiorari and affirmed the decision of the Court of Appeals. The Supreme Court held that, under the plain language of subsection 12-36-910(A) of the South Carolina Sales and Use Tax Act, Amazon Services was “engaged in the business of selling” due to its comprehensive control and involvement in third-party transactions and was therefore required to remit sales tax on those sales. The Court also held that this application did not violate due process, as the relevant statutory provisions were in effect prior to the challenged assessment, and clarified that its holding was not based on interpreting tax statutes broadly but on ordinary statutory interpretation principles. View "Amazon Services v. SCDOR" on Justia Law

NUSTAR ENERGY, L.P. v. HANCOCK

2026-03-13T12:18:34-08:00

A Texas-based company sold bunker fuel to primarily foreign-registered vessels at Texas ports, transferring possession and control of the fuel in Texas. The company initially paid franchise taxes on these sales, but later sought a refund, arguing that these transactions should not be attributed to Texas for franchise-tax purposes because the fuel was not used, sold, or consumed in Texas. The company contended that, under the relevant statute, sales should be sourced to the buyer’s ultimate destination or place of use, not merely the location where possession was transferred. After the Texas Comptroller denied the refund, the company exhausted administrative remedies and filed suit, also challenging the validity of regulations that sourced sales to Texas based on the point of delivery to the buyer. Both parties filed motions for summary judgment, focusing on whether the statutory phrase “delivered or shipped to a buyer in this state” refers to the place where the buyer takes delivery or to the location where the buyer uses or consumes the goods. The trial court ruled in favor of the Comptroller, upholding the regulations. On interlocutory appeal, the Court of Appeals for the Third District of Texas affirmed, finding the statute unambiguously sources sales based on where the buyer receives the property. The Supreme Court of Texas reviewed the case to resolve the statutory interpretation. The Court held that the statute sources receipts from sales of tangible personal property to Texas if the seller transfers possession and control to the buyer at a location in Texas, regardless of where the buyer ultimately uses or consumes the goods. The Court found that the Comptroller’s rules were consistent with this interpretation and thus valid. The judgment of the court of appeals was affirmed and the case remanded for further proceedings. View "NUSTAR ENERGY, L.P. v. HANCOCK" on Justia Law

Lockhart vs. Hennepin County

2026-03-12T01:14:26-08:00

The taxpayer owned a residential property in Hennepin County, Minnesota, and disputed the county's valuation assessments for the property covering years 2018 through 2023. The taxpayer alleged that county officials overvalued his property by failing to consider environmental factors, misclassifying its location, and improperly using computer algorithms. He claimed the valuation process was discriminatory due to his disability and asserted violations of both federal and state law. His complaint, filed in Hennepin County District Court, sought monetary damages, injunctive relief, and a public apology. Respondents moved to dismiss or transfer the case to the Minnesota Tax Court. The district court determined that all claims related to the property’s valuation or the assessment process fell under Minnesota’s tax laws and chapter 278, and transferred the case, including pending motions, to the tax court. The tax court dismissed four enumerated counts in the complaint (unjust enrichment, malfeasance, disability discrimination, and constitutional rights violations), ruling they were property tax assessment claims subject to the exclusive remedy of chapter 278. Claims for valuation years 2018–2021 were time-barred, and the 2023 claim was dismissed without prejudice, leaving only the 2022 valuation claim for trial. The Minnesota Supreme Court reviewed the case, considering whether the tax court had subject matter jurisdiction, whether dismissal of the four counts was proper, and whether the trial dismissal of the 2022 valuation claim was correct. The court held that the tax court had jurisdiction because the district court properly transferred the case and all claims arose under tax law. It affirmed that chapter 278 provides the exclusive remedy for property tax assessment claims and that the taxpayer failed to present substantial evidence to overcome the statutory presumption of the county’s assessed value. The Supreme Court affirmed the tax court’s decision. View "Lockhart vs. Hennepin County" on Justia Law

Alameda County Taxpayers' Assn., Inc. v. City of Oakland

2026-03-09T15:01:31-08:00

A city-owned zoo in Alameda County is managed through a contract with a nonprofit corporation. In 2022, local voters approved an initiative, Measure Y, which imposed a parcel tax to fund zoo operations. The measure specified that tax revenue would be placed in a city fund and distributed to the “Zoo Operator” for certain uses. Measure Y identified the Conservation Society of California, the current nonprofit operator, by name and assigned it specific duties and powers related to the new tax revenue. The measure stated it would take effect if approved by a simple majority of voters and received 63.1% support. Following the election, the Alameda County Taxpayers’ Association and an individual filed a reverse validation action in the Superior Court of Alameda County, seeking to invalidate Measure Y. They argued that the measure violated article II, section 12 of the California Constitution by naming a private corporation to perform functions or have duties, and that the measure required a two-thirds supermajority to pass. The trial court sustained demurrers to the supermajority claims, finding only a simple majority was needed, and granted judgment on the pleadings as to the constitutional claims. The court concluded that any reference to the Conservation Society was either not a violation or, if so, was severable, leaving the rest of the measure valid. Judgment was entered for the city and the Conservation Society. On appeal, the California Court of Appeal, First Appellate District, Division Four, found that Measure Y’s references to the Conservation Society as the “Zoo Operator” violated article II, section 12 because they assigned specific functions and duties to a named private corporation. However, the court held these references could be severed without affecting the remainder of the measure, which would remain valid. The court further held that only a simple majority vote was required for passage. The trial court’s judgment was affirmed as modified to reflect severance. View "Alameda County Taxpayers' Assn., Inc. v. City of Oakland" on Justia Law

ESPLANADE MALL REALTY HOLDINGS, LLC VS. LOPINTO

2026-03-06T09:34:31-08:00

Esplanade Properties Corporation, a subsidiary of R.H. Macy & Co., owned the Macy’s Parcel in Kenner, Louisiana. In 1992, while Esplanade Properties was under bankruptcy protection and subject to an automatic stay, Jefferson Parish assessed ad valorem taxes for that year. In 1993, the Sheriff conducted a tax sale for nonpayment of those taxes, but the sale was later nullified because it occurred during the bankruptcy stay. For nearly two decades, the Parish took no action to collect the 1992 taxes. After subsequent transfers, the property was acquired by Esplanade Mall Realty Holding, LLC, which in 2018 received notice of a large sum due for past taxes, including the 1992 taxes, interest, and costs. The company disputed the collectibility of the old taxes, citing a statutory three-year limitation on tax sales. The 24th Judicial District Court initially dismissed the suit on procedural grounds, and the Louisiana Fifth Circuit Court of Appeal affirmed. The Louisiana Supreme Court reversed and remanded. While proceedings continued, the property was sold to Pacifica Kenner, LLC, which was substituted as plaintiff. The trial court ultimately ruled that La. R.S. 47:2131—which prohibits tax sales for taxes more than three years overdue—was unconstitutional because it conflicted with Louisiana constitutional provisions regarding tax collection and prescription. The trial court denied declaratory relief to the plaintiff. The Supreme Court of Louisiana reviewed the case and chose to avoid the constitutional issue, finding it unnecessary to resolve the dispute. Interpreting the relevant statutes, the court concluded that the Sheriff was required to include all statutory impositions, including the 1992 taxes, interest, and costs, in the 2020 tax sale price. The court held that the redemption price for the property must likewise include these amounts. The judgment was reversed, rendered, and remanded to the trial court to calculate the redemption price consistent with this interpretation. View "ESPLANADE MALL REALTY HOLDINGS, LLC VS. LOPINTO" on Justia Law

9W HALO v ADOR

2026-03-03T09:01:08-08:00

A company operating an industrial healthcare textile laundry facility in Arizona rents reusable healthcare textiles such as bedsheets, gowns, and scrubs to medical institutions. The facility processes approximately 30 million pounds of textiles annually, which must be laundered and disinfected to remove contaminants before they can be used or reused in healthcare settings. The laundering process involves specialized machinery and chemicals under regulatory oversight. Between 2014 and 2018, the company purchased equipment and chemicals for its operation, paid state and city use taxes, and later sought a refund under a statutory exemption for machinery or equipment used in “processing operations.” The Arizona Department of Revenue partially denied the refund claim. The company appealed to the Arizona Tax Court, arguing that its laundry process qualified as a “processing operation” for the use tax exemption. The Tax Court ruled against the company, finding that its business as a whole did not meet the statutory definition. On further appeal, the Arizona Court of Appeals affirmed, concluding that the company’s operations did not constitute “processing” because the business primarily rented and reprocessed textiles, rather than preparing raw materials for market. The Supreme Court of the State of Arizona reviewed the case. It held that the statutory “processing operation” exemption applies to machinery or equipment used to change the marketability of a product, not limited to operations involving raw materials or defined by the business’s downstream transactions, such as sales versus rentals. The court concluded that the company’s textile laundering and disinfecting process qualifies as a “processing operation” since it transforms the textiles into a marketable form. The Supreme Court vacated the Court of Appeals’ decision, reversed the Tax Court’s summary judgment, and remanded the matter for further proceedings. View "9W HALO v ADOR" on Justia Law

Safdieh v. Comm'r

2026-02-27T07:00:06-08:00

The case involves an individual who was assessed $50,000 in penalties by the Commissioner of Internal Revenue for failing to report control of a foreign business during the tax years 2005 through 2009, as required by section 6038 of the Internal Revenue Code. The penalties were $10,000 for each year of the alleged reporting violation. When the individual did not pay, the IRS filed a notice of federal tax lien, which the taxpayer challenged through a Collection Due Process hearing before the IRS Independent Office of Appeals. After that challenge was unsuccessful, the taxpayer petitioned the United States Tax Court for relief. The United States Tax Court granted summary judgment in favor of the taxpayer. The Tax Court concluded that Congress had not granted the Commissioner statutory authority to collect the section 6038(b) penalty through administrative assessment, which is the process the IRS typically uses to record tax liabilities and activate collection powers such as liens and levies. The Tax Court ruled that, instead, the Commissioner would have to bring a lawsuit in federal district court to collect this penalty. The United States Court of Appeals for the Second Circuit reviewed the case on appeal. The Second Circuit disagreed with the Tax Court’s interpretation and held that the Commissioner does have authority to assess penalties under section 6038(b) through the administrative process. The appellate court found that the history, purpose, and structure of the statute support the conclusion that the penalty is assessable, and that requiring the Commissioner to proceed only through district court would complicate and frustrate congressional intent. Accordingly, the Second Circuit vacated the Tax Court’s judgment and remanded the case for further proceedings consistent with its opinion. View "Safdieh v. Comm'r" on Justia Law

Centro de Trabajadores Unidos v. Bessent

2026-02-24T07:34:31-08:00

A group of organizations challenged the Internal Revenue Service (IRS) policy permitting the sharing of taxpayer address information with the Department of Homeland Security (DHS) for immigration enforcement. The plaintiffs initiated suit after reports that Immigration and Customs Enforcement (ICE) was seeking addresses from the IRS to locate undocumented immigrants. The IRS and DHS subsequently formalized an agreement (Memorandum of Understanding, or MOU) specifying procedures for ICE to request taxpayer addresses from the IRS for use in nontax criminal investigations, provided statutory requirements were met. The case was first heard in the United States District Court for the District of Columbia. After denying a temporary restraining order, the District Court denied the plaintiffs’ motion for a preliminary injunction. The District Court found that at least one plaintiff had standing and concluded the plaintiffs were unlikely to succeed on their claims. Specifically, the court found that 26 U.S.C. § 6103(i)(2) unambiguously allowed the IRS to disclose address information in response to valid requests, and that the IRS’s prior internal guidelines to the contrary did not have the force of law. The court also determined that the MOU was a nonbinding policy statement, not a final agency action subject to judicial review under the Administrative Procedure Act (APA). On appeal, the United States Court of Appeals for the District of Columbia Circuit affirmed the District Court’s denial of preliminary injunction. The appellate court held that the plaintiffs likely had standing, but were unlikely to succeed on the merits. The court ruled that § 6103(i)(2) clearly authorizes the IRS to disclose taxpayer address information, and that the MOU was not a reviewable agency action. It further held that any challenge to the agency’s change of interpretation was not viable because the court’s interpretation of the statute controls. The judgment of the District Court was affirmed. View "Centro de Trabajadores Unidos v. Bessent" on Justia Law

Committee to Protect and Preserve v. State

2026-02-06T09:07:01-08:00

Several organizations and individuals petitioned to prevent the Idaho State Tax Commission from implementing a newly enacted parental choice tax credit. This tax credit, established in 2025, provides refundable credits to parents, guardians, and foster parents for certain private educational expenses, including private school tuition and related services, for dependent students not enrolled in public schools. The law caps total annual credits and includes prioritization based on income and previous participation. The petitioners, including advocacy groups, a school district, and parents, argued that the statute creates a separate, non-public education system funded by public resources, allegedly violating the Idaho Constitution’s mandate for a single, general, uniform, and thorough system of public schools. They also claimed the statute failed the “public purpose doctrine,” asserting it primarily benefits private rather than public interests. Before the Idaho Supreme Court, the petitioners sought a writ of prohibition, which would prevent the Tax Commission from carrying out the law. The respondents, including the State and the Idaho Legislature, contested the petitioners’ standing and the merits of the constitutional claims. The Supreme Court determined that the petitioners lacked traditional standing but, given the urgency and importance of the constitutional question and the absence of another suitable challenger, relaxed standing requirements to address the merits. The Supreme Court of Idaho denied the petition. It held that Article IX, section 1 of the Idaho Constitution does not restrict the legislature from enacting educational measures beyond the required public school system, so long as the public system remains intact and constitutionally sufficient. The Court also found that the tax credit serves a legitimate public purpose—supporting parental choice in education—even if private entities benefit. The petition was dismissed, and the Tax Commission was awarded attorney fees and costs. View "Committee to Protect and Preserve v. State" on Justia Law

Torrington Tax Collector, LLC v. Riley

2026-02-04T08:03:02-08:00

A municipal tax collector initiated a bank execution action against an individual to collect unpaid personal property taxes owed by a business with which the individual was previously associated. The individual had moved to California years earlier and claimed that she never received notice of the tax debt or an opportunity to contest it, despite providing her new address to the tax collector. Previous bank executions had been initiated, but the individual continued to assert lack of notice. In the 2021 action, the trial court found that the tax collector failed to comply with statutory notice requirements and that the individual had not been afforded due process, leading the court to grant her exemption from the execution. Following the 2021 judgment, the tax collector withdrew its appeal and attempted a new bank execution after sending written demand to the individual's California address, but did not provide a new tax bill or opportunity to challenge it. The individual again moved for exemption. The Superior Court concluded that the new execution was a collateral attack on the previous judgment and was barred by doctrines of res judicata and collateral estoppel. The Appellate Court affirmed, finding that the issue of notice and opportunity to challenge the tax debt had been actually litigated and necessarily determined in the prior action. Upon review, the Connecticut Supreme Court held that collateral estoppel barred the municipal tax collector from relitigating whether it could execute on the individual's funds without first providing adequate notice and an opportunity to challenge the underlying tax debt. The Court determined that both independent, alternative grounds supporting the earlier judgment were entitled to preclusive effect and declined to create a public policy exception for municipal tax collection actions. The Supreme Court affirmed the judgment of the Appellate Court. View "Torrington Tax Collector, LLC v. Riley" on Justia Law

MetroPCS Cal., LLC v. City of Lakewood

2026-02-01T10:03:11-08:00

The City of Lakewood, Colorado enacted a business and occupation tax on certain telecommunications providers in 1969, which initially applied only to utility companies maintaining a telephone exchange and supplying local service within the city. Following changes in state and federal law promoting competitive neutrality and prohibiting barriers to entry, the city amended its tax ordinances in 1996 and again in 2015. The 1996 amendment expanded the tax to cover all providers of basic local telecommunications service, including some cellular services, while the 2015 amendment further broadened the scope to include all cellular and wireless voice service providers. Lakewood did not seek voter approval before enacting either amendment. After Lakewood audited MetroPCS California, LLC and assessed more than $1.6 million in unpaid business and occupation taxes, MetroPCS sued in the Jefferson County District Court. The district court granted summary judgment to MetroPCS, ruling that both the 1996 and 2015 Ordinances constituted "new taxes" under Colorado's Taxpayer's Bill of Rights (TABOR), and thus required advance voter approval. The court found the ordinances expanded the tax to previously untaxed providers and services, generating revenue that was not merely incidental or de minimis. Lakewood’s arguments that the ordinances simply clarified or updated the existing tax and did not produce significant new revenue were rejected. The district court declared both ordinances void and unenforceable for lack of voter approval. The Supreme Court of Colorado reviewed the case directly. Applying de novo review, it affirmed the district court’s judgment. The Court held that both the 1996 and 2015 Ordinances imposed new taxes within the meaning of TABOR, as they expanded the tax base to include new classes of providers and services, and the resulting revenue increases were not incidental. Because Lakewood failed to obtain voter approval prior to enacting these ordinances, both were held void and unenforceable. The Court remanded the case for consideration of MetroPCS’s request for appellate fees and costs. View "MetroPCS Cal., LLC v. City of Lakewood" on Justia Law

Disney Platform Distribution, Inc. v. City of Santa Barbara

2026-01-30T10:31:50-08:00

Several subsidiaries of a major entertainment company providing video streaming services were notified by the City of Santa Barbara that they owed significant sums in unpaid video users’ taxes, penalties, and interest for the period from 2018 to 2020. The City’s demand was based on a 2008 ordinance, approved by local voters, which imposed a tax on those using “video services” in the city. The ordinance defined “video services” broadly, including services delivered by Internet Protocol. The companies argued that their streaming services did not fall under the ordinance because streaming platforms do not provide a “channel” as contemplated by the ordinance, instead relying on customers’ independently obtained Internet services. Following the City’s deficiency notice, the companies appealed administratively. An independent hearing officer upheld the City’s position, concluding that the ordinance applied to video streaming. The companies then sought judicial review in the Superior Court of Santa Barbara County by filing a petition for a writ of administrative mandate. The trial court denied their petition, determining that the ordinance was intended to apply to streaming, that its enforcement did not violate federal or state law, and that the City was not required to provide additional notice before enforcement. On appeal, the California Court of Appeal, Second Appellate District, Division Six, affirmed the lower court’s judgment. The appellate court held that the ordinance, as approved by the electorate, applies to providers of video streaming services and that the ordinary, non-technical meaning of “channel” should govern. The court further held that applying the tax to streaming services does not violate the Internet Tax Freedom Act, the First Amendment, or the California Constitution, nor did the City’s delayed enforcement require additional voter approval or special notice under state law. The judgment denying the companies’ petition was affirmed. View "Disney Platform Distribution, Inc. v. City of Santa Barbara" on Justia Law

Sirius Solutions v. Commissioner of Internal Revenue

2026-01-16T16:30:11-08:00

Sirius Solutions, L.L.L.P. is a limited liability limited partnership organized under Delaware law, operating as a business-consulting firm. The partnership consisted of both limited partners and a general partner, Sirius Solutions GP, L.L.C. For the tax years 2014, 2015, and 2016, Sirius reported all ordinary business income as allocated to its limited partners and excluded those distributive shares from net earnings from self-employment, claiming an exemption under 26 U.S.C. § 1402(a)(13) for limited partners. This resulted in Sirius reporting zero net earnings from self-employment in each year. The Internal Revenue Service audited Sirius’s returns and, through Notices of Final Partnership Administrative Adjustment, determined that Sirius’s limited partners did not qualify as “limited partners” for purposes of the statutory exception. Therefore, the IRS reclassified the distributive shares of income as subject to self-employment tax, substantially increasing Sirius’s net earnings from self-employment for the years at issue. Sirius petitioned the United States Tax Court for readjustment, and the cases for all three years were consolidated. The Tax Court, relying on its decision in Soroban Capital Partners LP v. Commissioner, 161 T.C. 310 (2023), held that only passive investors qualify as “limited partners” under § 1402(a)(13), and thus upheld the IRS’s adjustments. On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the meaning of “limited partner” under § 1402(a)(13). The Fifth Circuit held that a “limited partner” is a partner in a state-law limited partnership who has limited liability, rejecting the narrower “passive investor” test applied by the Tax Court and IRS. The Fifth Circuit vacated the Tax Court’s decision and remanded for further proceedings, instructing that the distributive shares of limited partners with limited liability should be excluded from self-employment earnings for tax purposes. View "Sirius Solutions v. Commissioner of Internal Revenue" on Justia Law

Jones Apparel Group/Nine West Holdings v. Harris Tax Commr.

2026-01-14T06:12:29-08:00

Jones Apparel, a company that designs and sells apparel, shoes, and accessories, sold merchandise to DSW, Inc. from 2010 through 2016. All merchandise was initially shipped to DSW’s distribution center in Columbus, Ohio. DSW subsequently transferred merchandise from the distribution center to its retail stores, many of which are located outside Ohio. Jones Apparel did not know at the time of sale or shipment how much merchandise would remain in Ohio or be sent elsewhere. After paying Ohio’s Commercial Activity Tax (CAT) on the gross receipts from these sales, Jones Apparel later claimed that much of the merchandise ultimately left Ohio and sought a refund for the portion of receipts it believed should not have been taxed. Jones Apparel filed CAT-refund claims with the Ohio Tax Commissioner, arguing that the relevant gross receipts lacked an Ohio situs. The Tax Commissioner denied the claim, reasoning that shipping labels and bills of lading showed delivery to Ohio and that accepting secondary evidence regarding subsequent shipment outside Ohio could create administrative problems. Jones Apparel appealed to the Ohio Board of Tax Appeals (BTA), which held a hearing. The BTA acknowledged that evidence obtained after initial delivery could theoretically establish that goods were ultimately received outside Ohio, but found that Jones Apparel had failed to provide sufficient documentary evidence to establish the amount of gross receipts for merchandise transported out of Ohio. The BTA affirmed the denial of the refund claim. On further appeal, the Supreme Court of Ohio reviewed the BTA’s decision for reasonableness and lawfulness. The court rejected the Tax Commissioner’s argument that only contemporaneous records should be considered in situsing determinations, finding no such statutory requirement. However, the court held that Jones Apparel did not meet its burden of providing documentary evidence to establish the amount of gross receipts that left Ohio, as required by statute. Therefore, the Supreme Court of Ohio affirmed the BTA’s decision denying the refund. View "Jones Apparel Group/Nine West Holdings v. Harris Tax Commr." on Justia Law

United States of America v. Reyes

2026-01-07T07:00:06-08:00

Juan and Catherine Reyes, both United States citizens, maintained a jointly-held foreign bank account in Switzerland that contained over two million dollars, representing the majority of their assets and a significant source of their income. Despite being asked by both their accountant and the IRS about foreign accounts, the Reyeses did not disclose their interest in the account on tax forms for 2010, 2011, and 2012, nor did they file the required Report of Foreign Bank and Financial Accounts (FBAR). After the IRS discovered the omission and assessed civil penalties for willful failure to file FBARs for those years, the Reyeses did not pay, resulting in the United States initiating suit to convert those penalties into a money judgment. The United States District Court for the Eastern District of New York granted summary judgment in favor of the United States, finding that the Reyeses' conduct was at least reckless and therefore "willful" under 31 U.S.C. § 5321. The court imposed enhanced penalties and also applied a six percent late payment penalty under 31 U.S.C. § 3717(e)(2) and relevant Treasury regulations. The Reyeses contested both the determination of willfulness and the application of the late payment penalty, arguing that recklessness should not suffice for willfulness and that the penalty rate should be discretionary. Reviewing the case de novo, the United States Court of Appeals for the Second Circuit held that "willful" as used in 31 U.S.C. § 5321 encompasses reckless conduct, aligning its interpretation with that of other circuits and Supreme Court precedent. It further determined that the undisputed evidence established the Reyeses acted recklessly and that summary judgment was appropriate. The appellate court also concluded that the six percent late payment penalty imposed by the district court was mandatory under controlling Treasury Department regulations. The Second Circuit affirmed the judgment of the district court in all respects. View "United States of America v. Reyes" on Justia Law

Johnston v. Ernst

2026-01-06T08:13:34-08:00

The case concerns a property owner who challenged the assessed valuation of his residential property by the county assessor. After receiving a tax assessment notice valuing his home at $732,661, the property owner met with the assessor to contest the figure, citing his home’s 2013 purchase price as more accurate. The assessor, after review, reduced the assessment twice—first lowering the quality rating of the home and then making a minor adjustment for siding type—ultimately setting the value at $674,465. The property owner appealed the assessment, objecting to the timing of evidence disclosure by the assessor and arguing that the assessed value should reflect actual sales in the neighborhood or a realtor’s market evaluation instead of the mass appraisal system used. The Laramie County Board of Equalization held a hearing on the appeal, admitting both parties’ evidence, including the assessor’s exhibits, which were received by the property owner three days later than the statutory deadline but still twenty-seven days before the hearing. The Board found the assessor’s methods and use of the state-mandated Computer Assisted Mass Appraisal (CAMA) system proper, and concluded that the property owner failed to provide credible evidence that the valuation was incorrect or unlawful. The Board affirmed the assessment. The property owner appealed to the State Board of Equalization, which remanded briefly for procedural reasons, after which the Board reaffirmed its decision. The State Board and then the District Court of Laramie County both affirmed. The Supreme Court of Wyoming reviewed the case and held that the County Board did not abuse its discretion in admitting the assessor’s evidence, given the minimal delay and lack of prejudice. It also held that the property owner did not meet his burden to rebut the presumption of correctness in the assessor’s valuation, which was supported by substantial evidence and in accordance with law. The Supreme Court affirmed the lower courts’ decisions. View "Johnston v. Ernst" on Justia Law

Piezko v. County of Maui

2025-12-30T11:13:20-08:00

The plaintiffs in this case are trustees who own a property in Kīhei, Maui, which they use as a vacation home for personal use. In 2021, Maui County reclassified their property as a “short-term rental” based solely on zoning, not actual use, resulting in a higher property tax rate. The plaintiffs paid the assessed taxes but did not utilize the administrative appeals process available through the Maui County Board of Review. Instead, they filed a class action in the Circuit Court of the Second Circuit, seeking a refund and alleging that the County’s collection of the higher taxes was unconstitutional, violated due process, and resulted in unjust enrichment. The Circuit Court of the Second Circuit granted the County’s motion to dismiss, finding it lacked subject matter jurisdiction. The court determined that under Hawai‘i Revised Statutes chapter 232 and Maui County Code chapter 3.48, the proper procedure for contesting real property tax assessments—including constitutional challenges—requires first appealing to the County Board of Review and, if necessary, then to the Tax Appeal Court. Because the plaintiffs bypassed these required steps and missed the statutory deadline to appeal, the court dismissed the case with prejudice. On appeal, the Supreme Court of the State of Hawai‘i affirmed the circuit court’s dismissal. The Supreme Court held that the Tax Appeal Court has exclusive jurisdiction over appeals regarding real property tax assessments, including those raising constitutional issues, and found that the plaintiffs’ claims were time-barred due to their failure to timely pursue the established administrative remedies. As a result, the Supreme Court affirmed the circuit court’s judgment dismissing the plaintiffs’ claims for lack of subject matter jurisdiction. View "Piezko v. County of Maui" on Justia Law

P. v. Salstrom

2025-12-29T11:00:56-08:00

The defendant was convicted in 2003 of voluntary manslaughter, robbery, possession of a firearm, and received various sentence enhancements, including a prior strike, a firearm enhancement, and seven prior prison term enhancements, resulting in a sentence of 42 years and four months. Two restitution fines of $5,000 each were also imposed. In 2023, following legislative changes, the Department of Corrections and Rehabilitation identified the defendant as eligible for resentencing under Penal Code section 1172.75, which invalidated certain prior prison term enhancements. The defendant sought to have those enhancements stricken and also requested further modifications, including striking the prior strike and firearm enhancement, and imposing a lesser term for the manslaughter conviction. At the Superior Court of Sacramento County, during the resentencing hearing held in October 2024, the court struck the seven prior prison term enhancements, reducing the sentence to 35 years and four months. However, the court declined to strike the prior strike and firearm enhancement, and reimposed the original restitution fines and victim restitution. The updated abstract of judgment noted the restitution fines were “stayed.” The defendant appealed, raising constitutional and statutory challenges to the reimposition of the upper term, the denial of his request to strike the firearm enhancement under section 1385, and the continued imposition of the restitution fine. The California Court of Appeal, Third Appellate District, held that the trial court did not err by reimposing the upper term for voluntary manslaughter without requiring new findings of aggravating circumstances under amended section 1170, subdivision (b), because section 1172.75, subdivision (d)(4) exempts previously imposed upper terms from these requirements. The court also found no abuse of discretion or statutory error in declining to dismiss the firearm enhancement, as no applicable mitigating factors were established. However, the court concluded that the restitution fine originally imposed in 2003 must be vacated under section 1465.9, as more than ten years had elapsed. The judgment was affirmed as modified to vacate the restitution fine. View "P. v. Salstrom" on Justia Law

VVF Intervest, L.L.C. v. Harris

2025-12-24T06:09:58-08:00

VVF Intervest, L.L.C., a contract manufacturer based in Kansas, produced bar soap for High Ridge Brands (HRB), the brand owner. HRB, an "asset light" entity, directed VVF to ship the soap from Kansas to a third-party distribution center in Columbus, Ohio. Subsequently, HRB resold most of the product to national retailers, and the soap was shipped out of Ohio to various locations. Between 2010 and 2014, VVF paid Ohio’s commercial-activity tax (CAT) on its gross receipts from these sales to HRB. After making these payments, VVF sought a refund from the Ohio tax commissioner, arguing that its gross receipts should not be sitused to Ohio since the products left the state soon after arrival. The tax commissioner denied the refund, emphasizing that the relevant sale for tax purposes was VVF’s sale to HRB, not HRB’s subsequent sales to retailers. VVF appealed to the Ohio Board of Tax Appeals, which held that the Columbus distribution center was merely an interim stop and that the gross receipts should not be sitused to Ohio. The board also found that VVF had not adequately preserved an alternative statutory argument regarding services and declined to rule on constitutional claims. The Supreme Court of Ohio reviewed the appeal and reversed the Board of Tax Appeals’ decision. The court held that under R.C. 5751.033(E), VVF’s gross receipts from sales to HRB are properly sitused to Ohio because HRB, as the purchaser, received the goods in Ohio. The court dismissed VVF’s alternative statutory argument for lack of jurisdiction and rejected VVF’s constitutional challenges under the Due Process, Commerce, and Equal Protection Clauses. Thus, VVF is not entitled to a refund of the CAT paid on these transactions. View "VVF Intervest, L.L.C. v. Harris" on Justia Law

Standard Insurances v. IRS

2025-12-22T08:01:25-08:00

Several Utah-based companies and individuals, including Standard Insurances and related entities, challenged actions taken by the Internal Revenue Service (IRS) following an audit. Standard Insurances, a micro-captive insurance company, had provided insurance to its affiliated companies, seeking certain federal tax benefits under 26 U.S.C. § 831(b). After an audit initiated in 2022, the IRS determined that Standard was not a legitimate micro-captive insurance company, issued deficiency notices, and adjusted the tax liabilities of Standard and its insureds. The IRS concluded that Standard’s transactions lacked economic substance and were not genuine insurance transactions, resulting in increased taxable income for Standard and decreased deductions for the insured entities. Following the issuance of deficiency notices, Standard petitioned the United States Tax Court for redetermination of its tax liabilities and made advance payments. While those proceedings remained pending, Standard filed suit in the United States District Court for the District of Utah, seeking declaratory and injunctive relief. The district court dismissed the case for lack of jurisdiction, finding that the claims were barred by the Declaratory Judgment Act (DJA) and the Tax Anti-Injunction Act (AIA), which prohibit suits in federal court that restrain the assessment or collection of federal taxes. On appeal, the United States Court of Appeals for the Tenth Circuit affirmed the district court’s dismissal. The Tenth Circuit held that Standard’s claims sought relief that would restrain the IRS’s assessment and collection of taxes, and thus were barred by the DJA and AIA. The court found that none of the judicially created exceptions to these statutes applied, as Standard had an available remedy in tax court and could pursue further review if necessary. The court rejected Standard’s arguments that its claims were not subject to the statutory bars and concluded that federal court jurisdiction was precluded in this instance. View "Standard Insurances v. IRS" on Justia Law

United States v. Clay

2025-12-19T14:30:33-08:00

Kevin Clay and his associate founded a pharmaceutical sales company that marketed compounded prescriptions directly to patients, promising them a share of the insurance reimbursements for each prescription filled. The company partnered with a pharmacy willing to pay a portion of the insurance proceeds and recruited employees from a local business whose health plan covered these prescriptions. Patients were directed to a doctor who readily prescribed the creams, resulting in millions of dollars in reimbursements over two years. Clay established a public charity to reduce his tax burden but used its funds for personal expenses and failed to comply with nonprofit requirements. The United States District Court for the Northern District of Ohio oversaw Clay’s trial. A jury convicted him of conspiracy to commit healthcare fraud, healthcare fraud, and making a false statement to the IRS, but acquitted him of a separate tax charge. The court sentenced Clay to 51 months’ imprisonment and ordered restitution totaling nearly $7 million to both Fiat Chrysler and the IRS. Clay appealed his convictions, sentence, and restitution orders. The United States Court of Appeals for the Sixth Circuit reviewed the case. The court affirmed Clay’s convictions and rejected his challenges to the jury instructions and evidentiary rulings. However, it found error in the district court’s restitution orders and the application of a sentencing enhancement. Specifically, the Sixth Circuit held that restitution should not include payments for medically necessary prescriptions and that the apportionment of restitution must consider each defendant’s contribution and economic circumstances. The court also determined the restitution order to the IRS was not properly substantiated and included acquitted conduct. Finally, the case was remanded for further proceedings on restitution and for clarification or reconsideration of the leadership sentencing enhancement. View "United States v. Clay" on Justia Law

United States v. Collins

2025-12-18T09:00:13-08:00

After serving more than a decade in the Illinois state legislature, the defendant established a lobbying and consulting firm and also sold life insurance for a private company. For several years, she correctly filed her tax returns and reported her income. However, beginning in 2014, she significantly underreported her income on her personal tax returns or failed to file altogether, despite substantial earnings from her business and insurance work. She was later terminated from her insurance position for fraudulent activity. The IRS discovered unreported income and issued a notice of tax liability, prompting her to amend one return and enter a payment plan, which she later abandoned. A grand jury indicted her on six counts, including making false statements on tax returns and willfully failing to file returns for herself and her company. The United States District Court for the Northern District of Illinois, Eastern Division, made several evidentiary rulings before and during trial, including excluding evidence of her amended tax return and payment plan, and limiting her expert’s testimony. The jury convicted her on four counts. The court denied her motion for judgment of acquittal and later sentenced her to one year of imprisonment and supervised release. She subsequently filed a motion to modify her sentence to make her eligible for good-time credits, which the district court denied. The United States Court of Appeals for the Seventh Circuit reviewed her convictions and the district court’s evidentiary rulings de novo and for abuse of discretion, respectively. The appellate court held that there was sufficient evidence for a rational jury to find willfulness, affirmed the exclusion of post-offense remedial evidence as within the district court’s discretion, found her challenge to the impeachment ruling waived since she did not testify, upheld the limitation on her expert’s testimony, and agreed that her motion to correct the sentence was untimely and properly denied. The Seventh Circuit affirmed the judgment. View "United States v. Collins" on Justia Law

State ex rel. Martens v. Findlay

2025-12-18T06:07:28-08:00

A taxpayer in the City of Findlay filed a mandamus action against the city and various municipal officials, alleging that the city failed to comply with municipal income-tax statutes and initiated fraudulent tax collection efforts against him and other delinquent taxpayers. He sought to enjoin the city from engaging in these tax collection activities and to compel compliance with local tax ordinances. In his filings, the taxpayer did not claim that any tax complaint was currently pending against him or allege a specific, individualized injury. Instead, he asserted standing as a taxpayer and attempted to bring his action on behalf of all taxpayers, invoking the public right doctrine. Previously, this dispute had resulted in several adverse judgments against the taxpayer in both the Third District Court of Appeals and the Supreme Court of Ohio, all relating to similar underlying facts concerning Findlay’s efforts to collect unpaid municipal taxes. In the present matter, the Third District Court of Appeals granted the city’s motion to dismiss the mandamus action under Civil Rule 12(B)(6). The appellate court found that the taxpayer lacked standing because he failed to allege a specific injury distinct from the general public and that his claims were not cognizable in mandamus. The court also denied his request for leave to file a third amended complaint, concluding that he had not demonstrated good cause to do so. On review, the Supreme Court of Ohio affirmed the judgment of the Third District Court of Appeals. The Supreme Court held that the taxpayer lacked standing to pursue the mandamus action because he did not allege an actual injury personal to him that was fairly traceable to the city’s conduct, as required for individual standing. The Supreme Court also rejected reliance on the public right doctrine, reaffirming its prior decision that this doctrine had been overruled, and denied both the motion to supplement the record and the request for oral argument. View "State ex rel. Martens v. Findlay" on Justia Law

Disney Platform Distribution v. City of Santa Barbara

2025-12-17T11:01:11-08:00

Disney Platform Distribution, BAMTech, and Hulu, subsidiaries of the Walt Disney Company, provide video streaming services to subscribers in the City of Santa Barbara. In 2022, the City’s Tax Administrator notified these companies that they had failed to collect and remit video users’ taxes under Ordinance 5471 for the period January 1, 2018, through December 31, 2020, resulting in substantial assessments. The companies appealed to the City Administrator, and a retired Associate Justice served as hearing officer, ultimately upholding the Tax Administrator’s decision. Following the administrative appeal, the companies sought judicial review by filing a petition for a writ of administrative mandate in the Superior Court of Santa Barbara County. The trial court denied their petition, finding that the Ordinance does apply to video streaming services and rejecting arguments that the Ordinance violated the Internet Tax Freedom Act, the First Amendment, and Article XIII C of the California Constitution. The trial court also found there was no violation of Public Utilities Code section 799’s notice requirements, as the City’s actions did not constitute a change in the tax base or adoption of a new tax. On appeal, the California Court of Appeal, Second Appellate District, Division Six, affirmed the trial court’s judgment. The court held that the Ordinance applies to video streaming services, interpreting the term “channel” in its ordinary, non-technical sense and finding that the voters intended technological neutrality. The court further held that the Ordinance does not violate the Internet Tax Freedom Act because video streaming subscriptions and DVD sales/rentals are not “similar” under the Act. Additionally, the court concluded the tax is not a content-based regulation of speech under the First Amendment, and that delayed enforcement did not constitute a tax increase requiring additional voter approval or notice under the California Constitution or Public Utilities Code section 799. View "Disney Platform Distribution v. City of Santa Barbara" on Justia Law

N.C. Dep't of Revenue v. Wireless Ctr. of N.C., Inc

2025-12-12T08:37:43-08:00

A retailer in North Carolina sold a product called “Replenishments” for a wireless provider. During the period audited by state tax authorities, the way Replenishments could be used changed. In the first part of the audit period, customers could only redeem Replenishments for prepaid wireless service. In the second part, they could redeem them for wireless service or for a broader range of products and services from the wireless provider. The state tax agency audited the retailer and determined that sales tax should have been collected and remitted on all Replenishment sales at the point of sale, assessing a significant tax liability. The retailer challenged the assessment in the Office of Administrative Hearings (OAH), which divided the audit period into two: Period I (pre-September 2017) and Period II (post-September 2017). The administrative law judge found the retailer responsible for tax collection during Period I, since Replenishments were only for wireless service, but not responsible during Period II, when Replenishments functioned as stored-value cards (like gift cards) usable for various products, making the wireless provider responsible for collecting tax at redemption. The North Carolina Business Court reviewed the case and disagreed with OAH about Period II, holding the retailer responsible for collecting sales tax on all Replenishment sales across both periods. The Supreme Court of North Carolina conducted a detailed statutory analysis, affirmed the Business Court’s ruling for Period I, and reversed as to Period II. The Supreme Court held that in Period I, Replenishments were prepaid wireless calling services taxable at the point of sale, making the retailer responsible for tax collection and remittance. For Period II, the Court held Replenishments were stored-value cards, taxable only when redeemed, with the wireless provider responsible for tax. The Court remanded the case for recalculation of the retailer’s tax liability consistent with this holding. View "N.C. Dep't of Revenue v. Wireless Ctr. of N.C., Inc" on Justia Law

USA v Sabaini

2025-12-10T08:00:17-08:00

A special agent with Homeland Security Investigations was discovered to have stolen money from criminal targets, embezzled agency funds, and entered into a cash-for-protection arrangement with a confidential source. The agent’s conduct came to light after the confidential source was arrested by the DEA, and text messages between the two were uncovered. Investigators found that the agent deleted incriminating messages, misappropriated cash from drug dealers and agency sources, manipulated controlled buys for personal gain, and protected his source from law enforcement scrutiny. The agent was also shown to have structured cash deposits to evade bank reporting requirements and failed to report significant taxable income. The United States District Court for the Northern District of Illinois, Eastern Division, conducted a thirteen-day jury trial in 2023. The jury found the agent guilty on all counts, including filing false tax returns, structuring cash transactions, and concealing material facts from the government. The district court denied the agent’s post-trial motions for acquittal and a new trial, then imposed sentence. The agent appealed, contesting the sufficiency of the evidence supporting his conviction. The United States Court of Appeals for the Seventh Circuit reviewed the case. Applying the appropriate standards of review, the court held that there was sufficient evidence for a rational jury to convict on all counts. The evidence included direct and indirect proof of unreported income, clear indications of structuring to evade reporting requirements, and material omissions on government forms. The court found no grounds to disturb the jury’s credibility determinations or the district court’s denial of post-trial motions. Accordingly, the Seventh Circuit affirmed the judgment of the district court. View "USA v Sabaini" on Justia Law

Blake v USA

2025-12-09T08:30:18-08:00

The petitioner was convicted following a jury trial for filing a fraudulent tax return and theft of government funds, after he submitted a tax form claiming a large refund based on a mistaken belief about a government “trust” linked to Social Security. He received and spent the refund, then requested another, which was denied. The IRS investigated, and he later filed a document stating he was deceased. His defense at trial centered on his claim that he misunderstood tax law due to information from an online forum and advice from an IRS agent. The United States District Court for the Northern District of Indiana oversaw the criminal trial, where the petitioner was represented by attorney John Davis. During trial, Davis pursued motions under Brady v. Maryland, seeking exculpatory evidence, but the motions were denied. After conviction, Davis was removed from the Seventh Circuit Bar for misconduct in an unrelated case. The petitioner then moved for a new trial and, later, for relief under 28 U.S.C. § 2255, arguing ineffective assistance of counsel based on Davis’s disciplinary history and alleged trial errors. The district court denied both motions, finding Davis’s performance did not prejudice the petitioner’s defense and that his disciplinary issues in other cases did not establish ineffectiveness in the present case. On appeal, the United States Court of Appeals for the Seventh Circuit reviewed the district court’s denial of collateral relief de novo for legal issues and for clear error regarding factual findings. The court held that there is no per se rule that concurrent or subsequent attorney discipline renders counsel ineffective; instead, a petitioner must show specific deficient performance and resulting prejudice under Strickland v. Washington. The petitioner failed to demonstrate that counsel’s alleged errors affected the outcome of the trial. The Seventh Circuit affirmed the district court’s denial of the § 2255 motion. View "Blake v USA" on Justia Law

Department of Revenue v. PacifiCorp

2025-12-02T08:39:57-08:00

A company engaged in oil and gas production in Wyoming purchased electricity to operate equipment—primarily electronic submersible pumps and pumpjacks—that lifted fluids from underground, moved them to surface facilities for separation, and ultimately delivered the separated crude oil to custody transfer units (LACTs). The company sought a refund of sales tax paid on a portion of this electricity, arguing that the power was used for “transportation” and therefore exempt from sales tax under a statutory provision for those “engaged in the transportation business.” Utility studies commissioned by the company attempted to quantify what percentage of electricity was used for surface movement of fluids. A prior audit by the Wyoming Department of Revenue covering different years led to a similar refund dispute, but the Department conceded that the company was “engaged in the transportation business,” and the Wyoming State Board of Equalization ruled in the company’s favor. However, for the tax years at issue here, the Department denied the refund, asserting the company was not engaged in the transportation business as required by statute. The Board, after a contested hearing, again ruled for the company, finding it met the exemption, but the Department appealed, and the District Court certified the case to the Supreme Court of Wyoming. The Supreme Court of Wyoming held that collateral estoppel did not bar the Department’s appeal because the issue of whether the company was engaged in the transportation business was not actually litigated in the prior proceeding, but stipulated. On the merits, the Court reversed the Board’s decision. It found that the company’s activities—moving crude oil from the wellhead to the LACT and separating water—were part of the production process, not transportation. The company was not engaged in the transportation business as contemplated by the statute and the electricity was used for production, not actual transportation purposes. Thus, the company was not entitled to a sales tax exemption or refund. View "Department of Revenue v. PacifiCorp" on Justia Law

Southampton 100, LLC v. Alabama Department of Revenue

2025-11-26T06:30:04-08:00

The dispute centers on the ad valorem tax assessments for a low-income-housing property purchased in 2019 by Southampton 100, LLC. Dissatisfied with the Jefferson County Tax Assessor's valuations for several tax years, Southampton sought adjustments from the Jefferson County Board of Equalization and Adjustments. While the Board reduced some assessments, Southampton remained dissatisfied and filed separate appeals for each tax year. These appeals were consolidated in the Jefferson Circuit Court, where the Alabama Department of Revenue (ADOR) became the appellee. As the consolidated appeal progressed, the parties encountered repeated discovery disputes. ADOR filed multiple motions for sanctions, culminating in a request to depose Southampton’s second corporate representative, who resided in California, in person in Alabama. Southampton argued that requiring travel was unduly burdensome, offering instead to make this representative available via Zoom or for an in-person deposition immediately before trial. However, Southampton never sought a formal protective order. ADOR persisted and, after additional scheduling complications and denied motions, requested dismissal of the appeal as a sanction for alleged noncompliance. The Jefferson Circuit Court granted this request and dismissed Southampton’s appeal with prejudice, without a hearing or explanation. The Supreme Court of Alabama reviewed the case, applying the standard of whether the trial court exceeded its discretion in imposing sanctions. The Court held that dismissal with prejudice is a severe sanction that requires a showing of willful and deliberate disregard for discovery obligations. The record did not support a finding that Southampton acted willfully or intentionally to prevent discovery. Therefore, the Supreme Court of Alabama reversed the circuit court’s judgment and remanded the case for further proceedings. View "Southampton 100, LLC v. Alabama Department of Revenue" on Justia Law

State Water Resources Control Bd. v. Superior Court

2025-11-24T12:01:26-08:00

This case concerns the State Water Resources Control Board's intervention in the Tulare Lake groundwater subbasin pursuant to California’s Sustainable Groundwater Management Act (the Act). After local agencies in the subbasin submitted a groundwater sustainability plan that the Department of Water Resources twice determined to be inadequate, the State Board designated the basin as probationary in April 2024. This designation triggered state-imposed monitoring, reporting, and fee obligations on certain groundwater extractors. In response, the Kings County Farm Bureau and others filed a petition for writ of mandate and complaint, asserting that the State Board exceeded its authority and challenging the validity of the designation and associated fees on several grounds. The Superior Court of Kings County addressed both a demurrer filed by the State Board and a request from the Farm Bureau for a preliminary injunction. The trial court dismissed the equal protection claim with leave to amend, but overruled the demurrer as to claims that (1) the State Board used improper “underground regulations” not adopted under the Administrative Procedure Act (APA), (2) the imposed extraction fee constituted an unlawful tax, and (3) general declaratory relief was appropriate. The trial court also granted a preliminary injunction, temporarily halting the State Board’s enforcement activities. The California Court of Appeal, Fifth Appellate District, reviewed the trial court’s order overruling the demurrer. The appellate court held that all actions by the State Board taken under sections 10735.2 and 10735.8 of the Act—including the designation of a probationary basin—are exempt from the APA unless the State Board voluntarily opts to adopt regulations using APA procedures. Therefore, the claim for improper “underground regulations” could not proceed. The court also held that a challenge to the extraction fee as an unlawful tax was barred by the constitutional “pay first” rule, as no exception applied. Lastly, the court determined that declaratory relief was unavailable because the Legislature provided for review of State Board actions exclusively by writ of mandate. The appellate court ordered the trial court to grant the demurrer without leave to amend as to these three claims. View "State Water Resources Control Bd. v. Superior Court" on Justia Law

Matter of First United Methodist Church in Flushing v Assessor, Town of Callicoon

2025-11-24T08:09:03-08:00

A nonprofit religious organization based in Queens purchased a 73-acre parcel in the Town of Callicoon, Sullivan County, in 2018. Although the organization originally intended to use the property as a retreat center, testimony established that its actual use involved farming vegetables on about one cleared acre for charitable distribution to low-income residents in Queens. Occasional overnight stays involved religious activities, but there was no evidence of regular organized religious services or use as a retreat center. The Town Supervisor, who lived nearby and farmed part of the property without a formal agreement, confirmed the farming use but did not observe overnight retreats. After the Town Assessor denied a religious use tax exemption for the property for the 2021 tax year, the organization filed a grievance complaint, which was denied by the Town’s Board of Assessment Review. The organization then initiated an RPTL article 7 proceeding in Supreme Court, challenging the denial. A similar process occurred for the 2022 tax year, and both proceedings were joined. Supreme Court held a nonjury trial, found all witnesses credible, credited the organization’s testimony about actual use, and granted the petitions for both tax years, concluding the property was exempt. The Appellate Division affirmed this decision, with one Justice dissenting. The New York Court of Appeals reviewed the case. It held that the lower courts applied the correct legal standards: the burden to prove entitlement to exemption rests with the party seeking it, while the burden to prove a zoning violation rests with the municipality. The Court of Appeals found record support for Supreme Court’s factual findings and concluded that the Town failed to prove a zoning violation sufficient to defeat the exemption for both years. The order of the Appellate Division was affirmed, with costs. View "Matter of First United Methodist Church in Flushing v Assessor, Town of Callicoon" on Justia Law

United States v. DiPietro

2025-11-17T13:30:16-08:00

Four individuals established two illegal gambling businesses in northern Ohio, operating gaming rooms that paid out winnings in cash. To avoid detection, the true owners concealed their involvement by using nominal owners and destroyed financial records. The businesses operated almost entirely in cash, allowing the owners to hide profits and evade taxes. One of the defendants, an accountant, played a central role in managing finances and preparing false tax returns for the group. The scheme also involved efforts to launder money and shield assets from IRS collection, including the use of shell companies and deceptive real estate transactions. After law enforcement executed multiple search warrants in 2018, a grand jury indicted several participants on conspiracy, illegal gambling, tax evasion, and related charges. The United States District Court for the Northern District of Ohio denied motions to dismiss and to sever the trials. At trial, a jury convicted two defendants on nearly all counts. At sentencing, the court calculated tax losses exceeding $3.5 million for each defendant, resulting in lengthy prison terms and substantial restitution orders. Both defendants challenged the loss calculations, the denial of severance, jury instructions, and other procedural aspects. The United States Court of Appeals for the Sixth Circuit reviewed the case. It held that the district court did not abuse its discretion in denying severance, as no compelling prejudice was shown. The court found no error in the denial of the motion to dismiss the tax evasion count, concluding that affirmative acts of evasion within the limitations period were sufficiently alleged. The appellate court also upheld the district court’s tax loss calculations, the application of the sophisticated means enhancement, and the handling of jury instructions. The sentences were affirmed, but the case was remanded for the limited purpose of correcting a clerical error in the judgment regarding restitution interest. View "United States v. DiPietro" on Justia Law

Newark Property Association v. State

2025-11-14T14:35:52-08:00

The dispute centers on a Delaware law, House Bill 242 (HB242), which permits New Castle County school districts to set different property tax rates for residential and non-residential properties for the 2025-2026 school year. This legislation was enacted after a county-wide property reassessment revealed a significant shift in the tax base, resulting in higher taxes for residential properties. In response to public concern, HB242 allowed school districts to implement a split-rate system, reducing residential rates and increasing non-residential rates, with the stipulation that non-residential rates could not exceed twice the residential rate and that total projected revenue could not surpass the amount projected under the original tax warrant. Subsequent corrections to property classifications led to a net increase in projected tax revenue. The plaintiffs, four property-related associations, challenged HB242 in the Court of Chancery, arguing that it violated the Uniformity Clause of the Delaware Constitution and a “revenue neutrality” requirement in the statute. The Court of Chancery rejected these claims, finding that the General Assembly has the authority to create reasonable property classifications for tax purposes and that the statute’s use of “projected” rather than “actual” revenue allowed for adjustments due to classification corrections. On appeal, the Supreme Court of Delaware reviewed the constitutionality of HB242 and the statutory interpretation issues de novo. The Court held that the Uniformity Clause does not prohibit reasonable legislative classifications of property for taxation, provided tax rates are uniform within each class. The Court also determined that HB242’s revenue limitation applies to projected, not actual, revenue, and that corrections to property classifications do not violate the statute. The Supreme Court of Delaware affirmed the judgment of the Court of Chancery. View "Newark Property Association v. State" on Justia Law

STATE OF CALIFORNIA V. DEL ROSA

2025-11-07T09:00:30-08:00

A corporation owned by a federally recognized Indian tribe, along with several tribal officials, was alleged by the State of California to have violated state cigarette tax laws and regulations. The corporation manufactured and distributed cigarettes in California, including to non-tribal consumers, without collecting or remitting required state excise taxes or payments under the Master Settlement Agreement. California claimed that the corporation and its officials distributed contraband cigarettes not listed on the state’s approved directory and failed to comply with shipping, recordkeeping, and tax collection requirements under the federal Prevent All Cigarette Trafficking Act (PACT Act). Despite warnings and being placed on a federal non-compliance list, the corporation continued its operations. The United States District Court for the Eastern District of California considered the defendants’ motion to dismiss. The court found that the corporation, as an arm of the tribe, was shielded by tribal sovereign immunity and dismissed claims against it. However, the court allowed claims for injunctive relief against the individual tribal officials in their official capacities to proceed, holding that the Ex parte Young doctrine permitted such relief under the PACT Act. The court also denied the officials’ claims of qualified immunity for personal capacity claims, reasoning that qualified immunity did not apply to enforcement actions brought by a state under a federal statute. On interlocutory appeal, the United States Court of Appeals for the Ninth Circuit affirmed the district court’s rulings. The Ninth Circuit held that the PACT Act does not preclude Ex parte Young actions for prospective injunctive relief against tribal officials, as the Act does not limit who may be sued or the types of relief available, nor does it contain a sufficiently detailed remedial scheme to displace Ex parte Young. The court also held that qualified immunity does not shield tribal officials from California’s claims for civil penalties and money damages under the PACT Act. View "STATE OF CALIFORNIA V. DEL ROSA" on Justia Law

Pinnacle Enters. v. Sarpy Cty. Bd. of Equal.

2025-11-07T06:35:41-08:00

The dispute centers on the taxable valuation of two apartment complex parcels owned by the taxpayers in Sarpy County, Nebraska. For tax years 2020 and 2021, the Sarpy County Assessor set the values at $8,953,000 and $5,263,000, which the taxpayers believed were excessive. They protested these assessments to the Sarpy County Board of Equalization, providing evidence of actual rental income that was lower than market estimates. A referee for the Board recommended adopting the taxpayers’ lower valuations, and the Board accepted these recommendations, setting the values at $7,450,829 and $3,559,566. The Assessor appealed the Board’s decision to the Nebraska Tax Equalization and Review Commission (TERC). At the TERC hearing, both parties agreed on using the income approach for valuation but disagreed on whether to use actual or market-typical income figures. The Assessor relied on market data, while the Board’s referee used actual income figures verified against an online database. TERC found that the Board’s methodology was not a professionally accepted mass appraisal method and that the actual income figures were not shown to be consistent with market rates. TERC vacated and reversed the Board’s valuations, reinstating the Assessor’s original higher values. On appeal, the Nebraska Supreme Court reviewed TERC’s decision for errors on the record. The court held that TERC erred in finding the Board’s valuations unreasonable or arbitrary, as the Board’s referee had provided a reasonable basis for using actual income figures, verified against market data. The Supreme Court reversed TERC’s decision and remanded the case with directions to affirm the Board’s lower valuations for both parcels for the relevant tax years. View "Pinnacle Enters. v. Sarpy Cty. Bd. of Equal." on Justia Law

Corning Place Ohio, LLC v. Commissioner of Internal Revenue

2025-11-05T14:00:15-08:00

A partnership purchased a historic eleven-story building in downtown Cleveland for $6 million in 2015 and later redeveloped it into residential apartments, utilizing state and federal historic preservation tax credits. In 2016, the partnership donated a conservation easement on the building’s façade and development rights to a local charity, claiming a $22 million charitable deduction—substantially more than the purchase price. The Internal Revenue Service (IRS) disallowed the deduction, citing that it was claimed in the wrong tax year, was grossly overvalued, and lacked proper documentation for related expenses. The IRS also imposed significant penalties for negligence and overvaluation. The partnership and its tax matters partner challenged the IRS’s determinations in the United States Tax Court. After a trial, the Tax Court found that the deduction was improperly claimed by the partnership for a period when it was not a taxable entity, as it had only one partner at the time of the donation. The court also concluded that the easement’s valuation was speculative and unsupported, rejecting the $22 million figure in favor of the IRS’s much lower estimate. Additionally, the Tax Court determined that the partnership failed to adequately document its claimed expenses and upheld the IRS’s penalties. On appeal, the United States Court of Appeals for the Sixth Circuit affirmed the Tax Court’s decision. The Sixth Circuit held that the partnership could not claim the deduction for a period when it was not a taxable partnership, that the valuation of the easement was grossly overstated and speculative, and that the partnership failed to substantiate its claimed expenses. The court also upheld the imposition of negligence and gross valuation misstatement penalties, finding no clear error in the Tax Court’s factual determinations. View "Corning Place Ohio, LLC v. Commissioner of Internal Revenue" on Justia Law

Charles G. Berwind Trust v. Commissioner of Internal Revenue

2025-10-30T09:00:08-08:00

The case concerns a dispute over the tax characterization of a $191 million payment made in 2002 to the Charles G. Berwind Trust (DB Trust) following a complex series of corporate transactions and litigation. The Berwind Corporation, a closely held coal mining business, was owned through family trusts. In 1999, a short-form merger under Pennsylvania law resulted in the DB Trust’s shares in Berwind Pharmaceutical Services, Inc. (BPSI) being extinguished, with the DB Trust entitled to payment for its shares. The DB Trust challenged the validity of the merger and the valuation of its shares through federal and state litigation, ultimately leading to a settlement in 2002, where BPSI paid the DB Trust $191 million. After the settlement, a tax dispute arose regarding whether a portion of the settlement payment should be treated as interest (taxed as ordinary income) or as capital gains. The Internal Revenue Service (IRS) determined that part of the payment represented unstated interest under Section 483 of the Internal Revenue Code, which applies to deferred payments under contracts for the sale of property. The DB Trust petitioned the United States Tax Court for redetermination, arguing that the payment was made under the 2002 Settlement Agreement, not the 1999 Merger Agreement, and thus should be taxed entirely as capital gains. The United States Tax Court found that the sale of the DB Trust’s shares occurred in 1999 under the Merger Agreement, which constituted a contract for the sale of property. The court held that the 2002 payment was made “under” the 1999 Merger Agreement, triggering Section 483 and requiring a portion of the payment to be treated as interest. The DB Trust appealed. The United States Court of Appeals for the Third Circuit affirmed the Tax Court’s decision. The Third Circuit held that Section 483 applied because the payment was made under a contract for the sale of property, and the Merger Agreement served as the basis for the payment obligation. Thus, the interest portion of the payment is taxable as ordinary income. View "Charles G. Berwind Trust v. Commissioner of Internal Revenue" on Justia Law

State Water Resources Control Bd. v. Super. Ct.

2025-10-29T13:30:55-08:00

The dispute centers on groundwater management in the Tulare Lake groundwater subbasin, a high-priority basin under California’s Sustainable Groundwater Management Act (the Act). Local groundwater agencies developed and submitted a sustainability plan for the subbasin, but the Department of Water Resources twice found the plan inadequate. Following these determinations, the State Water Resources Control Board designated the Tulare subbasin as probationary, triggering state intervention and new monitoring, reporting, and fee requirements. In response, Kings County Farm Bureau and other parties filed a writ of mandate and complaint, challenging the State Board’s authority and actions, including the probationary designation and associated fees. The Superior Court of Kings County reviewed the Farm Bureau’s claims. It granted a preliminary injunction halting the State Board’s implementation of the probationary designation and denied in part the State Board’s demurrer to the complaint. Specifically, the trial court dismissed the equal protection claim with leave to amend but allowed the Farm Bureau to proceed on claims alleging improper underground regulations, unconstitutional fees, and general declaratory relief. The State Board then sought appellate review of the trial court’s order overruling its demurrer. The California Court of Appeal, Fifth Appellate District, reviewed the trial court’s decision de novo. It held that the Act exempts the State Board’s actions under the relevant statutory sections from the Administrative Procedures Act, precluding claims based on alleged underground regulations. The court further found that challenges to the extraction fees as unlawful taxes are barred by the “pay first” rule, requiring payment before judicial review. Finally, the court determined that declaratory relief is unavailable where the Legislature has provided a writ of mandate as the exclusive remedy. The appellate court issued a writ of mandate directing the trial court to vacate its order overruling the demurrer and to grant the demurrer without leave to amend as to the sixth, seventh, and ninth causes of action. View "State Water Resources Control Bd. v. Super. Ct." on Justia Law

Leeds v. City of L.A.

2025-10-24T15:31:00-08:00

The City of Los Angeles implemented the recycLA program in 2017, establishing exclusive franchise agreements with private waste haulers to provide waste collection services for commercial and multi-unit residential properties. Under these agreements, haulers paid the City a percentage of their gross receipts as a franchise fee. Several property owners and tenants who paid for waste hauling services under this system filed a consolidated class action against the City, alleging that the franchise fees were actually an unlawful tax imposed without voter approval, in violation of Proposition 218 and related constitutional provisions. The plaintiffs sought refunds of the alleged illegal taxes and declaratory relief regarding the validity of the fees. The Superior Court of Los Angeles County considered the plaintiffs’ motion for class certification. While the court found the proposed class sufficiently numerous and ascertainable, and agreed that the question of whether the franchise fees constituted an illegal tax was subject to common proof, it identified a fundamental problem: not all proposed class members suffered an economic loss, as some landlords and property owners may have passed the cost of the fees on to tenants. The court concluded that entitlement to refunds was not susceptible to common proof and that individual issues predominated over common ones. It also found that a class action was not the superior method for resolving the dispute, due to the risk of unjust enrichment and the complexity of determining who actually bore the cost of the fees. The court denied class certification. On appeal, the California Court of Appeal, Second Appellate District, Division Four, reviewed the trial court’s order under the substantial evidence standard. The appellate court affirmed the denial of class certification, holding that the trial court did not err in finding that individual issues predominated and that class treatment was not superior. The order denying class certification was affirmed. View "Leeds v. City of L.A." on Justia Law

BELAIRE DEVELOPMENT & CONSTRUCTION, LLC VS. SUCCESSION OF SHELTON

2025-10-24T07:05:49-08:00

A company acquired a tax title to certain immovable property in St. Martin Parish, Louisiana, after the original owners failed to pay property taxes. Following the expiration of the redemptive period, the company mailed post-tax sale notice to the executrix of the former owner’s succession at the address listed in the succession proceedings. The company then filed a petition to quiet title, and the executrix was personally served. In response, she filed a reconventional demand seeking to annul the tax sale, alleging she had not received adequate pre-tax and post-tax sale notice. The City, which had previously held a small interest in the property, was also named as a third-party defendant. The 16th Judicial District Court sustained exceptions of prescription raised by the company and the City, dismissing the executrix’s claims as untimely. On appeal, the Louisiana Third Circuit Court of Appeal reversed, finding the reconventional demand was timely because it was filed within six months of service of the petition to quiet title, as required by La. R.S. 47:2266. The appellate court also held that the failure to provide pre-tax sale notice could render the tax sale absolutely null, and that the company and the City bore the burden of proving the reconventional demand was prescribed. The Supreme Court of Louisiana reviewed the case and held that, following the 2008 revision to Louisiana’s tax sale statutes, failure to provide pre-tax sale notice for tax sales occurring after January 1, 2009, no longer results in an absolute nullity. Instead, such defects are relative nullities, subject to specific prescriptive periods under La. R.S. 47:2287. The Court further held that a nullity action brought as a reconventional demand in a quiet title action must also comply with the six-month limitation in La. R.S. 47:2266. The Court affirmed the appellate ruling regarding prescription but reversed on the issue of absolute nullity, remanding for further proceedings. View "BELAIRE DEVELOPMENT & CONSTRUCTION, LLC VS. SUCCESSION OF SHELTON" on Justia Law

SMITH V. APEX FUND SERVICES AS CUSTODIAN FOR CERES TAX RECEIVABLES, LLC

2025-10-23T06:06:51-08:00

After the owners of a parcel of real property in Manchester, Kentucky, died, no one paid the property taxes, resulting in the issuance of multiple certificates of delinquency for unpaid taxes. Clay County sold the 2011 and 2012 tax liens to third parties: the 2011 lien was eventually assigned to Keith and Jessica Smith, and the 2012 lien was purchased by Apex Fund Services. The Smiths recorded their lien before Apex recorded its own. Both the Smiths and Apex sought to enforce their liens, and Apex initiated a foreclosure action in Clay Circuit Court, naming all lienholders and heirs as defendants. The property was ultimately sold at a master commissioner’s auction, with the Smiths purchasing it for $2,500. The Clay Circuit Court initially ruled that the Smiths’ lien had priority because it was recorded first, applying the “first in time, first in right” doctrine. The court allowed the Smiths to receive a credit against the purchase price for the amount owed to them under their lien, plus costs and attorney fees. Apex appealed, and the Kentucky Court of Appeals reversed, holding that all tax liens were of equal rank and that the proceeds from the sale should be distributed pro rata among all tax lienholders, including the county. The Supreme Court of Kentucky affirmed the Court of Appeals’ decision. The Court held that, under Kentucky statutes, tax liens held by the state, county, city, or third-party purchasers are of equal rank and are not subject to the common law “first in time, first in right” rule. Instead, when the proceeds from a foreclosure sale are insufficient to pay all tax liens and associated costs, the proceeds must be distributed pro rata among all tax lienholders. The case was remanded for the circuit court to determine the amounts owed and to distribute the proceeds accordingly. View "SMITH V. APEX FUND SERVICES AS CUSTODIAN FOR CERES TAX RECEIVABLES, LLC" on Justia Law

Sawlani v. Lake County Assessor

2025-10-07T13:35:21-08:00

The petitioners own a home on nearly four acres of land in a gated community in Crown Point, Indiana. For the 2019 tax year, the Lake County Assessor classified one acre of their property as a “homestead” and taxed it at one percent of its assessed value, while the remaining 2.981 acres were taxed as non-residential property at a higher rate. The owners did not dispute the total assessed value but argued that the statutory one-acre limit for the homestead tax cap was unconstitutional as applied to them, claiming that their entire parcel constituted “curtilage” under the Indiana Constitution and should be subject to the lower tax rate. After the Lake County Property Tax Assessment Board of Appeals rejected their claim, the Indiana Board of Tax Review affirmed, stating it lacked authority to declare a statute unconstitutional and was bound by the one-acre limit. The petitioners appealed to the Indiana Tax Court, which reversed the Board’s decision. The Tax Court held that the Constitution does not permit a fixed one-acre limitation for the homestead tax cap and remanded for further proceedings to determine whether the excess acreage was used as part of the principal place of residence. The Indiana Supreme Court reviewed the Tax Court’s decision de novo. It held that, even if the Constitution does not impose a size limit on curtilage, the petitioners failed to present sufficient evidence that their excess land was used as curtilage. Therefore, they did not meet their burden to prove the statute unconstitutional as applied to them. The Supreme Court reversed the Tax Court’s judgment and remanded with instructions to affirm the Board’s determination in favor of the Assessor. View "Sawlani v. Lake County Assessor" on Justia Law

Alliance San Diego v. California Taxpayers Action Network

2025-10-03T11:32:13-08:00

The case concerns a challenge to the validity of Measure C, a citizens’ initiative placed on the ballot by the City of San Diego for the March 2020 election. Measure C proposed an increase in the city’s transient occupancy tax, with revenues earmarked for homelessness programs, street repairs, and convention center improvements. The measure also authorized the City to issue bonds repaid from the new tax revenues. Measure C received 65.24 percent of the vote, and the city council subsequently passed resolutions declaring the measure approved and authorizing the issuance of related bonds. After the election, Alliance San Diego and other plaintiffs filed actions challenging the City’s resolution declaring Measure C had passed, arguing it was invalid. The City responded with a validation complaint seeking judicial confirmation of the validity of Measure C and the related bond resolutions. California Taxpayers Action Network (CTAN) and other opponents answered, contending that Measure C required a two-thirds vote and was not a bona fide citizens’ initiative. The Superior Court of San Diego County initially granted a motion for judgment on the pleadings, finding that a two-thirds vote was required, and entered judgment against the City. On appeal, the California Court of Appeal, Fourth Appellate District, Division One, reversed and remanded for further proceedings to determine whether Measure C was a bona fide citizens’ initiative. On remand, the trial court conducted a bench trial and rejected CTAN’s arguments, finding that it had subject matter jurisdiction, the case was ripe, the special fund doctrine exempted the bonds from the two-thirds vote requirement, and Measure C was a bona fide citizens’ initiative requiring only a simple majority vote. The California Court of Appeal affirmed the trial court’s judgment, holding that Measure C and the related bond resolutions were valid, and that the trial court properly excluded certain hearsay evidence. View "Alliance San Diego v. California Taxpayers Action Network" on Justia Law

3M Company v. Commissioner of Internal Revenue

2025-10-01T07:30:28-08:00

A U.S.-based multinational corporation filed a consolidated federal tax return for 2006, reporting royalty income received from its Brazilian subsidiary for the use of intellectual property. Brazilian law limited the amount the subsidiary could pay in royalties to its foreign parent, so the subsidiary paid and the parent reported only the amount permitted under Brazilian law. Years later, the Internal Revenue Service (IRS) issued a Notice of Deficiency, reallocating nearly $23.7 million in additional royalty income to the parent company, arguing that this reflected what an unrelated party would have paid for the intellectual property, notwithstanding the Brazilian legal restriction. The corporation challenged the IRS’s determination in the United States Tax Court. The Tax Court, in a closely divided decision, upheld the IRS’s position. A plurality of judges deferred to the IRS regulation that allowed such reallocation, finding the statute ambiguous and the regulation reasonable. Two concurring judges agreed with the result but believed the statute itself required the reallocation, regardless of the regulation. The dissenting judges argued that the statute unambiguously prohibited the IRS from reallocating income that the parent could not legally receive, and some also found the regulation procedurally invalid. On appeal, the United States Court of Appeals for the Eighth Circuit reviewed the case in light of recent Supreme Court precedent clarifying that courts must independently interpret statutes without deferring to agency interpretations. The Eighth Circuit held that the relevant statute does not permit the IRS to reallocate income that the taxpayer could not legally receive due to foreign law restrictions. The court concluded that the IRS’s authority to allocate income under the statute is limited to amounts over which the taxpayer has dominion or control. The Eighth Circuit reversed the Tax Court’s decision and remanded for redetermination of the taxes owed. View "3M Company v. Commissioner of Internal Revenue" on Justia Law