Justia Tax Law Opinion Summaries

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The Supreme Court of Arkansas ruled in favor of the county assessor and other similarly positioned defendants, affirming the lower court's dismissal of a lawsuit brought by Ronald and Mitzi Kimbrough. The plaintiffs, representing themselves and other similarly situated taxpayers, had argued that the county assessor's method of calculating property tax assessments for homeowners over 65 or who are disabled violated the Arkansas Constitution's Amendment 79. In their view, the amendment should freeze the assessment on a homeowner's principal residence at the time of purchase. However, the defendants argued that the plaintiffs had failed to exhaust their administrative remedies, as required by law, before taking the case to court.The Supreme Court agreed with the defendants, noting that the plaintiffs' complaint must be handled by the County Court according to the Arkansas Constitution due to its relation to county taxes. The Court held that the plaintiffs had failed to exhaust the necessary administrative remedies before bringing the case to court, which deprived the court of subject-matter jurisdiction. The Court dismissed the plaintiffs' arguments about the potential policy implications of its ruling, noting that public policy is declared by the General Assembly, not the courts. Thus, the Court affirmed the lower court's dismissal of the case and dismissed the defendants' cross-appeal as moot. View "KIMBROUGH V. GRIEVE" on Justia Law

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The Supreme Court of Arkansas reversed a lower court's ruling in a dispute involving the Arkansas Department of Finance and Administration (ADFA) and two car dealerships, Trotter Ford and Trotter Auto. The case centered on whether the dealerships' assignment of vehicles to certain employees and family members, for personal use, constituted a "withdrawal from stock" subject to sales tax under Arkansas law.The ADFA audited Trotter Ford and Trotter Auto and found that several individuals not qualified as authorized users for dealer tags under Motor Vehicle Rule 2005-7 were using dealer-tagged vehicles. The ADFA considered this a "withdrawal from stock" which required the payment of sales tax and issued notices of proposed assessment to the dealerships. Trotter paid the assessed taxes and interest, but subsequently protested the assessments. After a consolidated administrative hearing and subsequent legal challenges, the Jefferson County Circuit Court granted summary judgment in favor of Trotter, reversing ADFA’s assessments.On appeal, the Supreme Court of Arkansas disagreed with the circuit court. The court held that the use of vehicles from the dealerships' inventory, assigned to unauthorized individuals for personal use, constituted a withdrawal from stock under Arkansas law and was therefore subject to sales tax. The court further held that ADFA met its burden of proving by a preponderance of the evidence that Trotter was subject to sales tax based on the plain language of Arkansas Code Annotated section 26-52-322. Consequently, the court reversed the lower court's decision and remanded the case. View "ARKANSAS DEPARTMENT OF FINANCE AND ADMINISTRATION V. TROTTER FORD, INC." on Justia Law

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This case involves Alliance Housing Incorporated and North Penn Supportive Housing LLC, collectively known as Alliance, Minnesota nonprofits operating to create, own, and operate affordable housing for low and very low-income people. Alliance owns several properties in Minneapolis, which are used exclusively as private residences for tenants whose incomes are 30–50 percent of the area median income. Alliance provides some supplies and cleaning services to various units but does not occupy the properties. In late 2018, Alliance applied for tax exemption for all its properties in assessment year 2020. The Minneapolis City Assessor denied the applications. Alliance then filed a property tax petition for the assessment year 2020, payable in 2021, claiming that its properties were tax-exempt. The tax court concluded that the properties owned by Alliance were exempt from property taxes.The State of Minnesota in Supreme Court held that for purposes of qualifying for tax exemption under Article X, Section 1, of the Minnesota Constitution, an institution of purely public charity with a purpose of providing housing for low-income individuals uses its real property in furtherance of its charitable purpose when it leases its property to its intended beneficiaries for personal residence. The court found that when the very purpose of an Institution of Purely Public Charity (IPPC) is to own and operate real property in a charitable manner for private residence, the exclusive residential occupancy of the property by the clients of the IPPC does not defeat the constitutional requirement that property be used to further a charitable purpose. Therefore, the tax court did not err in finding that Alliance’s properties are used for the tax-exempt purpose of providing affordable housing to low-income tenants. The decision of the tax court granting property tax exemptions to Alliance’s properties was affirmed. View "Alliance Housing Incorporated vs. County of Hennepin" on Justia Law

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The case involves a dispute between Direct Supply, Inc., and the United States of America regarding tax deductions. Direct Supply, a company that assists nursing homes in purchasing equipment, medical supplies, and furniture through a system it calls "Direct Supply DSSI" (DSSI), filed for deductions under §199 of the Internal Revenue Code. This section allowed for deductions based on revenues from the "disposition" of "qualifying production property," which includes software. However, the Internal Revenue Service (IRS) disallowed these deductions, prompting Direct Supply to sue for a refund.Direct Supply argued that DSSI is the "disposition" of the software that runs the system. However, the IRS and the district court viewed DSSI as a service based on software, not a disposition of software. The court noted that Direct Supply's customers did not possess the software code or a license to use any of DSSI’s software. Furthermore, the majority of the revenue flowing to Direct Supply came from fees that were a percentage of the vendors' sales, rather than anything that measured the value of software.The United States Court of Appeals for the Seventh Circuit agreed with the district court and the IRS. The court noted that while DSSI depended on software, it did not "dispose" of that software. The court also pointed out that Direct Supply's receipts were not "directly derived" from the software, as required by the governing regulation, but were instead derived from the goods the vendors sold to the customers. The court affirmed the district court's decision that Direct Supply's deductions under §199 of the Internal Revenue Code were correctly disallowed. View "Direct Supply, Inc. v. United States" on Justia Law

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This case involves a dispute between Jennifer Zuch and the Internal Revenue Service (IRS) over the allocation of estimated tax payments and the subsequent application of those payments to pay off her tax liability. Zuch argued that the IRS erroneously applied $50,000 in estimated tax payments, which she and her then-husband had made, to her ex-husband's tax liability instead of hers. As the dispute was litigated over several years, the IRS withheld tax refunds owed to Zuch and applied them to her alleged unpaid balance, thereby satisfying it in full. The IRS then moved to dismiss the Tax Court proceeding, arguing the case was moot since there was no more tax to be paid. The Tax Court granted the motion.In appeal, the U.S. Court of Appeals for the Third Circuit vacated the Tax Court's dismissal and remanded the matter back to the Tax Court. The appellate court found that Zuch's claim was not moot, even though the IRS had satisfied her tax liability by applying her tax refunds to it. The court held that the IRS cannot unilaterally moot a case by withdrawing its proposed collection action, especially when the Tax Court has already obtained jurisdiction of a liability challenge. The court also found that a taxpayer's challenge to the tax liability at issue in an action under § 6330(c)(2)(B) of the Internal Revenue Code cannot be rendered moot by the unilateral action of the IRS. The court concluded that the Tax Court retained jurisdiction to review Zuch's liability and to determine whether she is entitled to receive credit for any amount of the estimated tax payments at issue. View "Zuch v. Commissioner of Internal Revenue" on Justia Law

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The Supreme Court of Alabama ruled in a case concerning a dispute over the amount of ad valorem taxes owed by Indorama Ventures Xylenes & PTA, LLC for the personal property at a petrochemical plant that it owns in Morgan County.The Morgan County Revenue Commissioner assessed Indorama's personal-property value at nearly 1.5 times the amount that Indorama had paid for the plant, which Indorama challenged before the Morgan County Board of Equalization. After the Board affirmed the Commissioner's assessments, Indorama appealed the decisions to the Morgan Circuit Court. The circuit court ruled in favor of Indorama, determining that the fair market value of the property was roughly $150 million less than the Board's appraisal.The Board then appealed to the Supreme Court of Alabama, arguing that the circuit court's valuation was contrary to the evidence and violated Alabama law. However, the Supreme Court of Alabama affirmed the judgment of the circuit court, stating that under Alabama law, the circuit court was entitled to consider "all the evidence," and was not restricted to any particular method of valuation.Furthermore, the Supreme Court of Alabama also affirmed the circuit court's application of the corporate rate to the prejudgment interest on Indorama's overpayment, determining that this was correct under Alabama law. View "Morgan County Board of Equalization v. Indorama Ventures Xylenes & PTA, LLC" on Justia Law

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LaTonya Foxx, along with two others, was charged and convicted for engaging in a fraudulent tax scheme. Foxx pleaded guilty to one count of wire fraud and was sentenced to 18 months’ imprisonment, one year of supervised release, and ordered to pay $1,261,903 in restitution. The scheme involved filing fraudulent tax returns to generate improper refunds for clients and the defendants. The United States Court of Appeals for the Seventh Circuit heard Foxx's appeal of the restitution order.The court noted that any power to award restitution must come from a statute. In this case, the Mandatory Victims Restitution Act authorizes restitution for wire fraud offenses. The court noted that restitution is limited to the actual losses caused by the specific conduct underlying the offense, and the government must establish those losses by a preponderance of the evidence.Foxx argued that the district court failed to adequately delineate the scheme and make specific findings that the losses included in the restitution derived from the same scheme for which she was convicted. The court found no fatal deficiency in the district court's findings and concluded that Foxx failed to demonstrate a plain error. The court held that Foxx could be ordered to pay restitution for all the losses she caused during the scheme, not just those relating to the specific wire transactions to which she pleaded guilty. The court affirmed the restitution order. View "United States v. Foxx" on Justia Law

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The case pertains to a dispute between the Department of Finance of the City of New York and Brookdale Physicians' Dialysis Associates, Inc. over the revocation of a real property tax exemption. The property in question was owned by Samuel and Bertha Schulman Institute for Nursing and Rehabilitation Fund, Inc., a not-for-profit entity, and was leased to Brookdale Dialysis, a for-profit corporation. The Department of Finance retroactively revoked the property's tax-exempt status in 2013, citing the fact that the property had been leased to a for-profit entity.The Supreme Court initially annulled the Department's determination, arguing that it failed to consider whether Brookdale Dialysis' services were reasonably incidental to the exemption purpose. The Department of Finance reassessed the property for the 2014-2015 tax year and again revoked the exemption after finding that the income from the lease exceeded the expenses for the property. The decision to revoke the exemption was subsequently affirmed by the Appellate Division.However, the Court of Appeals reversed these decisions, holding that the property was not exempt under New York Real Property Tax Law § 420-a. The court noted that the law mandatorily exempts from taxation any real property owned by certain not-for-profit entities and used exclusively for beneficial purposes without financial gain. The law does not apply to property leased by a for-profit corporation. Therefore, the court concluded that the property in this case was not exempt under this law, and the Department of Finance's decision to revoke the exemption was justified. View "Matter of Brookdale Physicians' Dialysis Assoc., Inc. v Department of Fin. of the City of N.Y." on Justia Law

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A case in the Supreme Court of Pennsylvania involved a dispute over the termination of a charitable trust. The trust was established by Richard H. Wells in 1965 for the sole benefit of his alma mater, the Virginia Military Institute (VMI), with the Virginia Military Institute Foundation (the “Foundation”) named as the beneficiary. Since its inception, the Trust has been managed by an independent corporate trustee, PNC Bank. The Foundation sought to terminate the Trust and receive the assets outright, arguing that it could manage the Trust with fewer expenses and higher returns.The lower courts denied the termination, concluding that the burdens of the Trust did not meet the statutory criteria for termination under Section 7740.3(e) of the Uniform Trust Act. The Foundation appealed to the Supreme Court of Pennsylvania, arguing that the lower courts erroneously considered Wells’ intent to create a trust, which the Foundation claimed was not relevant under the statute.The Supreme Court of Pennsylvania affirmed the lower courts’ decision. The court held that the Foundation failed to satisfy the statutory standard under Section 7740.3(e) of the Uniform Trust Act, which requires a showing that the administrative expenses or other burdens of the trust are unreasonably out of proportion to the charitable benefits. The court concluded that the expenses and burdens of the trust, including an annual excise tax and mandatory annual distribution under the Private Foundation Rules of the Internal Revenue Code, were not unreasonably out of proportion to the trust's charitable benefits. View "In Re: Trust B of Wells; Apl of: V.M.I. Foundation" on Justia Law

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In this case, the appellant, Tax Equity Now NY LLC (TENNY), challenged the property-tax system of New York City, arguing that it imposes substantially unequal tax bills on similarly valued properties that bear little relationship to the properties' fair market value. TENNY further alleged that multi-million-dollar properties are taxed at similar or lower rates than less valuable properties and that real property in majority-people-of-color districts are overassessed and subjected to higher taxes compared to properties in majority-white districts. The plaintiff sought relief against City and State defendants for alleged constitutional and statutory violations caused by the City's tax scheme.The Court of Appeals of New York concluded that although TENNY's complaint failed to state claims against the State defendants, the complaint sufficiently alleges causes of action against the City defendants under section 305 (2) of Real Property Tax Law (RPTL) and the federal Fair Housing Act (FHA) on the basis that the system is unfair, inequitable and has a discriminatory disparate impact on certain protected classes of New York City property owners. The court therefore modified the Appellate Division's order with respect to these causes of action. The court also affirmed the dismissal of the remaining causes of action against the City and all claims against the State for failure to state a claim. View "Tax Equity Now NY LLC v City of New York" on Justia Law