Justia Civil Procedure Opinion Summaries

The American Jobs Creation Act of 2004 authorized the IRS to gather information about tax shelters, 26 U.S.C. 6707A. The IRS requires taxpayers and certain third parties to submit records pertaining to “reportable transaction[s]” as defined by IRS regulations, subject to significant penalties. A “material advisor” who provides material aid to a taxpayer in carrying out reportable transactions and who derives a threshold amount of gross income from that aid, faces similar penalties. A material advisor who fails to maintain a list of taxpayers that he aided in carrying out reportable transactions faces a $10,000 per day penalty. Notice 2016-66 identified “micro-captive transactions” as “transactions of interest,” a subset of reportable transactions that have “a potential for tax avoidance or evasion,” but stated that the IRS “lack[s] sufficient information” to distinguish between those that are lawful and those that are unlawful. Plaintiff, a material advisor to taxpayers engaging in micro-captive transactions, challenged the Notice under the Administrative Procedure Act, 5 U.S.C. 500, and the Congressional Review Act, 5 U.S.C. 801, arguing that it was a legislative rule that required notice-and-comment rulemaking, was arbitrary, and required submission for congressional review. The Sixth Circuit affirmed the dismissal of the complaint as barred by the Anti-Injunction Act, 26 U.S.C. 7421(a) and the tax exception to the Declaratory Judgment Act, 28 U.S.C. 2201, which divest federal district courts of jurisdiction over suits “for the purpose of restraining the assessment or collection of any tax.” The court noted that the IRS does “not have a great history of complying with APA procedures.” View "CIC Services., LLC v. Internal Revenue Service" on Justia Law

The Colorado School of Mines contracted with Sodexo America, LLC, to fulfill its obligations to provide meals and food options for its students. During the time at issue, Mines loaded each meal-plan student’s student identification card, with an individual meal plan choice. To use their meal plans, students swiped their “BlasterCards” at a dining facility. Sodexo had nothing to do with loading the students’ BlasterCards with their meal plans; Sodexo also had no way of knowing if a student had fully paid for his or her meal plan, and Sodexo had no way of enforcing collections against a student who hadn’t fully paid. Neither Mines nor Sodexo collected any sales tax on these meal-plan meals. When the City of Golden’s Finance Department audited Sodexo and discovered that sales tax for these meal plans had not been collected, it issued a sales and use tax assessment. Sodexo protested and lost, so Sodexo appealed to the district court. The court granted summary judgment for Golden, finding that Sodexo had engaged in taxable retail sales directly to Mines’ students, rather than tax-exempt wholesale sales to Mines. Sodexo appealed again. This time, a unanimous division of the court of appeals reversed the judgment of the district court, concluding that there were two sales transactions at issue: one between Mines and Sodexo, and the other between Mines and its students. The division further concluded that Mines and Sodexo were engaged in tax-exempt wholesale transactions. Accordingly, the division remanded for entry of judgment in Sodexo’s favor. The Colorado Supreme Court granted the City of Golden’s request to review the appellate court’s decision. After review, the Court agreed that two transactions took place. Like the division below, the Court concluded Sodexo sold the meal-plan meals to Mines at wholesale, and, accordingly, these transactions were exempt from taxation under the Code. The Court therefore affirmed the judgment of the court of appeals. View "City of Golden v. Sodexo America, LLC" on Justia Law

Between 2012 and 2014, Medhost of Tennessee, Inc. ("Medhost"), sold Russell County Community Hospital, LLC, d/b/a Jack Hughston Memorial Hospital ("the taxpayer"), computer software and accompanying equipment, which Medhost contracted to install in a hospital operated by the taxpayer. The software and equipment assists the taxpayer in operating various aspects of its hospital. Medhost collected a little less than $18,000 in sales tax in connection with the transactions, which it remitted to the Alabama Department of Revenue ("the Department"). Later, the taxpayer petitioned the Department for a refund of the sales tax it had paid on the transactions with Medhost. The Department denied that request, and the taxpayer appealed to the Alabama Tax Tribunal, which reversed the Department's decision and directed the Department to grant the taxpayer's request for a refund. The Department then filed an action in the trial court requesting de novo review of the tax tribunal's decision. After a hearing, during which testimony was presented ore tenus, the trial court overturned the tax tribunal's decision and affirmed the Department's denial of the taxpayer's refund petition. The taxpayer appealed to the Court of Civil Appeals, which affirmed the trial court's judgment. The Alabama Supreme Court granted the taxpayer's petition for a writ of certiorari. Under the ore tenus rule, which the taxpayer has conceded was applicable here, "a judgment based on [ore tenus] evidence is presumed to be correct and will not be disturbed on appeal unless a consideration of the evidence and all reasonable inferences therefrom reveals that the judgment is plainly and palpably erroneous or manifestly unjust." Under that standard, the Court found the evidence sufficient to support the trial court's judgment. Accordingly, the Court of Civil Appeals correctly affirmed that judgment, and the Supreme Court affirmed its judgment. View "Ex parte Russell County Community Hospital, LLC, d/b/a Jack Hughston Memorial Hospital." on Justia Law

The Supreme Court denied Appellee's motion to dismiss Appellant's appeal from the decision of the Board of Tax Appeals (BTA) that denied Appellant's claim for property-tax exemption for several parcels of land it owned, holding that Appellant timely perfected its appeal.As support for its motion to dismiss, Appellee argued that because Appellant did not initiate service by certified mail within the thirty-day period prescribed by Ohio Rev. Code 5717.04 for filing its notice of appeal, the Supreme Court must dismiss the appeal for lack of jurisdiction. The Supreme Court rejected Appellee's argument, holding that section 5717.04 does not state a timeline for the certified-mail service of the notice of appeal on the appellees, and it is not disputed that the notice of appeal was properly served on Appellee by certified mail. View "The City of Upper Arlington v. McClain" on Justia Law

John and Deanne Roth appealed a Tax Court decision that imposed a 40% penalty for the Roths’ “gross misstatement” of the value of a conservation easement they donated to a land trust in Colorado. On appeal, the Roths largely argued that, before imposing the penalty, the IRS failed to obtain written, supervisory approval for its “initial determination” of a penalty assessment as required by I.R.C. 6751(b). The Roths also sought a deduction in 2007 for repayments they made on the proceeds from their sale of tax credits generated by their donation of a separate conservation easement in 2006. The Tenth Circuit disagreed as to both counts and therefore affirmed the Tax Court. View "Roth v. CIR" on Justia Law

Gold Forever, a music publishing company solely owned by Holland, has agreements with various artists entitling it to half of the royalties collected for the sale and performance of those artists’ work. Holland was a Motown artist and co-wrote several famous songs. His music forms some, but not all, of Gold’s catalog. BMI and Universal license others to use Gold’s music; they collect and remit the royalties to Gold. Holland owes millions of dollars to the IRS in taxes, interest, and penalties. In 2012, the IRS served notices of levy to BMI and Universal, identifying Gold as the “alter ego/nominee transferee of" Holland and requiring the companies to remit to the IRS property and rights to property that they were obligated to pay Gold. Beginning on October 6, 2016, the companies remitted $967,140.76 to the IRS. Gold made requests for refunds to the IRS within nine months. On December 6, 2017, Gold filed a wrongful levy action for the funds remitted beginning on October 6, 2016, alleging that most, if not all, of the money belongs either to Gold or to artists other than Holland. The court dismissed the suit as untimely. The Sixth Circuit reversed. The statute of limitations for a wrongful levy action cannot begin until there has been a levy that attaches to the property at issue. Notices of levy in 2012 did not constitute levies on royalties generated after the notices were served, so the statute of limitations did not bar the wrongful levy action. View "Gold Forever Music, Inc. v. United States" on Justia Law

The Supreme Court discharged the writ of certiorari sought by Guardian Energy and dismissed the appeal in this case, holding that the order appealed from was not a final order at the time Guardian petitioned for a writ of certiorari, and therefore, this Court lacked jurisdiction.In 2015, the Supreme Court remanded this case to the tax court, concluding that the tax court's external-obsolescence calculations in valuating Guardian's property were not reasonably supported by the records. Before judgment was entered on the tax court's new order entered in 2016, Waseca County filed a motion requesting correction of computational errors made by the tax court through amended findings. Thereafter, the tax court stayed entry of judgment. Before the tax court ruled on the County's motion, Guardian sought review of the tax court's order. The Supreme Court dismissed the appeal for lack of jurisdiction, holding that the County's unresolved motion and the tax court's stay of entry of judgment rendered the 2016 order not final. Therefore, this Court lacked jurisdiction over Guardian's appeal. View "Guardian Energy, LLC, Relator v. County of Waseca" on Justia Law

Respondents were four Ranch owners who, with notice of the Lake Fork Hunting and Fishing Club’s (the Club) restrictive covenants and bylaws, purchased deeds conferring record title to their respective Ranches. In 2015, the Hinsdale County Assessor conducted valuations of the Respondents’ Ranches and assessed property taxes to their parcels. Respondents protested these valuations and assessments to the Hinsdale County Board of Equalization (the BOE), which denied their petitions. Respondents then appealed the BOE’s determination to the Board of Assessment Appeals (the BAA), arguing that because of the Club’s restrictive covenants and bylaws, the Club was the true owner of those parcels and should have been held responsible for real property taxes. The BAA denied the Respondents’ appeal and affirmed the Assessor’s valuation of the Ranch parcels. The Ranch owners then appealed the BAA’s decision to the court of appeals, which reversed the BAA’s order. Given the extent of the Club’s control over the property, the court of appeals concluded that the Club was the true owner of the parcels for purposes of property taxation and viewed the Ranch owners’ interests as akin to mere licenses to conduct certain activities on the Club’s property. The Colorado Supreme Court reversed, finding Colorado’s property tax scheme reflected the legislative intent to assess property taxes to the record fee owners of real property. “Because Respondents voluntarily agreed to the restrictive covenants and bylaws that facilitate the collective use of their property for recreational purposes, we hold that they cannot rely on these same restrictive covenants and bylaws to avoid property tax liability that flows from their record title ownership.” Accordingly, the court of appeals erred in relying on the Club’s restrictive covenants and bylaws to conclude that the Club is the “owner” of the Ranch parcels and that the Ranch owners hold mere licenses to use Club grounds. The court further erred in holding that the Assessor therefore improperly valued the Respondents’ parcels. View "Hinsdale County v. HDH Partnership" on Justia Law

This case arose out of the efforts the IRS made to investigate the tax liability of High Desert Relief, Inc. (“HDR”), a medical marijuana dispensary in New Mexico. The IRS began an investigation into whether HDR had improperly paid its taxes, and specifically whether it had improperly taken deductions for business expenses that arose from a “trade or business” that “consists of trafficking in controlled substances.” Because HDR refused to furnish the IRS with requested audit information, the IRS issued four summonses to third parties in an attempt to obtain the relevant materials by other means. HDR filed separate petitions to quash these third-party summonses in federal district court in the District of New Mexico, and the government filed corresponding counterclaims seeking enforcement of the summonses. HDR argued that the summonses were issued for an improper purpose—specifically, that the IRS, in seeking to determine the applicability of 26 U.S.C. 280E, was mounting a de facto criminal investigation pursuant to the Controlled Substances Act. HDR also asserted that enforcement of section 280E was improper because an "official [federal] policy of non-enforcement” of the CSA against medical marijuana dispensaries had rendered that statute’s proscription on marijuana trafficking a “dead letter” incapable of engendering adverse tax consequences for HDR. The petitions were resolved in proceedings before two different district court judges; both judges ruled in favor of the United States on the petitions to quash, and separately granted the United States’ motions to enforce the summonses. HDR challenged these rulings on appeal. The Tenth Circuit determined HDR was unable to overcome the government’s demonstration of good faith under United States v. Powell, 379 U.S. 48 (1964), and its alternative “dead letter” argument was without merit. View "High Desert Relief v. United States" on Justia Law

In this consolidated appeal from twenty-nine General Excise Tax (GET) assessments levied by the State Director of Taxation against five online travel companies based on car rental transactions taking place in the State between 2000 and 2013, the Supreme Court held that rental cars are tourism-related services and that the assessed transactions qualified for the reduced GET rate based only on the portion of the proceeds that the online travel companies retained.The online travel companies in this case argued (1) the majority of the assessments were barred because they already litigated their GET liability for the years 2000 through 2013 to final judgment in an earlier case; and (2) the rental car transactions should qualify for a reduced GET rate calculated based only on the portion of the proceeds that they retained because rental cars are “tourism-related services” within the meaning of a statutory income-reducing provision. The Supreme Court held (1) the assessments could be considered on the merits because the claim preclusion component of res judicata is not an available defense against the government’s sovereign power of taxation; and (2) car rentals are tourism-related services that qualify for GET apportionment under the circumstances of this case. View "In re Tax Appeal of Priceline.com, Inc." on Justia Law