Justia Civil Procedure Opinion Summaries

Defendants appealed from a judgment of the district court awarding the United States $112,324.18, plus statutory additions and interest, in connection with an unpaid tax assessment from 2007. The district court granted summary judgment in favor of the government, notwithstanding the fact that the Internal Revenue Service (the “IRS”) referred the assessment to the Department of Justice (the “DOJ”) before formally rejecting Defendants’ proposed installment agreement. Defendants contended that this referral violated the provisions of the Internal Revenue Code and the implementing Treasury Regulations that curb the IRS’s collection activities while a proposed installment agreement remains on the table.   The Second Circuit affirmed. The court explained that as their plain terms indicate, the suspension provisions of Section 6331(i) and (k) prohibit the commencement of a collection action in court during specified periods, not the IRS’s antecedent request that the DOJ file such an action. The court wrote that the Internal Revenue Code is silent on when the IRS may refer an action to the DOJ, and a Treasury Regulation that limits the IRS’s referral power cannot read into the statute something that is not there. Further, this conclusion is not altered because authorization from the Treasury Secretary is a prerequisite to commencing an in-court proceeding.   Further, the court explained that Defendants have not claimed a violation of their constitutional rights and the regulatory limits on IRS referrals of collection actions are not statutorily derived. As a result, Defendants must demonstrate prejudice for the government’s regulatory violation to invalidate the instant collection action. The court found that Defendants have failed to do so. View "United States v. Schiller" on Justia Law

Jarrett produces Tezos tokens cryptocurrency by “staking.” Jarrett claims staking uses existing Tezos tokens and computing power to produce new tokens, so he owes tax on the tokens only when he sells or transfers them and “realizes” income, 26 U.S.C. 61(a). The IRS's position was that Jarrett realized income when he received each token. Jarrett’s 2019 staking yielded 8,876 Tezos tokens; he “did not sell, exchange, or otherwise dispose of these tokens during 2019.” He reported those tokens as income and paid tax, then asked the IRS for a refund ($3,793). After six months, Jarrett filed a refund lawsuit, 28 U.S.C. 1346(a)(1), seeking a judgment that Jarrett was entitled to a refund; costs and attorney’s fees; and an injunction preventing the IRS “from treating tokens created by the Jarretts as income.”The Attorney General approved Jarrett’s refund request. The IRS issued a $4,001.83 refund check and a “Notice of Adjustment.” Preferring to litigate the case to judgment, Jarrett has “not cashed, and [does] not intend to cash, this check.” The district court dismissed the case as moot. The Sixth Circuit affirmed. Refund lawsuits exist for a single purpose: “the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected.” The IRS satisfies its repayment obligation when it issues and mails a refund check for the full amount of the overpayment. View "Jarrett v. United States" on Justia Law

Petitioners challenged he post-trial rulings of the United States Tax Court regarding their tax obligations for the 2004 tax year. Petitioners argued that the Tax Court erroneously concluded that (1) they filed a valid joint return, (2) the Internal Revenue Service issued a statutory notice of deficiency before the limitations period for a tax assessment under I.R.C. Sections 6501(a) and (c)(4) expired, (3) they owed a $28,836 penalty pursuant to I.R.C. Section 6651(a)(1) for filing a late tax return, and (4) they owed a $128,526 penalty pursuant to I.R.C. Section 6662 for filing an inaccurate tax return.   The Second Circuit affirmed. The court held that the Tax Court did not clearly err in its finding that Petitioners intended to jointly file the Return. Further, the court wrote that the IRS issued the Deficiency Notice within the limitations period for the tax assessment. Moreover, the court held that Petitioners are subject to a $28,836 late-filing penalty under I.R.C. Section 6651(a)(1). Finally, the court held that Petitioners are subject to a $128,526 accuracy-related penalty under I.R.C. Section 6662. View "Soni v. Comm'r of Internal Revenue" on Justia Law

Petitioners challenged the post-trial rulings of the United States Tax Court regarding their tax obligations for the 2004 tax year. Petitioners argued that the Tax Court erroneously concluded that (1) they filed a valid joint return, (2) the Internal Revenue Service issued a statutory notice of deficiency before the limitations period for a tax assessment under I.R.C. Sections 6501(a) and (c)(4) expired, (3) they owed a $28,836 penalty pursuant to I.R.C. Section 6651(a)(1) for filing a late tax return, and (4) they owed a $128,526 penalty pursuant to I.R.C. Section 6662 for filing an inaccurate tax return.   The Second Circuit affirmed. The court held that the Tax Court did not clearly err in its finding that Petitioners intended to jointly file the Return. Further, the court concluded that the IRS issued the Deficiency Notice within the limitations period for the tax assessment. The court held that Petitioners are subject to a $28,836 late-filing penalty under I.R.C. Section 6651(a)(1). Finally, the court held that Petitioners are subject to a $128,526 accuracy-related penalty under I.R.C. Section 6662. The court explained that Petitioner’s inaccuracy was not the product of reasonable reliance upon the advice of a tax professional. As the Tax Court also found, Petitioners failed to provide their accountants “necessary and accurate information.” Moreover, the record includes evidence that Petitioner disregarded the advice of accountants who warned him that he would need proof to substantiate the claimed loss. View "Soni v. Comm'r of Internal Revenue" on Justia Law

Show Me State Premium Homes wants its purchase of a foreclosed property to be free and clear of all other interests, including those belonging to the United States. Getting what it wants would require a “judicial sale.” After removing the case the United States filed a motion to dismiss. Its position was that there could be no foreclosure without a judicial sale. The district court agreed, declined to exercise supplemental jurisdiction over what remained, and remanded to state court.   The Eighth Circuit affirmed the judgment of the district court but modified the dismissal of the ejectment and damages claims to be without prejudice. The court explained that a buyer’s interest is only “inchoate” before it gets a valid deed, not after. And here, title vested once the bond company “exercised its right to have the legal title transferred.” No “judicial sale” ever took place, and it is too late to hold one now, meaning that the interests held by the United States have never been foreclosed. View "Show Me State Premium Homes, LLC v. George McDonnell" on Justia Law

The Culps each received $8,826.30 to settle a lawsuit and reported their payments as “Other income,” “PRIZES, AWARDS” in their 2015 tax return. In 2017 the IRS proposed to increase their taxes owed for 2015 to reflect a perceived underpayment, giving the Culps 30 days to respond and stating it would send a notice of deficiency if they failed to do so. The Culps did not respond. The IRS mailed a notice of deficiency, informing the Culps of their right to file a petition in the Tax Court within 90 days. In May 2018, the IRS sent the Culps another letter stating they owed only $2,087 in 2015 taxes, penalties, and interest—less than the amount previously assessed. Again they failed to respond. The IRS levied on their property, collecting approximately $1,800 from the Culps’ Social Security payments and 2018 tax refund.The Culps filed a petition in the Tax Court, which dismissed their petition for lack of jurisdiction, reasoning its “jurisdiction depends upon the issuance of a valid notice of deficiency and the timely filing of a petition,” 26 U.S.C. 6212, 6213, 6214. It found the petition untimely because the Culps did not file it within 90 days of the date the IRS sent the second notice of deficiency. The Third Circuit reversed. Congress did not clearly state that section 6213(a)’s deadline is jurisdictional; non-jurisdictional time limits are presumptively subject to equitable tolling. That presumption was not rebutted. View "Culp v. Commissioner of Internal Revenue" on Justia Law

Taxpayers did not file returns for 2007 and 2012. The Tax Court concluded that taxpayers owed no deficiencies or penalties for those years, because the partnership losses claimed for those years exceeded the IRS’s adjusted non-partnership deficiencies.   The Ninth Circuit reversed and remanded for recalculation of the deficiencies and penalties for those years. The panel held that the unsigned, unfiled tax returns on which the partnership losses were reported were legally invalid because they had not been filed and executed under penalty of perjury and, therefore, could not be used to offset non-partnership income in an individual deficiency proceeding. Accordingly, the panel reversed the Tax Court’s deficiency determinations for these years and remanded with instructions to determine taxpayers’ deficiencies without regard to any partnership losses claimed on the legally invalid tax returns. For 2009 through 2011, taxpayers reported no tax liability because of large net operating losses (NOLs) from partnerships subject to the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA). The panel explained that when carried forward as deductions, net operating losses composed of partnership losses can offset a taxpayer’s non-partnership income or instead are part of the “net loss from partnership items” under Internal Revenue Code Section 6234(a)(3), as it was then in effect. The panel remanded for the Tax Court to assess the non-partnership items in the recomputed deficiencies for those years, accounting for the TEFRA-eligible partnership components of the net-operating-loss deductions only in the Section 6234(a)(3) calculations of “net loss from partnership items.” View "CIR V. RITCHIE STEVENS, ET AL" on Justia Law

Gulf South Pipeline Company, LLC owned an underground natural gas storage facility in Rankin County, Mississippi. It owned additional properties that ran through thirty-two Mississippi counties. As a public service corporation with property situated in more than one Mississippi county, property belonging to Gulf South was assessed centrally by the Mississippi Department of Revenue rather than by individual county tax assessors. After conducting the central assessment, MDOR apportions the tax revenues among the several counties in which the property is located. A significant amount of the natural gas stored in Gulf South’s Rankin County facility is owned by Gulf South’s customers and, therefore, it is excluded from MDOR’s central assessment. The Rankin County tax assessor requested that Gulf South disclose the volume of natural gas owned by each of its customers. Following Gulf South’s refusal to provide these data, in September 2021 the Rankin County tax assessor gave notice of its intention to assess Gulf South more than sixteen million dollars for approximately four billion cubic feet of natural gas stored by Gulf South but owned by its customers. Gulf South filed suit at the Chancery Court in Hinds County, seeking to enjoin the assessment and seeking a declaratory judgment that MDOR was the exclusive entity with the authority to assess a public service corporation with property located in more than one Mississippi county. On interlocutory appeal, the Mississippi Supreme Court was asked to determine whether venue was proper in Hinds County when Rankin County was named as a defendant and MDOR was joined as a necessary party. The Court held that, under the venue provisions of Mississippi Code Section 11-45-17 and the Court’s consistent construction of these statutory provisions as mandatory and controlling, venue was proper only in Rankin County. Therefore, the chancellor erred by denying Rankin County’s motion to transfer venue. View "Rankin County v. Boardwalk Pipeline Partners, L.P., et al." on Justia Law

The Board of Supervisors for Lowndes County appealed the trial court’s grant of summary judgment in favor of the Lowndes County School District. The Board argued that the trial court erred in its interpretation of Mississippi Code Section 37-57-107(1) (Rev. 2014) and that the trial court lacked jurisdiction to review the Board’s September 15, 2020 decision to exclude $3,352,0751 from the District’s requested ad valorem tax effort. The Mississippi Supreme Court found that the District appealed the decision of a county board of supervisors. As such, the District’s exclusive remedy was Section 11-51-75. Because the District failed to meet these requirements and because Section 11-51-75 was the District’s exclusive remedy, the chancery court was without jurisdiction to hear this matter and issue a declaratory judgment. Therefore, the trial court’s grant of summary judgment was reversed, and the matter remanded to the chancery court for it to enter an order dismissing the case for lack of jurisdiction. View "Board of Supervisors for Lowndes County v. Lowndes County School District" on Justia Law

Clary Hood, Inc. (“Hood, Inc.”), a South Carolina corporation engaged in land excavation and grading, with revenue of $44 million in 2015 and $69 million in 2016, paid its CEO a $5 million bonus in both of those years, deducting the payments on its income tax returns as reasonable business expenses under 26 U.S.C. Section 162(a)(1). The Internal Revenue Service (“IRS”) contended that the bonuses were excessive, with the excess amount actually representing a disguised payment of dividends from profits, which could not be deducted. The Tax Court mostly agreed with the IRS and determined that Hood, Inc. could only deduct roughly $3.7 million for 2015 and $1.4 million for 2016 as reasonable amounts for total compensation to its CEO. Accordingly, it assessed tax deficiencies for both years in the total amount of roughly $1.96 million, as well as a penalty for 2016 in the amount of $282,398.   The Fourth Circuit affirmed the Tax Court’s findings with respect to the amount of reasonable deductions and consequent tax deficiency but vacated the imposition of the penalty. The court explained that because the record indicates that Hood, Inc. anticipated remedying Mr. Hood’s past under compensation in installments over multiple years and discussed that plan with its tax advisors, who approved it as reasonable, the court concluded that the Tax Court’s finding regarding the reasonable-cause defense for the 2015 tax year should also have applied to the 2016 tax year. Further, Hood, Inc. used a consistent methodology to determine the amount of Mr. Hood’s bonuses for both 2015 and 2016 with the advice of independent accountants. View "Clary Hood, Inc. v. Commissioner of Internal Revenue" on Justia Law