Justia U.S. 5th Circuit Court of Appeals Opinion Summaries

After plaintiffs challenged a substantial increase in the taxes on two properties they own, the Parish sent two tax assessors to inspect the property. Plaintiffs filed suit in state court alleging violations of their state and federal constitutional rights stemming from the inspection. After removal to federal court, the district court determined that inspector Lloyd Handorf was not entitled to qualified immunity because he had exceeded the scope of his consent and therefore violated plaintiffs’ Fourth Amendment rights. Specifically, the district court determined that while Handorf had consent to conduct a tax appraisal, he exceeded this consent by: (1) being on the curtilage; (2) peering into the windows; and (3) opening the pool house door. The court concluded that there is no guidance within this circuit regarding the actions a tax appraiser may take in an assessment. Further, other than conclusory allegations, plaintiffs have not identified the proper course of conduct for a tax appraiser. Therefore, the court reversed the judgment and concluded that Handorf is entitled to qualified immunity because plaintiffs' constitutional right was not clearly established at the time of the challenged conduct. View "King v. Louisiana Tax Commission" on Justia Law

Plaintiffs are individuals who obtained property tax loans from defendant property tax lenders in exchange for the transfer of their tax liens pursuant to Sections 32.06 and 32.065 of the Texas Tax Code. In these four consolidated appeals, at issue is whether the Truth in Lending Act's (TILA), 15 U.S.C. 1602(f), (g), (i), disclosure and consumer protection requirements apply to transfers of property tax liens carried out under Section 32.06 of the Texas Tax Code. The court concluded that the transfer of a tax lien does not constitute an extension of “credit” that is subject to TILA. Accordingly, the court denied the district court's dismissal of No. 14-51326, and reversed the district court's denial of defendants' motion to dismiss in No. 15-50199, 15-50340, and 15-50437. View "Billings v. Propel Fin. Servs." on Justia Law

Defendant pled guilty to failing to file a tax return in 2006 and was sentenced to twelve months’ imprisonment, one year supervised release, and restitution in the amount of $453,547.00. The district court entered an order directing defendant's ex-wife's employer to withhold the portion of her earnings that accrued prior to the date of the divorce, including paid time off and contributions to her 401(k) and 403(b) retirement plans. The district court subsequently denied the ex-wife's motion to quash the writs of garnishment, as well as a motion to alter or amend the judgment. The court agreed with the district court that the ex-wife did not qualify for relief under I.R.C. 66(c), the "Innocent Spouse" provision, because this provision is only available as an affirmative defense to the government’s efforts to assess a tax deficiency, not when the government is enforcing a criminal judgment. Further, the ex-wife was aware that her husband earned an income as an insurance broker, disqualifying her under the knowledge provision of section 66(c)(3). The court affirmed the judgment. View "United States v. Tilford" on Justia Law

The Commissioner issued petitioner a notice of deficiency for the 2011 tax year and charged that petitioner had mischaracterized $1.8 million of the $3.1 million he received as a result of the merger between his company and Google, Inc., as long-term capital gain rather than ordinary income. The court agreed with the tax court’s finding that the preponderance of the evidence favors the Commissioner’s deficiency determination, so any error in the court’s allocation of the burden of proof is harmless. In this case, the facts lend credence to the tax court’s conclusion that petitioner did not make a good faith effort to assess his tax liability and could not reasonably rely on his advisers. Accordingly, the court affirmed the judgment. View "Brinkley v. CIR" on Justia Law

Plaintiff claimed that it acquired title to the foreclosed property at issue by a tax sale and filed suit to quiet title in state court. Defendant removed the action to federal court and counter-claimed for declaratory relief. The district court dismissed the suit and found that the tax sale was void, quieting title in favor of defendant. The court determined that the district court properly concluded that it did not have subject matter jurisdiction over plaintiff’s suit. A quiet title action against the federal government must be brought in federal court, and when the state court lacks subject matter jurisdiction, no jurisdiction is added by removal to federal court. The court also concluded that in the absence of consent from the federal government, the sale of the property under state law was invalid. While the statute preserves local “power to tax,” it does not permit local governments to seize and sell federal government property. Therefore, the tax sale of federally owned real estate was null and void, and the district court rightly quieted title in favor of the Secretary. The court affirmed the judgment. View "Equity Trust Co. v. McDonald" on Justia Law

Petitioners are subsidiaries of the Howard Hughes Corp., an entity involved in selling and developing commercial and residential real estate. Petitioners used the completed contract method of accounting in computing their gains from sales of property under long-term construction contracts. The IRS challenged the method and the Tax Court sided with the IRS. At issue was whether petitioners' contracts were “home construction contracts” within the meaning of I.R.C. 460(e)(6)(A), thereby making petitioners eligible to use the completed contract method of accounting. The court concluded that petitioners' construction contracts do not fall within the meaning of subsection (i) of section 460(e)(6)(A) or subsection (ii) of section 460(e)(6)(A). Because petitioners' contracts are not "home construction contracts," within the meaning of the statute, the court affirmed the Tax Court's judgment. View "Howard Hughes Co. v. Commissioner" on Justia Law

Plaintiff filed suit for wrongful levy after the IRS levied her account at a bank, which she asserts was her separate property, when her husband incurred a tax liability. The district court dismissed the suit for lack of subject matter jurisdiction. The court concluded that plaintiff, as the person who paid a tax assessed against another person, is a “taxpayer” under the Internal Revenue Code’s default definition, and nothing in the Taxpayer Assistance Order (TAO) statute, 26 U.S.C. 7811, redefines or is manifestly incompatible with that definition. Further, the court concluded that her TAO application tolled the running of the statute of limitations under the plain language of section 7811(d). Accordingly, the court reversed and remanded for further proceedings. View "Rothkamm v. United States" on Justia Law

This case involves the intersection of sections 482 and 965 of the United States Tax Code. Foreign subsidiaries of United States-based companies sometimes pay dividends to their United States-based parent companies, which constitute taxable income for the United States-based parent company. However, rather than pay these dividends, and the accompanying taxes, many United States-based multinational corporations park large sums of earnings in accounts owned by their foreign subsidiaries. Doing so allows these corporations to avoid federal income taxes, but only as long as the cash remains overseas. This case involves a decision by the Commissioner of Internal Revenue to partially disallow BMC Software, Inc.’s (BMC) repatriated-dividends tax deduction under 26 U.S.C. 965(b)(3) on the ground that subsequently created accounts receivable constituted "indebtedness" and reduced BMC’s eligibility for the deduction. Because the plain text of section 965 did not support the Commissioner’s interpretation, and because BMC never agreed to treat the relevant accounts receivable as indebtedness, the Fifth Circuit reversed. View "BMC Software, Incorporated v. Comm'r Internal Revenue" on Justia Law

Pilgrim's Pride was the successor-in-interest to Pilgrim's Pride Corporation of Georgia f/k/a Gold Kist, Inc., which was the successor-in-interest to Gold Kist, Inc. In 1998, Gold Kist sold its agriservices business to Southern States Cooperative, Inc. To facilitate the purchase, Southern States obtained a bridge loan that was secured by a commitment letter between Southern States and Gold Kist. The letter permitted Southern States to require Gold Kist to purchase certain securities from Southern States. In early 2004, Gold Kist and Southern States negotiated a price at which Southern States would redeem the securities. Gold Kist’s Board of Directors, instead of accepting the offer, decided to abandon the securities for no consideration. The issue this case presented for the Fifth Circuit's review centered on whether whether Pilgrim’s Pride Corporation's loss from its abandonment of securities was an ordinary loss or a capital loss. The Tax Court (in what appeared to be the first ruling of its kind by any court) ruled that 26 U.S.C. 1234A(1) applied to the abandonment loss and required that it be classified as capital. However, the Fifth Circuit disagreed. Because section 1234A(1) only applied to the termination of contractual or derivative rights, and not to the abandonment of capital assets, the Court reversed the Tax Court and rendered judgment in favor of Pilgrim's Pride. View "Pilgrim's Pride Corporation v. CIR" on Justia Law

In 2006, Boyd sent his income and expense information for 2004 to a tax specialist, who prepared a return showing a tax liability of over $27,000. Boyd did not file the return he received from the tax specialist. Instead, Boyd filed his tax returns for 2004, 2005, and 2006 in October 2007, having recently read a book called Cracking the Code, which espoused a theory that federal income tax obligations applied only to individuals who earned income working for the federal government. The three returns declared that in those years he had zero income and zero tax liability. During those three years, Boyd actually had continued the work he had done in prior years and had earned income totaling $795,000. Convicted under 26 U.S.C. 7206(1), Boyd argued that the government had not proven willfulness because it failed to show the absence of a good-faith belief that the he did not have to file returns or pay taxes. The Fifth Circuit affirmed, rejecting challenges to denial of funding for neuropsychologist testimony, admission of uncharged conduct, the prosecutor’s statements, the judge’s statements, the jury instructions, the response to a jury note, and the sufficiency of the evidence. View "United States v. Boyd" on Justia Law