Latest 6 Cases This Week: United States v. RaPower-3 (10th Cir.), Adkins v. United States (Fed. Cir.), State Tax Assessor v. Kraft Foods Group, ...

The Response to President Trump’s Shameless Religious Photo Op Gives Me Hope for the Future

MARCI A. HAMILTON

University of Pennsylvania professor Marci A. Hamilton praises the response of liberal clergy in response to President Trump’s seemingly opportunistic photo op in front of St. John’s Episcopal Church in Washington, D.C. Hamilton calls upon these religious leaders to continue speaking out loudly in the name of inclusion, love, and truth.

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United States v. RaPower-3

Court: US Court of Appeals for the Tenth Circuit

Docket: 18-4119

Opinion Date: June 2, 2020

Judge: Harris L. Hartz

Areas of Law: Business Law, Government & Administrative Law, Tax Law, White Collar Crime

After a bench trial, a district court decided that Defendants RaPower-3, LLC, International Automated Systems, Inc. (IAS), LTB1, LLC, Neldon Johnson, and R. Gregory Shepard had promoted an unlawful tax scheme. Defendants’ scheme was based on a supposed project to utilize a purportedly new, commercially viable way of converting solar radiation into electricity. There was no “third party verification of any of Johnson’s designs.” Nor did he have any “record that his system ha[d] produced energy,” and “[t]here [were] no witnesses to his production of a useful product from solar energy,” a fact that he attributed to his decision to do his testing “on the weekends when no one was around because he didn’t want people to see what he was doing.” Defendants never secured a purchase agreement for the sale of electricity to an end user. The district court found that Johnson’s purported solar energy technology was not a commercial-grade solar energy system that converts sunlight into electrical power or other useful energy. Despite this, Defendants’ project generated tens of millions of dollars between 2005 and 2018. Beginning in 2006, buyers would purchase lenses from IAS or RaPower-3 for a down payment of about one-third of the purchase price. The entity would “finance” the remaining two-thirds of the purchase price with a zero- or nominal- interest, nonrecourse loan. No further payments would be due from the customer until the system had been generating revenue from electricity sales for five years. The customer would agree to lease the lens back to LTB1 for installation at a “Power Plant”; but LTB1 would not be obligated to make any rental payments until the system had begun generating revenue. The district court found that each plastic sheet for the lenses was sold to Defendants for between $52 and $70, yet the purchase price of a lens was between $3,500 and $30,000. Although Defendants sold between 45,000 and 50,000 lenses, fewer than 5% of them were ever installed. Customers were told that buying a lens would have very favorable income-tax consequences. Johnson and Shepard sold the lenses by advertising that customers could “zero out” federal income-tax liability by taking advantage of depreciation deductions and solar-energy tax credits. To remedy Defendants' misconduct, the district court enjoined Defendants from continuing to promote their scheme and ordered disgorgement of their gross receipts from the scheme. Defendants appealed. Finding no reversible error, the Tenth Circuit affirmed the district court.

Adkins v. United States

Court: US Court of Appeals for the Federal Circuit

Docket: 19-1356

Opinion Date: May 29, 2020

Judge: O’Malley

Areas of Law: Tax Law

Adkins sought a federal income tax refund, based on financial losses sustained as the victim of a fraudulent investment scheme. The IRS was unable to formalize the parties’ settlement before the statute of limitations on the refund request was set to expire. Adkins filed suit. Following a remand, the Claims Court ruled against Adkins. The Federal Circuit reversed. The court noted its previous holding that the Claims Court misconstrued the regulation concerning the timing of a theft loss deduction by reading Treasury Regulation 1.165- 1(d)(3) as imposing a higher burden on taxpayers who attempt to recover their losses after discovering a fraud than on taxpayers who claim the same loss immediately upon discovery and by holding that, where a taxpayer has filed a claim for reimbursement from those who defrauded her, the taxpayer may not claim a loss until that claim is fully resolved or abandoned. What a taxpayer must prove by reasonable certainty is that, as of the time the loss was claimed, there was no reasonable “prospect of recovery”; she is not required to prove that it was certain no recovery could be had. While one could establish the absence of any reasonable prospect of recovery by the abandonment of a claim, abandonment is not a prerequisite to such a showing. On remand, the Claims Court again required too much with respect to the showing required.

State Tax Assessor v. Kraft Foods Group, Inc.

Court: Maine Supreme Judicial Court

Citation: 2020 ME 81

Opinion Date: June 4, 2020

Judge: Humphrey

Areas of Law: Tax Law

The Supreme Judicial Court vacated in part and affirmed in part a summary judgment entered in the business and consumer docket that adjudicated all claims on the parties' separate, but judicially consolidated, petitions for review of two tax abatement decisions, holding that the court erred in partially abating a portion of certain penalties levied by the State Tax Assessor against Kraft. On appeal, Kraft argued that the lower court erred in determining that it was not entitled to an alternative apportionment of a portion of its 2010 taxable income, that it was not entitled to a full abatement of penalties levied by the Assessor as part of the "first assessment," and that the "second assessment" was not time barred. The Assessor cross-appealed, arguing that the lower court erred in partially abating the substantial understatement penalty levied as part of the first assessment. The Supreme Court (1) affirmed the court's conclusion that Kraft was not entitled to an alternative apportionment; (2) vacated the court's partial abatement of the substantial underpayment penalty because Kraft was not entitled to any abatement; and (3) affirmed the court's determination that the second assessment was not barred by the statute of limitations.

The Williams Companies, Inc. v. Mississippi Department of Revenue

Court: Supreme Court of Mississippi

Citation: 2018-CA-01487-SCT

Opinion Date: June 4, 2020

Judge: Ishee

Areas of Law: Government & Administrative Law, Tax Law

The Mississippi Department of Revenue (Department) conducted an audit of the Mississippi corporate tax returns of The Williams Companies, Inc. (Williams), for the years 2008 through 2010. During the course of the audit, Williams filed amended returns removing the capital of its single-member limited-liability companies (SMLLCs) from its calculation of capital employed in the state, seeking a refund of franchise tax in the amount of $981,419. After the Department’s review of Williams’ records and returns, the Department issued an assessment. The calculation included the capital of Williams’ SMLLCs in Williams’ Mississippi franchise-tax base. This resulted in a refund of $231,641. Williams objected, arguing it should not have been assessed a franchise-tax on capital employed by its Mississippi subsidiaries because of ambiguous language in the Mississippi franchise tax statutes. After review, the Mississippi Supreme Court affirmed the holding of the chancery court that Williams could not exclude the capital of its SMLLCs from its franchise-tax base.

Kansas City Chiefs Football Club, Inc. v. Director of Revenue

Court: Supreme Court of Missouri

Docket: SC97730

Opinion Date: June 2, 2020

Judge: Laura Denvir Stith

Areas of Law: Government & Administrative Law, Tax Law

The Supreme Court reversed the decision of the Administrative Hearing Commission (AHC) holding that The Kansas City Chiefs Football Club, Inc. (the team) was the "purchaser" of certain items used in the renovation of Arrowhead Stadium and its related facilities and was, therefore, liable for sales and use tax on those items, holding that the AHC erred in determining that the team was the purchaser of the items. After the renovation was complete, the Director of Revenue conducted a sales and use tax audit and determined that the team was liable for sales and use tax on seven categories of contested items purchased from the nine vendors at issue in this appeal. The team appealed to the AHC, which found the team liable for sales tax and use tax on the items. The Supreme Court reversed, holding that the team was not the source of the consideration for the contested items and, therefore, was not the purchaser of the items, as that term is used in Missouri's sales and use tax statutes.

ACP Land, LLC v. Rhode Island Public Utilities Commission

Court: Rhode Island Supreme Court

Docket: 17-415

Opinion Date: June 1, 2020

Judge: William P. Robinson, III

Areas of Law: Tax Law, Utilities Law

The Supreme Court affirmed the order of the Public Utilities Commission (PUC) approving the interconnection tax which National Grid (NG) charged Petitioners to interconnect to NG's distribution system then paid to the Internal Revenue Service (IRS) as contributions in aid of construction, holding that the PUC did not err. In their petition for the issuance of writ of certiorari, Petitioners asked the Supreme Court to declare the PUC order illegal and unreasonable for purportedly failing to follow a specific IRS ruling and for failing to hold NG to its burden of proof. The Supreme Court affirmed the PUC's order, holding (1) NG was entirely reasonable in believing that it continued to owe the interconnection tax to the IRS and in, therefore, passing that tax on to Petitioners; and (2) the PUC order fully comported with a settlement proposal in this case.