Tax Controversy Posts

Latest from Tax Controversy Posts

The Pennsylvania Constitution requires that taxes be uniform: “All taxes shall be uniform, upon the same class of subjects, within the territorial limits of the authority levying the tax, and shall be levied and collected under general laws.” Pa. Const. Art. VIII, § 1. While conceptually similar to the Equal Protection Clause of the Fourteenth Amendment, Pennsylvania courts apply this uniformity requirement much more stringently. In 2017, the Supreme Court of Pennsylvania held that “a…
The First Amendment provides that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.” U.S. Const., amend. I. Churches qualify for an exemption from taxation under section 501(c)(3) of the Internal Revenue Code, as do a variety of other charitable organizations. While they may be exempt from tax, charities generally must file a return, known as a Form 990. There are exceptions, however. Small organizations that generally receive…
Equitable doctrines are generally read into most federal statutes of limitations. Equitable tolling typically applies “when the prospective plaintiff simply does not have and cannot with due diligence obtain information essential to bringing a suit.” Wolin v. Smith Barney Inc., 83 F.3d 847, 852 (7th Cir. 1996). Similarly, when a defendant acts affirmatively to dissuade a plaintiff from pursuing a claim, equitable estoppel may apply to preclude the defendant from relying on the statute of…
On October 28, 2019, the Third Circuit in United States v. Wegeler, No. 17-1717, 2019 U.S. App. LEXIS 32282, addressed an issue of first impression, holding that a False Claims Act (FCA) relator whose information resulted in a criminal prosecution cannot intervene in that prosecution to pursue a whistleblower award. The court held a relator can only get a recovery by proceeding with his FCA qui tam action. In so ruling, the Third Circuit…
The marijuana business is a peculiar enterprise: In many states medical marijuana is legal and dispensaries are licensed; in others, recreational use is legal. Meanwhile, the industry participants are still trafficking in a controlled substance and potentially subject to federal prosecution. And they also face serious tax complications because section 280E of the Internal Revenue Code bars them from deducting most of their business expenses. Given that environment, those who enter the industry should choose…
The IRS seizes stuff. If people do not pay their taxes, it will seize their property to collect. I.R.C. § 6331(a), (b) (authorizing collection by means of administrative levy, including “the power of distraint and seizure by any means”). It will also seize property through asset forfeiture proceedings when the assets are linked either to violations of the Bank Secrecy Act or to money laundering in the context of other violations of Title 26 of…
Business expenses are generally deductible: “There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” I.R.C. §162(a). While certain types of expenses get particular scrutiny and require greater substantiation, most expenses are readily deductible under the “ordinary and necessary” standard. But there are limits: Recently, the Tax Court held that where a corporation paid an expense incurred by…
Dead statutes have a long life span in the tax world. They have a long life span because cases involving prior tax years percolate through the judicial system long after the relevant statute has been amended or repealed. Perhaps the best example is the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), the regime that Congress created in the 1980s to streamline partnership audits. In 2015, Congress passed the Balanced Budget Act of 2015,…
“You got to put a splash of diesel fuel in it . . . so we can generate tax credits.” Alternative Carbon Res., LLC v. United States, No. 2018-1948, 2019 U.S. App. LEXIS 29043, *6 (Fed. Cir. Sept. 25, 2019). A quote like that spells trouble, especially if the taxpayer claimed $19,773,393 in tax credits based on that logic. And the Federal Circuit’s opinion lives up to that expectation. A little background is in…
If a taxpayer overpays her taxes, she is entitled to sue for a refund after exhausting her administrative remedies. I.R.C. § 7422. She can file suit in district court, which has jurisdiction in cases “for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority.” 28 U.S.C. § 1346(a)(1). Taxpayers are entitled to interest on their overpayments. I.R.C. §…