Noteworthy Cases

Subscribe to Noteworthy Cases via RSS

In two procedural cases, appellate courts in Oregon and Wisconsin dismissed taxpayer appeals for using improper service methods, despite the fact that the Department of Revenue in each case actually received the notice of appeal.

The Oregon Supreme Court dismissed an appeal from the Tax Court, finding that the taxpayer failed to properly serve the…

Virginia released a ruling discussing the right to apportion and how to source sales when the ultimate destination of the sale is outside of Virginia. The Taxpayer was a manufacturer whose headquarters and only production facility were located in Virginia. However, the Taxpayer’s business was largely comprised of sales of its products to the U.S. Government, which in turn exported the products from the Taxpayer’s Virginia facility to various foreign countries. The Taxpayer would then send employees to the product locations for set up and installation.

First, the Tax Commissioner discussed whether the Taxpayer had the right to apportion its income for Virginia income tax purposes. Noting that in Virginia a corporation has the right to apportion its income if it is subject to a tax on net income in another jurisdiction, the Commissioner determined that it needed further information about the Taxpayer’s activities in other jurisdictions to determine if the Taxpayer had a right to apportion.Continue Reading Virginia Ruling Appears to Reach Right Outcome on “Right to Apportion” and Sourcing of Sales…But Perhaps for the Wrong Reason

We previously reported on a significant taxpayer victory in which the Oregon Tax Court held that changes or corrections made by other states’ taxing authorities will not hold open the Oregon statute of limitations. Dep’t of Revenue v. Washington Federal, Inc., TC 5010 (Or. Tax Ct., June 29, 2012). As promised, following is our analysis of the case.

The taxpayer, a multistate federal savings and loan corporation, timely filed its Oregon corporate excise tax returns for tax years 1999 through 2002. Arizona and Idaho state taxing authorities assessed the taxpayer in 2003 and 2006, respectively. In 2008, after the expiration of the standard Oregon statute of limitations for assessment (generally three years from the date the return was filed), the Oregon Department of Revenue (the Department) issued assessments for the tax years 1999 through 2002. The issue before the court was whether the Department’s assessments were timely.Continue Reading Oregon DOR Out of Luck on SOL: Our Analysis

In a non-precedential, summary decision released May 3, 2012, the California State Board of Equalization (the Board) held that a foreign corporation with only one employee in California was “doing business” in the state and thus was subject to California’s corporation franchise tax. Appeal of Warwick McKinley, Inc., Cal. Bd. of Equal., Jan. 11, 2012 (released May 3, 2012). While California recently expanded its statutory definition of “doing business” in California Revenue and Taxation Code (CRTC) section 23101(b) to include a factor presence nexus test, the Board in Appeal of Warwick McKinley, Inc. focused on CRTC section 23101(a), which defines “doing business” to mean “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit.”Continue Reading California Nexus: Not in My House!

More than a decade into the case, AT&T’s challenge to the constitutionality of Mississippi’s dividends received deduction is over. On September 6, the Mississippi Supreme Court invalidated on procedural grounds the trial court’s 2006 decision finding that the dividends received deduction was unconstitutional. Mississippi’s dividends received deduction is limited to dividends paid from subsidiaries doing…

The U.S. Supreme Court held in Armour v. City of Indianapolis, 132 S.Ct. 2073 (June 4, 2012), that a city’s refusal to refund sewer taxes prepaid by some homeowners while relieving taxes paid by other homeowners who elected to pay the tax by installment did not violate the Equal Protection Clause. Applying a rational basis standard, the Court upheld the tax forgiveness scheme because it was rationally related to the city’s legitimate interest of avoiding the administrative costs associated with issuing refunds.

The opinion reflects the difficulty of applying the Equal Protection Clause. The Court provided that laws treating similarly situated taxpayers differently are constitutional as long as there is a “plausible policy reason for the classification . . . and the relationship of the classification to its goal is not so attenuated so as to render the distinction arbitrary or irrational.” The Court noted that the only instance where it has found a rational basis lacking in this context is where a state law requiring equal assessment was “dramatically violated” by gross disparity in assessments. Here, the sewer project financing assessments were equally distributed, as required by state law. Whether the tax should be forgiven and how such a tax forgiveness program should be implemented are separate questions which are not addressed by state law.Continue Reading Administrative Convenience Justifies Inequality in Tax Forgiveness Program