The U.S. Supreme Court recently issued a unanimous decision in North Carolina Dept. of Revenue v. The Kimberley Rice Kaestner 1992 Family Trust, ruling that residence in a state is not a sufficient reason to tax an out-of-state trust's undistributed income. Justice Sonia Sotomayer delivered the opinion, explaining the Court's two-step analysis of the case in regards to the 14th Amendment on due process. The judges considered that there must be "some definite link, some minimum connection, between a state and the person, property or transaction it seeks to tax" and that the "income attributed to the State for tax purposes must be rationally related to 'values connected with the taxing State.'" In this instance, "the presence of in-state beneficiaries alone does not empower a State to tax trust income that has not been distributed to the beneficiaries where the beneficiaries have no right to demand that income and are uncertain ever to receive it."
Help may be coming for retailers concerned with the abrupt change in the law last year that may require many retailers to begin collecting tax on sales to customers in a state regardless of whether the retailer has a physical presence in the state. In 2018, the U.S. Supreme Court's holding in Wayfair v. South Dakota allowed states to require remote retailers to collect taxes and fees on sales in their state if the seller was deemed to have an economic nexus with the state, regardless of any physical presence. On January 9, 2019, relief legislation was announced, known as the "Protecting Business from Burdensome Compliance Cost Act," which would delay the imposition of new laws to January 1, 2020, and would require states to streamline the tax rate and submission requirements. Click here to read about HR 379.
Yesterday the Supreme Court issued an opinion in which it set forth standards for obtaining an evidentiary hearing in the context of a summons enforcement proceeding. Clarke v. U.S., No. 13-301 (June 19, 2014).
On Monday, December 2, the United States Supreme Court declined to hear a case that could have answered long-standing questions about a state's right to collect sales tax from internet retailers who do not have a physical presence in the state. Amazon and Overstock.com joined forces to challenge a New York state law that requires online retailers to collect the sales tax. The lawsuit claims the New York law is not constitutional because it violates the Commerce Clause, which limits the states' power to regulate interstate commerce.
Yesterday the Supreme Court held that the 40% gross valuation misstatement penalty under I.R.C. § 6662(h) is applicable in cases where the IRS determines that a partnership is a sham or lacks economic substance. United States v. Woods, No. 12-562 (U.S. Dec. 3, 2013). The Court's opinion in Woods provides two main holdings: (1) that the District Court had jurisdiction under TEFRA to determine whether the partnerships' lack of economic substance could justify the application of a valuation misstatement penalty on the partners; and (2) that the gross valuation misstatement penalty applied to the disallowed partnership losses.
On May 20, 2013, the Supreme Court decided PPL Corp. v. Commissioner, holding that a British "windfall tax" imposed on privatized British companies has the predominant character of an excess profits tax and is therefore creditable under Internal Revenue Code (IRC) Section 901.
I've recently blogged about the plethora of multi-jurisdictional tax issues which continue to increase as business becomes ever more globalized. On February 20th, the U.S. Supreme Court yesterday heard oral argument in PPL Corp. v. Commissioner. In PPL, the Court is considering:
On October 9, 2012, the U.S. Supreme Court denied, without comment, Scholastic Book Club's petition for certiorari, declining to hear an appeal regarding Connecticut's taxation of classroom catalog sales of books to students.
On August 27th the Seventh Circuit decided In Re: Special February 2011-1 Grand Jury Subpoena Dated September 12, 2011. The Court held that the required records doctrine requires a taxpayer asserting a Fifth Amendment privilege to produce the documents required to be maintained under the FBAR statute. Specifically, the Court held that the taxpayer had to comply with a subpoena and produce foreign bank account records that were required to be maintained under the Bank Secrecy Act. The Seventh Circuit's holding fits squarely with the Ninth Circuit's holding in M.H. v. United States (In re Grand Jury Investigation M.H.), 648 F.3d 1067 (9th Cir. 2011), here. In M.H. the Ninth Circuit held that, "Because the records sought through the subpoena fall under the Required Records Doctrine, the Fifth Amendment privilege against self-incrimination is inapplicable..."