March 17, 2015
The Fifth Circuit reversed the Tax Court’s decision in BMC Software yesterday. As we speculated that it might at the outset of the case here, the Fifth Circuit’s decision hinged on how far to take the legal fiction that the taxpayer’s accounts receivable created under Rev. Proc. 99-32 were deemed to have been established during the taxpayer’s testing period under section 965(b)(3). While the Tax Court treated that legal fiction as a reality that reduced the taxpayer’s section 965 deduction accordingly, the Fifth Circuit treated that legal fiction as just that—a fiction that had no effect for purposes of … Read More
November 5, 2014
The Second Circuit did not make the parties wait very long to learn the outcome of the Barnes Group’s appeal from the Tax Court’s imposition of dividend treatment on its multi-step transaction that enabled it to use in the United States cash that was located in Singapore. See our prior reports here and here. Little more than a month after oral argument, the court of appeals today issued a summary order affirming the Tax Court in all respects. The first page of such unpublished orders recites that they “do not have precedential effect,” but they can be cited in … Read More
Supreme Court Set to Hear Argument in Wynne on Constitutionality of Failing to Give an Income Tax Credit for Taxes Paid to Other States
November 4, 2014
[Note: Miller & Chevalier filed an amicus brief in this case in support of the taxpayers on behalf of the National Association of Publicly Traded Partnerships.]
Supreme Court briefing is now complete in Comptroller of the Treasury of Maryland v. Wynne, No. 13-485. The issue presented is whether the U.S. Constitution requires a state to allow residents to take a credit against their state income tax liability for income taxes paid to other states on income earned in those states.
Maryland’s state income tax system taxes its residents at both the state level and the county level. Like other … Read More
August 26, 2014
As you may have noticed, the blog has been on summer vacation for a variety of reasons. I hope our readers managed some vacation as well and are now eagerly awaiting updates on appellate tax matters. In any case, here are updates on two cases that have now been scheduled for oral argument in the fall. The identity of the judges who will hear these appeals has not yet been revealed.
Oral argument in the MassMutual case in the Federal Circuit is scheduled for Tuesday morning, October 14.
Oral argument in Barnes in the Second Circuit is scheduled for Wednesday … Read More
Supreme Court’s Clarke Decision Sets Forth General Guidelines for When Evidentiary Hearings Should Be Required in Summons Enforcement Proceedings
June 19, 2014
As expected, the Court this morning reversed the Eleventh Circuit’s decision in Clarke based on the Court’s agreement with the government’s position that the Eleventh Circuit erroneously had required an evidentiary summons enforcement hearing based on nothing more than the bare allegation of an improper purpose. See our previous report here. But the Court’s unanimous opinion, authored by Justice Kagan, went on to attempt to provide guidance for future disputes over the availability of such hearings, including the resolution of this case on remand, and that guidance could perhaps lead courts to allow such hearings more often than in … Read More
June 17, 2014
It is now six weeks since the Supreme Court heard argument in Clarke regarding the circumstances under which a court must convene an evidentiary hearing in a summons enforcement proceeding to allow IRS officials to be questioned regarded their reasons for issuing the summons. Based on the way the case was litigated and the questions at oral argument, the government is likely rooting for a relatively narrower opinion, whereas taxpayers who might someday be disputing a summons hope that the Court will take this opportunity to elaborate and provide new guidance on summons enforcement proceedings.
The dichotomy between a broad … Read More
June 16, 2014
All of the briefs have now been filed in the Barnes case. The government’s response brief defends the Tax Court’s decision as a run-of-the-mill application of substance over form principles. Quoting from True v. Commissioner, 190 F.3d 1165 (10th Cir. 1999), it argues that the step-transaction doctrine applies because the “Bermuda/Delaware exchanges did not ‘make[ ] any objective sense standing alone’ without contemplation of the other steps.” In arguing that these steps served no business purpose, the government relies heavily on evidence that the “reinvestment plan” was based on tax planning that the taxpayer’s accountants had previously done for … Read More
June 12, 2014
The government has now filed its reply brief in MassMutual. The brief begins by asserting that the taxpayer has abandoned on appeal an argument that had persuaded the trial court — namely, “reliance on its annual-dividend obligation to individual policyholders to establish the fact of its liability under the dividend guarantees.” In the government’s view, that “about-face is fatal to its case.” The reply brief then addresses the taxpayer’s reliance on the Washington Post case. See our previous report here. It argues that, “unlike the group obligations in Washington Post, the alleged group obligations in this case … Read More
May 6, 2014
The taxpayer has filed its response brief in the Federal Circuit in the MassMutual case. See our previous coverage here. With respect to the primary issue of whether its policyholder dividend guarantee was a “fixed liability” within the meaning of the “all events test,” the taxpayer relies heavily on Washington Post Co. v. United States, 405 F.2d 1279 (Ct. Cl. 1969). (The Court of Claims was the predecessor court to the Federal Circuit and its pre-1982 decisions are binding precedent in the Federal Circuit.) According to the taxpayer, Washington Post establishes that “a company can fix a liability … Read More
May 5, 2014
The taxpayer filed its reply brief in the BMC Software case last week. As in its opening brief, BMC cites Fifth Circuit precedent for the tax law definition of “indebtedness” as an “existing unconditional and legally enforceable obligation to pay.” BMC argues that it is undisputed that the accounts receivable created under Rev. Proc. 99-32 do not meet that definition—they neither existed nor were legally enforceable during the testing period for related-party indebtedness under section 965. (BMC observes that instead of disputing this point, the Commissioner tried to distinguish that case law, much of which comes from the … Read More