Articles Posted in Tax Law

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Linda Dunn appealed a district court’s judgment affirming the Idaho State Tax Commission’s deficiency determination. The Commission issued a deficiency against Linda after determining that her one-half community interest in her husband’s, Barry Dunn (“Husband”), out-of-state earnings should have been included as Idaho taxable income for 2000–01, 2003–05, and 2007–10 (the “Taxable Years”). Linda was married to Husband during the Taxable Years. During the Taxable Years, Husband lived primarily in Texas, employed by a Texas offshore drilling company. All of the earnings at issue were earned by Husband personally as a wage earner in Texas, Alaska, or Washington and were directly deposited into his bank account in Tomball, Texas. Husband never worked or was domiciled in Idaho during the Taxable Years. Throughout the Taxable Years, Linda temporarily lived with Husband at his work location, but always returned to Idaho to operate a horse farm. She was a resident of Idaho for all of the Taxable Years. Linda and Husband’s tax filing status was “married filing jointly.” Linda relied on Texas law for her argument that her interest in Husband’s earnings were immune from Idaho income tax. The Commission maintained Linda, as an Idaho resident, was taxed on all income she received during the Taxable Years while domiciled in Idaho, even if that income was derived from Texas. Finding no reversible error in the district court’s affirmance of the Commission’s decision, the Idaho Supreme Court affirmed. View "Dunn v. Idaho Tax Commission" on Justia Law

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At issue in this appeal was a judgment dismissing an action seeking to recover money unlawfully collected by the City of Pocatello from users of the City’s water and sewer systems. In 2005, the city government decided that the City should be able to operate its water and sewer systems at a profit like private utilities. By law, the City was required to charge and collect sufficient fees so that its water and sewer systems “shall be and always remain self-supporting.” Those fees had to be sufficient to pay when due all bonds and interest as required by Idaho Code section 50-1032(a) and “to provide for all expenses of operation and maintenance of such works . . . , including reserves therefor,” as required by Idaho Code section 50-1032(b). The City wanted to obtain a profit in excess of the amounts necessary for the water and sewer systems to remain self-supporting. This profit was paid into the general fund. The City instituted a program called "PILOT," which stood for payment in lieu of taxes, under which city-owned water and sewer departments paid "property taxes" to the City as if they were private entities, and the departments then passed this cost on to their customers. The “property taxes” were then paid into the City’s general fund. Plaintiffs sought a refund of the PILOT sums that they had paid. In granting summary judgment, the district court held that the imposition of the PILOT was not a compensable taking. The district court appeared to rely upon two grounds for that decision: (1) "Some courts have made that determination on the grounds that money is not 'property' within the meaning of the Takings Clause," and (2) "Other courts ‘have concluded that governmental-imposed obligations to pay money are not the sort of governmental actions subject to a takings analysis.?” The Idaho Supreme Court determined both of these rationales were incorrect, reversed and remanded for further proceedings. View "Hill-Vu Mobile Home Pk v. City of Pocatello" on Justia Law

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This appeal presents a narrow question of law relating to state income tax liability. Zippora Stahl was an Idaho resident who died in 2010. At the time of her death, Stahl owned real property located in Chino, California that had substantially appreciated in value. The Estate made a "1022 Election" following the sale of the Chino property in its 2012 federal income tax return. The Estate also filed an Idaho income tax return for 2012. When it did so, the Estate initially used the same modified carryover basis for the Chino property as it had for its federal income tax return. The Estate computed its state tax liability as $1,029,107, which the Estate paid. The Idaho State Tax Commission processed the Estate’s 2012 Idaho income tax return and determined that the Estate had incorrectly computed a credit for taxes paid to other states. Kathleen Krucker, personal representative of the Estate, appealed the district court’s grant of summary judgment in favor of the Commission and the district court’s denial of the Estate’s motion for reconsideration. The district court held that the Estate could not use a different figure as the starting point for calculating its Idaho taxable income for 2012 than it reported to the Internal Revenue Service for that year. Finding no reversible error in that judgment, the Idaho Supreme Court affirmed. View "Krucker v. Idaho State Tax Commission" on Justia Law

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Chandler’s-Boise, LLC (“Chandlers”), challenges a district court’s grant of summary judgment upholding the Idaho State Tax Commission’s (the “Commission”) deficiency determination. Chandlers owned and operated a restaurant in downtown Boise, Idaho. The Commission, through its Sales, Use, and Miscellaneous Tax Audit Bureau (the “Bureau”), conducted a comprehensive sales audit of Chandlers for the period of May 1, 2007, through May 31, 2010 (the “Audit Period”), to determine sales tax law compliance. After its audit, the Bureau found errors in sales, fixed asset additions, ordinary purchases, and meals given to employees and guests. The only error relevant to this appeal was Chandlers’ failure to pay sales tax on automatically added gratuities that were added to banquet meals, room service meals, and restaurant dining services for groups having six or more persons (the “Charges”). The bills that Chandlers gave its customers during the Audit Period did not contain a written statement indicating that the Charges could be declined as required by the Pre-2011 Rule. Chandlers did not retain the Charges in question; rather, the employees involved in preparing or providing the meals, including the server, busser, and bartender, kept the Charges. The Bureau issued a Notice of Deficiency Determination to Chandlers wherein it determined that Chandlers owed $91,243 for sales and use tax plus penalty and interest. After review, the Idaho Supreme Court determined the district court did not err in rejecting Chandlers’ arguments with respect to non-payment of the Charges, and affirmed that court’s judgment. View "Chandlers-Boise v. Idaho Tax Commission" on Justia Law

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The Board of Equalization of Ada County (Ada County) appealed a district court’s ruling granting Evangelical Lutheran Good Samaritan Society (Society) a charitable property tax exemption. After review, the Supreme Court concluded that Society was not a charitable organization under the factors announced in "Appeal of Sunny Ridge Manor, Inc.," (675 P.2d 813 (1984)). Accordingly, the Court reversed and remanded the case for further proceedings. View "Evangelical Lutheran Good Samaritan Society v. Bd of Equalization of Ada County" on Justia Law

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The Board of Tax Appeals' (the BTA) denied appellant Jayo Development, Inc.'s application for a business inventory property tax exemption. In 2012, Jayo Development applied for a property tax exemption pursuant to Idaho Code section 63-602W(4), claiming that the property qualified as site improvements held by a land developer. The Ada County Board of Equalization (the BOE) denied the application. Subsequently, the BTA and the district court both affirmed the denial. On appeal, Jayo Development argued: (1) that the plain language of the statute entitled it to the exemption;, (2) that the district court erred in relying on IDAPA 35.01.03.620 in denying Jayo Development the tax exemption; and (3) that the 2013 amendment of Idaho Code section 63-602W(4) clarified the legislature's intent and supports its interpretation of the statute. Finding no reversible error, the Supreme Court affirmed. View "Jayo Development, Inc. v. Ada County Bd. of Equalization" on Justia Law

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Cable One, Inc., is a Delaware corporation headquartered in Phoenix, Arizona. In 2005, Cable One received business income from four types of activities in Idaho: cable television services, internet access services, advertising services, and cable modem leasing. In its Idaho income tax return for that year, it included revenues earned from all of those activities except revenues from providing internet access services to Idaho customers. It excluded those revenues on the ground that providing such services to customers in Idaho constituted Arizona sales, although it also excluded such revenues from its 2005 Arizona income tax return on the ground that they came from Idaho sales. In 2008, the Idaho Tax Commission issued a notice of deficiency determination asserting a tax and interest deficiency on Cable One for the 2005 tax year. Cable One petitioned for redetermination, which the Tax Commission denied. Cable One then filed a complaint in the district court, which tried the matter de novo, and ruled in favor of the Tax Commission. Cable One then appealed to the Idaho Supreme Court. Finding no reversible error, the Supreme Court affirmed the district court. View "Cable One, Inc. v. Idaho State Tax Commission" on Justia Law

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In August 2006, Nagel Beverage Company approached the Youth Ranch and the Idaho Youth Ranch Foundation, Inc., about the sale of the real property. Nagel was looking to sell the property as part of a 1031 exchange and offered it to the Youth Ranch for $1,136,000 below the appraised value as a noncash donation. The Youth Ranch wanted to purchase the property and began to explore financing options with Key Bank. The Ada County Board of Equalization (the BOE) denied an application for a property tax exemption that the Youth Ranch and Idaho Youth Ranch Nagel Center, LLC asked for resulting from the donation. The Idaho Board of Tax Appeals affirmed that decision. The Youth Ranch and the LLC appealed. Ruling on the parties' cross-motions for summary judgment, the district court held that the property was not exempt from taxation. Finding no reversible error, the Supreme Court affirmed. View "Idaho Youth Ranch v. Ada County Bd of Equalization" on Justia Law

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A certified question of law from the U.S. District Court for the District of Idaho was presented to the Idaho Supreme Court. Karen White and her development company, Elkhorn, LLC, sought to recover $166,496 paid to Valley County for "capital investments for roads in the vicinity of [their] White Cloud development." Phase I of White Cloud was completed and it was undisputed by the parties that the tax monies paid for Phase I were used by the County to complete capital investments for roads in the vicinity of the White Cloud development. The County conceded that it did not adopt an impact fee ordinance or administrative procedures for the impact fee process as required by the Idaho Development Impact Fees Act (IDIFA). The County also conceded it did not enact an IDIFA-compliant ordinance, because, at the time, the County believed in good faith that none was required. Plaintiff filed suit against the County claiming that the road development fee imposed by the County as a condition for approval of the White Cloud project violated Idaho state law and deprived Plaintiff of due process under both the federal and Idaho constitutions. In her Second Amended Complaint, Plaintiff raised two claims for relief. The first claim for relief alleged that “Valley County’s practice of requiring developers to enter into a Road Development Agreement ("RDA," or any similar written agreement) solely for the purpose of forcing developers to pay money for its proportionate share of road improvement costs attributable to traffic generated by their development is a disguised impact fee, is illegal and therefore should be enjoined." The first claim for relief also alleged that, because the County failed to enact an impact fee ordinance under IDIFA, the imposition of the road development fees constituted an unauthorized tax. Plaintiff’s second claim for relief alleged that the County’s imposition of the road development fee constituted a taking under the federal and Idaho constitutions. The County argued Plaintiff voluntarily agreed to pay the RDA monies. Plaintiff denies that the payment was voluntary since it was required to obtain the final plat approval. The issue the federal district court presented to the Idaho Supreme Court centered on when the limitations period commences for statutory remedies made available under Idaho law to obtain a refund of an illegal county tax. The Court answered that the limitations period for statutory remedies made available under Idaho law to obtain a refund of an illegal county tax commences upon payment of the tax. View "White v. Valley County" on Justia Law

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The issue before the Supreme Court in this case concerned the district court’s holding that Ashton Urban Renewal Agency (AURA) had standing to challenge a property tax exemption granted to Ashton Memorial, Inc., a corporation with real and personal property located within AURA’s revenue allocation area. Specifically, the issue was whether AURA was a “person aggrieved” under I.C. 63-511, and therefore, could appeal the grant of the exemption to the Idaho Board of Tax Appeals (BTA). The Supreme Concluded that AURA was an "person aggrieved" under the statute, therefore it affirmed the district court's decision. View "Ashton Urban Renewal v. Ashton Memorial" on Justia Law