Articles Posted in Tax Law

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The Supreme Court affirmed the judgment of the district court dismissing Plaintiffs’ complaint against Weber County claiming that the County had violated Utah Code 59-22-103 and 59-2-103.5, which establish the tax exemption for primary residential property. Plaintiffs paid taxes on their primary residence but later learned that the County had not given them the residential exemption. The district court entered a judgment on the pleadings dismissing Plaintiffs’ causes of action, concluding, inter alia, that the assessor acted within the scope of his authority in reclassifying Plaintiffs’ property as “non-primary residential.” In affirming, the Supreme Court held that Plaintiffs’ challenges to the taxes they paid must fall under Utah Code 59-2-1321, which requires taxpayers to point an “error or illegality that is readily apparent from county records.” Because Plaintiffs did not challenge this requirement or show that the alleged errors or illegalities were readily apparent, the district court did not err in its judgment. View "Hammons v. Weber County" on Justia Law

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The Supreme Court affirmed the judgment of the district court dismissing Plaintiffs’ complaint against Weber County claiming that the County had violated Utah Code 59-22-103 and 59-2-103.5, which establish the tax exemption for primary residential property. Plaintiffs paid taxes on their primary residence but later learned that the County had not given them the residential exemption. The district court entered a judgment on the pleadings dismissing Plaintiffs’ causes of action, concluding, inter alia, that the assessor acted within the scope of his authority in reclassifying Plaintiffs’ property as “non-primary residential.” In affirming, the Supreme Court held that Plaintiffs’ challenges to the taxes they paid must fall under Utah Code 59-2-1321, which requires taxpayers to point an “error or illegality that is readily apparent from county records.” Because Plaintiffs did not challenge this requirement or show that the alleged errors or illegalities were readily apparent, the district court did not err in its judgment. View "Hammons v. Weber County" on Justia Law

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Rent-A-Center West, Inc. leases and sells a variety of consumer goods. Customers may opt to participate in a liability waiver program for an extra fee. Rent-A-Center charges sales tax on rental payments but not on the liability waiver fee. In 2010, the Utah State Tax Commission issued a statutory notice to Rent-A-Center imposing taxes and interest on the amounts Rent-A-Center charged for the liability waiver fee. In a formal hearing, the Commission found the waiver fee taxable. The Supreme Court reversed, holding that the liability waiver fee is not subject to sales and use tax under the plain text of the Utah Tax Code. View "Rent-A-Center v. Tax Comm’n" on Justia Law

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Utah’s pay-TV sales tax scheme provides a sales tax credit for an amount equal to fifty percent of the franchise fees paid by pay-TV providers to local municipalities for use of their public rights-of-way. Satellite providers, however, use a different business model that does not trigger franchise fees. The satellite providers brought this lawsuit asserting that Utah’s tax scheme favors local economic interests at the expense of interstate commerce in violation of the Commerce Clause and the Uniform Operation of Laws Clause. The State Tax Commission moved for judgment on the pleadings. The district court granted the motion. The Supreme Court affirmed, holding (1) Utah’s pay-TV tax credit survives dormant commerce scrutiny; and (2) the tax credit survives rational basis scrutiny under the Uniform Operation of Laws Clause. View "DIRECTV v. Utah State Tax Comm’n" on Justia Law

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In an equalization proceeding before the Utah State Tax Commission, Decker Lake Ventures, LLC sought a reduction of the assessed valuation of its property under Utah Code 59-2-1006. Under this statute, the Commission is directed to “adjust property valuations to reflect a value equalized with the assessed value of other comparable properties” upon a determination that “the property that is the subject of the appeal deviates in value plus or minus 5% from the assessed value of comparable properties.” The Commission rejected Decker Lake’s equalization claim. The Supreme Court affirmed, holding that the Commission did not commit reversible error in its determination of comparability or in its factual findings. View "Decker Lake Ventures v. Utah State Tax Comm'n" on Justia Law

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Anadarko Petroleum Corporation, which acquired Kerr-McGee Oil & Gas Onshore L.P. in 2006, operated oil and gas wells from 2008 to 2011 and filed severance tax returns during this period. The severance tax rate an owner of oil and gas interests must pay depends on the fair market value of the owner’s interest. At issue in this case was how the value of such an interest is to be calculated. In 2010, the Auditing Division of the Utah State Tax Commission issued notices to Anadarko and Kerr-McGee (collectively Anadarko) informing Anadarko of a deficiency in its 2009 severance tax and assessing additional taxes and interest, and informing Kerr-McGee that its claimed 2009 refund was being reduced. Anadarko filed a petition for determination with the Commission. At issue before the Commission was whether the Auditing Division had applied the correct tax rate. The Commission granted summary judgment for the Auditing Division. The Supreme Court reversed, holding that the Commission improperly disallowed deductions Anadarko made for tax-exempt federal, state, and Indian tribe royalty interests under the severance tax statute. Remanded. View "Anadarko Petroleum Corp. v. Utah State Tax Comm’n" on Justia Law

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In 2014, the City of Draper passed and adopted a Resolution that levied a tax on property located within the Traverse Ridge Special Service District. Petitioners, five residents, collected certified voter signatures and asked the City to refer the Resolution to voters of the District. The City rejected the referendum petition, asserting that the tax levy was a nonreferable administrative action. Petitioners filed a petition for writ of extraordinary relief. The Supreme Court granted the relief sought, holding (1) the Resolution was properly referable to the voters because it was legislative in nature; and (2) the City’s constitutional challenge to the subjurisdictional referendum statute failed. View "Mawhinney v. Draper City" on Justia Law

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In 2010, Plaintiff was negotiating the sale of three limited liability companies of which he was the sole shareholder. The companies were S Corporations. Plaintiff retained an Accounting Firm to advise him on his tax liability from the contemplated sale. Altaview Concrete, one of the companies, was named as the client. Jeffrey Bickel, a partner at the Accounting Firm, advised Plaintiff that he could restructure the deal to reduce his tax liability to $663,000. The buyer agreed to the restructuring proposals, and the sale closed. Later Bickel and the Accounting Firm (collectively, Defendants) discovered they had greatly underestimated Plaintiff's tax liability. Plaintiff filed a professional negligence claim in district court. The district court granted Defendants' motion for summary judgment, finding that Plaintiff's claim failed to satisfy the writing requirement of Utah Code 58-26-602, which provides that accountants are not liable to third parties unless the accountant identified in writing to the client that the professional services were intended to be relief upon by the third party. The Supreme Court reversed, holding that Defendants were liable to Plaintiff as a third party under section 602 because Defendants identified in writing that the professional services were intended to be relied upon by Plaintiff.View "Reynolds v. Bickel" on Justia Law

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In 1990, Chin Lee established a defined-benefit plan, which he converted in 1996 into a profit-sharing plan, both of which were qualified plans. Chin's sole proprietorship contributed funds to the Plan from 1990 to 1995. These funds were invested entirely in U.S. government obligations, the interest on which was tax-exempt. In their 2005 and 2006 tax filings, Chin and Yvonne Lee reported Plan distributions and claimed deductions for federal obligation interest that the Plan earned in those and in earlier years. The Utah State Tax Commission disallowed these deductions, concluding that the Lees' distributions from the Plan were not exempt from state taxation even though the Plan assets were invested solely in U.S. government obligations. The Supreme Court affirmed, holding that no portion of the Plan distributions was tax-exempt, as (1) the distributions from the Plan qualified for a tax exemption only if the Plan acted as a conduit, allowing the funds to retain their tax-exempt character after distribution; and (2) the Lees' qualified profit-sharing plan was a non-conduit entity, and thus, the funds did not retain their character as interest on U.S. obligations upon distribution to the Lees. Therefore, the distributions were fully taxable by Utah.View "Lee v. Utah State Tax Comm'n " on Justia Law

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This case required the Supreme Court to determine when a well "started" under Utah Code 59-5-102. Although that statute imposes a severance tax on oil or gas produced from a well, section 59-5-102(5)(c) permits an exemption for "the first six months of production for development wells started after January 1, 1990." Summit Operating, LLC argued that a well starts when it begins commercial production. Under this interpretation, Summit asserted that it was entitled to a six-month tax exemption for its well, which started commercial production in 2008. The Utah State Tax Commission asserted that a well starts on the date that drilling begins, and thus, Summit was not entitled to the tax exemption because drilling for Summit's well began in 1983. The Supreme Court affirmed the Commission's order granting summary judgment to the Auditing Division of the Commission, holding that under the Tax Exemption Statute, a well "starts" when drilling begins. View "Summit Operating v. State Tax Comm'n" on Justia Law