Archive for the ‘Supreme Court’ Category

A Big Case for the Supreme Court Later this Year

Monday, May 21st, 2007

The Supreme Court doesn’t decide many tax cases. They’re usually not that interesting, and it’s rare to see a split among the different circuits in a tax issue. However, a very important tax case will be decided in the next Supreme Court term (beginning in October): Department of Revenue v. Davis.

In 2006 the Kentucky Court of Appeals (the Kentucky Supreme Court declined to hear the case) held that, “…[W]e find that Kentucky’s tax on the income derived from bonds issued outside Kentucky violates the Commerce Clause of the United States Constitution, we vacate and remand.”

Why is this important? If you live in a state with a state income tax, and you own municipal bonds issued by your state, you do not pay income tax on those bonds. However, if you own bonds issued by another state you almost certainly do pay income tax on those bonds. The Kentucky ruling says that’s illegal—it violates the dormant commerce clause of the U.S. Constitution.

To no one’s surprise, the National Association of State Treasurers doesn’t like this ruling; they will be filing an amicus brief on the case. The Kentucky Department of Revenue doesn’t like the ruling; it will cost the state money. Indeed, high tax states (and Kentucky is not one of those) like this ruling even less. If the Court of Appeals ruling is upheld, bonds issued by high tax states (such as California) will need to pay a higher interest rate, costing the states money.

The case will be heard late this year; a decision isn’t likely to be announced until early 2008. If you own municipal bonds from a state other than your own, pay attention to the decision. If you paid enough tax from these bonds and the ruling is upheld by the Supreme Court, you may be able to amend your state tax return seeking a refund of tax.

The TaxProfBlog has more on this case, and you can find news stories at Bloomberg and elsewhere.

Hat Tip: TaxProfBlog

Tax Court Releases Clarifying Statements in Kanter Case

Thursday, July 21st, 2005

According to Tax Analysts, the Tax Court has released clarifying statements in the Kanter and Ballard cases. However, the statements are not available on the Tax Court’s website.

Tax Analysts is reporting that Chief Judge Joel Gerber released statements outlining the procedures followed in the cases. The Supreme Court in March ordered the Tax Court to release the original findings of Special Trial Judge Couvillion.

Tax Court Lifts Veil

Tuesday, July 12th, 2005

As I previously noted, the Tax Court had a secrecy rule that prevented, in certain circumstances, litigants from knowing what the judge felt the ruling should be. This “star chamber” provision became clear when the Kantar case was decided by the US Supreme Court earlier this year.

Luckily, previously is also the place where that oderous rule has been placed—the junk yard of history. As noted in this article in the Chicago Tribune and this article in the International Herald-Tribune (likely appearing in tomorrow’s New York Times), the rule has been rescinded as a direct result of the Supreme Court’s ruling. However, its’ status as to past cases is unknown.

This is one rule change that is definitely for the better.

Psssst: I’ve Got a Secret…

Monday, June 27th, 2005

After being gone over the weekend, I discover that the World’s Greatest Newspaper (the Chicago Tribune) ran a story on the infamous Kanter case. In this case, the US Tax Court’s Chief Judge apparently reversed the finding’s of the trial court judge—for no apparent reason. Earlier this year the Supreme Court ruled that the trial court’s ruling be made public. Under a 1984 Tax Court rule, the trial court’s ruling is not made public.

The Tribune has had two articles about this ruling. The first, on June 24th, features the classic line from Julie Roin, a law professor at the University of Chicago, “How could the tax court judges essentially lie about what was in the report?” The second article, on June 25th, has the comment of the current Chief Judge of the Tax Court, Joel Gerber, that no judge on the Tax Court will comment on the case.

You can find the Supreme Court’s decision here (the case is Ballard v. Commissioner).

Now, courts are supposed to have transparency in their actions. The Tax Court, today, doesn’t. Hopefully this ruling, and the associated publicity, will impact the Tax Court’s policies. I’m not holding my breath (again).

Thanks to the TaxProf Blog and Roth and Company’s Tax Updates for the heads-up.