Tax Law News - U.S. Tenth Circuit
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We're sorry to have to do this. We'll try to minimize your agony. But be warned: These are the two least interesting cases currently on the Supreme Court's docket, and the only two cases to come out of the Tenth Circuit (so far).

What are talking about? Sufficient fact pleading for removal of massive class action lawsuits to federal court and some barely comprehensible case involving the federal Tax Injunction Act and the ability of federal courts to hear non-taxpayers' complaints about a state reporting law that is a "secondary aspect of state tax administration."

Actually, on second thought, these are kind of interesting ... in a "law school casebook fodder/exam torture" sort of way.

10th Wants Stronger Sentence in Tax Evasion Case

The Tenth Circuit found that the government's evidence was valid in proving that appellant had knowingly committed tax evasion, affirming his conviction but reversing a sentence that was originally reduced. 

After a jury trial, appellant Bill Melot had been convicted of one count of attempting to evade or defeat tax, one count of corruptly endeavoring to impede the administration of the Internal Revenue Code, six counts of a willful failure to file, and seven counts of making false statements to the Department of Agriculture. He was sentenced to pay nearly $19 million in restitution to the IRS and to a 60-month term of imprisonment, which was actually a huge downward variance from the sentencing guideline range of 210-262 months.

Colorado has a sales tax of 2.9% for products purchased in the state, and a use tax of 2.9% for products purchased outside the state, but used in the state. Because of the Supreme Court's 1992 decision in Quill Corp v. North Dakota, a state may not collect taxes from "retailers with no in-state physical presence," and Colorado does not collect use taxes from out-of-state (i.e., catalog and online) retailers.

Instead, Colorado puts the onus on the taxpayers to pay their use tax.

SCOTUS Lets 10th Circuit Opinion Stay in Osage Nation Lawsuit

On Monday, the U.S. Supreme Court upheld a Tenth Circuit Court of Appeals decision that imposed taxes on the Osage Nation of the Oklahoma area. The Tenth Circuit lawsuit dealt with the issue of whether tribal citizens who live and work in Osage County are exempt from state income taxes.

The case ends at the Tenth Circuit, as SCOTUS denied the certiorari petition for the Pawhuska-based tribe.

The case arose in 1999, reports NewsOK, when a member of the Osage Nation challenged the state of Oklahoma's right to tax her income.

Tenth Circuit Court of Appeals Rejects Tax Protest

Here’s a long running tax case that has seen its way through the Tax Court, the Federal District Court and the Tenth Circuit Court of Appeals. The case has a bit of everything for the tax practitioner: tax liens,a notice of deficiency, a foreclosure and a tax protest. For all you non-tax lawyers, let’s try to put this in plain English.

From 1990 to 1995, a taxpayer failed to pay his taxes. As a consequence, he received two notices of deficiency from the Internal Revenue Service.

A quick sidebar: A notice of deficiency is known by tax practitioners as the “ticket to Tax Court.”

Klaas v. Apex Ins. Co., No. 09-9012

Tax Court Judgment Affirmed

In Klaas v. Apex Ins. Co., No. 09-9012, taxpayers' appeal from the decision by the United States Tax Court upholding the Commissioner's assessment of income tax deficiencies against the taxpayers for the taxable year 2001, the court affirmed the judgment where the taxpayers failed to show the Tax Court how they were prejudiced by the Commissioner's introduction of a legal theory in post-trial briefing.

Gee v. Pacheco, No. 08-8057

Taxpayer Appeal from Tax Court Decision

In Gee v. Pacheco, No. 08-8057, taxpayers' appeal from the decision by the United States Tax Court upholding the Commissioner's assessment of income tax deficiencies against the taxpayers for the taxable year 2001, the court affirmed the judgment where the taxpayers failed to show the Tax Court how they were prejudiced by the Commissioner's introduction of a legal theory in post-trial briefing.

Reversal of Tax Refund, and Criminal Matter

In Sala v. US, No. 08-1333, an action seeking a tax refund, the court of appeals reversed the district court's order granting the refund, holding that the transaction giving rise to petitioner's claimed tax loss had no economic substance because the claimed loss generated by the program was structured from the outset to be a complete fiction.

US v. Pope, No. 09-4150, involved a prosecution for possessing a firearm while having been previously convicted of a misdemeanor crime of domestic violence.  The court of appeals affirmed the denial of defendant's motion to dismiss the indictment on Second Amendment grounds, holding that all the material facts on which defendant's motion to dismiss relied were outside the indictment, hotly disputed by the government, and intimately bound up in the question of defendant's guilt or innocence.

Related Resources

Osage Nation v. Irby, No. 09-5050, concerned an action by the Osage Nation seeking a declaratory judgment that the Nation's reservation, which comprised all of Osage County, Oklahoma, had not been disestablished and remained Indian country within the meaning of 18 U.S.C. section 1151.

As the court of appeals wrote:  "The pivotal issue in this case is whether the Nation's reservation has been disestablished, not Oklahoma's tax policies. The district court held that the Osage reservation had been disestablished; that tribal members who work and live on non-trust/non-restricted land in Osage County are not exempt from state income tax; and that "[t]he Osage have not sought to reestablish their claimed reservation or to challenge [Oklahoma's] taxation until recently," and Oklahoma's longstanding reliance counsels against now establishing Osage County as a reservation."

The court of appeals affirmed summary judgment for defendants, holding that 1) the legislative history and the negotiation process made clear that all the parties at the table understood that the Osage reservation would be disestablished by the Osage Allotment Act, and uncontested facts in the record provided further evidence of a contemporaneous understanding that the reservation had been dissolved; and 2) after enactment, federal officials responsible for the Osage lands repeatedly referred to the area as a "former reservation" under state jurisdiction.

Related Resources

Powell v. Comm'r. of Int'l. Rev., No. 08-9005

In an appeal from a tax court's post-trial decision to adopt the Commissioner of Internal Revenue's computation of the taxpayer's estate tax deficiency rather than the taxpayer's own computation, the order is affirmed where: 1) the tax court did not abuse its discretion in computing the amount of the deficiency; and 2) the tax court did not abuse its discretion by adopting the Commissioner's Rule 155 computation.

Read Powell v. Comm'r. of Int'l. Rev., No. 08-9005

Appellate Information

Filed September 11, 2009

Judges

Opinion by Judge Holloway

Counsel

For Petitioner:

Edith Moates, Norman, OK

For Respondent:

Patrick J. Urda, Attorney, Tax Division, United States Department of Justice, Washington, DC

Nathan J. Hochman, Assistant Attorney General, Washington, DC