Justia U.S. 10th Circuit Court of Appeals Opinion Summaries

Victor Kearney was indicted for filing a false tax return for 2011 and for conspiring to defraud the United States by impeding the Internal Revenue Service (IRS). The government alleged that Kearney, with the assistance of his tax attorney, Robert Fiser, failed to report taxable trust income on his tax returns from 2007 to 2011. Fiser, who was both an attorney and a certified public accountant, prepared Kearney’s returns during those years, reporting negative income despite Kearney’s receipt of trust income. At trial, Kearney argued that he relied in good faith on Fiser’s advice and was unaware of his personal tax obligations. The defense also challenged Fiser’s credibility, highlighting his ethical violations and criminal history.The United States District Court for the District of New Mexico conducted the trial. The jury convicted Kearney on both counts: filing a false tax return and conspiracy to defraud the United States. The district court sentenced him to 27 months in prison for each count, to run concurrently, and denied his motion for a new trial. Kearney appealed, challenging only his conspiracy conviction. He argued that the district court erred by misinstructing the jury on the elements of conspiracy to defraud and by failing to include the conspiracy charge in the advice-of-counsel instruction.The United States Court of Appeals for the Tenth Circuit reviewed the case and found two plain errors. First, the jury instruction for conspiracy did not require the government to prove that Kearney used deceitful or dishonest means, an essential element of conspiracy to defraud under 18 U.S.C. § 371. Second, the advice-of-counsel instruction was limited to the false return charge and did not inform the jury that this defense applied to the conspiracy charge as well. The court held that these errors prejudiced Kearney’s defense, vacated his conspiracy conviction, and remanded for further proceedings. View "United States v. Kearney" on Justia Law

Liberty Global, a U.S. corporation, sold its controlling interest in a Japanese company for approximately $3.9 billion, realizing a gain of $3.2 billion. On its 2010 tax return, Liberty Global characterized $438 million of the gain as a foreign-source dividend and $2.8 billion as foreign-source capital gain. Of the capital gain, $474 million was re-sourced to the United States to recapture prior overall foreign losses, while the remaining $2.3 billion was treated as foreign-source capital gain, making Liberty Global eligible for a $240 million foreign tax credit.The Commissioner of Internal Revenue issued a notice of deficiency, asserting that the $2.3 billion in excess of the overall foreign loss account was U.S.-sourced, not foreign-sourced, and therefore Liberty Global was not entitled to the claimed tax credit. Liberty Global challenged this determination in the United States Tax Court, which reviewed the case on a stipulated record. The Tax Court agreed with the Commissioner, holding that only the portion of gain equal to the overall foreign loss balance could be treated as foreign-sourced under Internal Revenue Code § 904(f)(3), and the excess gain was U.S.-sourced.On appeal, the United States Court of Appeals for the Tenth Circuit reviewed the Tax Court’s decision de novo. The Tenth Circuit held that under the plain language of the Tax Code, specifically § 904(f)(3)(A)(i), only the lesser of the gain from the sale or the remaining overall foreign loss balance is treated as foreign-sourced income. The excess gain above the overall foreign loss balance is U.S.-sourced under § 865(a). The court rejected Liberty Global’s arguments based on statutory interpretation and Treasury regulations, affirming the Tax Court’s judgment and denying Liberty Global’s claim to the $240 million foreign tax credit. View "Liberty Global v. CIR" on Justia Law

The case involves God's Storehouse Topeka Church (GSH), which appealed a district court order denying its petition to quash a third-party summons issued by the Internal Revenue Service (IRS) to Kaw Valley Bank. The IRS sought bank records for accounts in GSH's name. GSH claimed the summons was invalid because the IRS failed to satisfy requirements applicable to church tax inquiries and examinations before issuing the summons. The district court denied GSH's petition, concluding that the provisions of § 7611, which govern church tax inquiries and examinations, do not apply to § 7609 third-party summonses.The case was initially referred to a magistrate judge who concluded that the third-party summons issued to Kaw Valley was not subject to the heightened requirements set out in § 7611. The district court adopted the magistrate judge's report and recommendation. It ruled that the Tax Exempt and Government Entities Commissioner, who had approved the inquiry, was an appropriate high-level Treasury official for purposes of §7611(h)(7). However, it also concluded that the provisions of § 7611 do not apply to § 7609 third-party summonses.On appeal, the United States Court of Appeals for the Tenth Circuit affirmed the district court's decision. The court held that the plain language of § 7611 makes clear it does not apply to § 7609 third-party summonses. Therefore, it was unnecessary to decide whether the Tax Exempt and Government Entities Commissioner is an appropriate high-level Treasury official. View "God's Storehouse Topeka Church v. United States" on Justia Law

This appeal arose from a converted Chapter 7 bankruptcy filed in 2017. In 2014, the debtor, All Resorts Group, Inc., paid personal tax debts of two of its principals totaling $145,138.78 to the Internal Revenue Service. Plaintiff, the United States Trustee, brought an adversary proceeding in bankruptcy court against the United States pursuant to Code 11 U.S.C. § 544(b)(1) to avoid these transfers. The “applicable law” on which the Trustee relied was now-former § 25-6-6(1) of Utah’s Uniform Fraudulent Transfer Act (amended 2017) as part of Utah’s Uniform Voidable Transactions Act. The United States (Government) did not contest the substantive elements required for the actual creditor (in this case, an individual with an employment discrimination claim against the debtor) to establish a voidable transfer under § 25-6-6(1). The Government acknowledged: (1) the debtor had made the transfers; (2) an actual creditor had an unsecured claim against the debtor arising before the transfers; (3) the debtor did not receive a reasonably equivalent value in exchange for the transfers; and (4) the debtor was insolvent at the time of the transfers. The Government further acknowledged that the sovereign immunity waiver contained in 11 U.S.C. § 106(a)(1) made it amenable to the Trustee’s § 544(b)(1) action. The Government contested § 544(b)(1)’s “actual creditor requirement,” arguing the actual creditor could not avoid the debtor’s tax payments made on behalf of its principals to the IRS because sovereign immunity would bar such creditor’s action against the Government outside of bankruptcy. According to the Trustee, the waiver contained in Code § 106(a) abrogated sovereign immunity not only as to his § 544(b)(1) adversary proceeding against the Government, but also as to the underlying Utah state law cause of action he invoked under subsection (b)(1) to avoid the transfers. On cross-motions for summary judgment, the bankruptcy court ruled in favor of the Trustee and avoided the transfers. The Government appealed. Finding no reversible error in the bankruptcy court's judgment, the Tenth Circuit affirmed. View "Miller v. United States" on Justia Law

The issue this appeal presented for the Tenth Circuit's review centered on the denial of tax benefits relating to petitioner Preston Olsen's purchase of solar lenses. The benefits were only available if the taxpayer had a profit motive for the purchases. Olsen bought the lenses in 2009, 2011, 2012, 2013, and 2014, through a program created by Neldon Johnson. Under the program, Johnson would use the lenses in a new system to generate electricity by heating a liquid to generate steam and drive a turbine. Johnson never finished the system; he had completed the lenses on only one tower and hadn’t decided whether those lenses would heat water, oil, or molten salt. Johnson funded the program through investors like Olsen who bought lenses from Johnson’s companies and leased the lenses to another of Johnson’s companies. Once the system began producing revenue, Johnson's company would pay Olsen’s company $150 per lens per year. But the system never generated any revenue. From 2009 to 2014, Olsen annually claimed depreciation deductions and solar energy credits on the lenses. These claims allowed the Olsens to pay little or no federal income taxes. "So the Olsens came out ahead even though they had never obtained any money from the leases." The tax court disallowed the benefits in part because it found Petitioner lacked a profit motive. Finding no reversible error in the tax court's decision, the Tenth Circuit affirmed. View "Olsen, et al. v. CIR" on Justia Law

Reserve Mechanical Corp. appealed a Tax Court judgment affirming the decision of the Commissioner of Internal Revenue that it did not qualify for an exemption from income tax as a small insurance company and that the purported insurance premiums it received must therefore be taxed at a 30% rate under I.R.C. section 881(a). After review, the Tenth Circuit held that the record supported the Tax Court’s decision that the company was not engaged in the business of insurance. The court had two grounds for deciding that Reserve was not an insurance company: (1) Reserve had not adequately distributed risk among a large number of independent insureds; and (2) the policies issued by Reserve were not insurance in the commonly accepted sense. In addition, Reserve argued that if it was not an insurance company, the premiums it received should have been treated as nontaxable capital contributions. The Tenth Circuit also rejected that argument. View "Reserve Mechanical Corp. v. CIR" on Justia Law

When Seminole Nursing Home, Inc. failed to pay $61,916.19 in federal employment taxes due for 2013, the IRS provided notice to Seminole of its intent to issue a levy to collect these unpaid taxes plus penalties and interest. Seminole challenged the validity of a Tax Code regulation that restricts economic hardship to individual taxpayers who fail to pay delinquent taxes after notice and demand. Seminole contended the economic-hardship exception should be applied to all taxpayers, including corporations. The United States Tax Court rejected the contention on the ground that the regulation was a reasonable interpretation of an ambiguous statute. The Home appealed, but agreeing with the Tax Court, the Tenth Circuit Court of Appeals affirmed. View "Seminole Nursing Home v. Comm'r of Internal Revenue" on Justia Law

The federal government sought to encourage delinquent taxpayers to pay up: by threatening to withhold or revoke their passports until their tax delinquency was resolved. No nexus between international travel and the tax delinquency needed to be shown; the passport revocation served only to incentivize repayment of the tax debt. A challenge to the constitutionality of this approach was a matter of first impression; appellant Jeffrey Maehr was one such taxpayer whose passport was revoked for non-payment of taxes. He argued the revocation violated substantive due process, ran afoul of principles announced in the Privileges and Immunities clauses, and contradicted caselaw concerning the common law principle of ne exeat republica. The district court rejected these challenges. Finding no reversible error, the Tenth Circuit affirmed the district court on each of these arguments. View "Maehr v. U.S. Department of State" on Justia Law

Pro se petitioner-appellant John Minemyer appealed two orders from the United States Tax Court. The first order granted the Commissioner of Internal Revenue’s (“Commissioner’s”) Motion for Partial Summary Judgment and denied Minemyer’s Motion for Summary Judgment. The second order denied Minemyer’s Motion for Reconsideration. Neither order, however, was a final decision by the Tax Court. Further, Minemyer’s appeal of those orders did not ripen after the Tax Court issued an opinion, without a “decision,” addressing the only remaining claim. Accordingly, the Tenth Circuit dismissed Minemyer’s appeal for lack of appellate jurisdiction. View "Minemyer v. CIR" on Justia Law

The Appellants objected to the IRS’s attempts to collect and audit information about their marijuana-related business practices, arguing: (1) the IRS investigation was quasi-criminal, exceeded the Agency’s authority, and was being conducted for an illegitimate purpose; (2) even if the investigation had a legitimate purpose, the information sought was irrelevant; and (3) the investigation was in bad faith and constituted an abuse of process because (a) the IRS may share the information collected with federal law enforcement agents, (b) the IRS summonses are overly broad and require the creation of new reports, (c) the dispensaries had a reasonable expectation of privacy in the data they tender to state regulatory authorities, and (d) those state authorities could not provide the requested information without violating Colorado law. The Appellants further contended the district court applied the wrong standard of review when it denied motions to quash and granted motions to enforce the summonses. Relying on the reasoning outlined in Standing Akimbo, LLC v. United States, 955 F.3d 1146, 1150–69 (10th Cir. 2020), the Tenth Circuit rejected Appellants' arguments and affirmed the district court's rulings in favor of the IRS. View "Speidell v. United States" on Justia Law