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Archive for Supreme Court

Supreme Court Refuses To Review Million Dollar FBAR Penalty

Despite the taxpayer’s persistent challenges, the Supreme Court has refused to review a Ninth Circuit Court of Appeals’ decision affirming a lower court’s decision in favor of the IRS, which assessed a giant $1.2 million penalty for failing to disclose financial interests in an overseas account.

The April 30th decision, which is now final, is noteworthy for two reasons. First, it shows the magnitude of penalty that can be reached, even with respect to an individual and a single foreign account and tax year (in this case, the relevant tax year was 2006). Second, it shows the type of taxpayer arguments that courts will likely reject when reviewing an FBAR penalty case.

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South Dakota V. Wayfair:  What Constitutes Substantial Nexus?

Gary Heald, South Dakota V. Wayfair

Historically, online retailers needed to be physically present in a state in order to be compelled by a state to collect state sales tax.  The physical presence requirement resulted in an inefficient “online sales tax loophole.”  In a 5/4 split the Court determined that the “anachronistic” Quill physical presence standard was impractical and effectively discriminated against in-state sellers.  Requiring physical presence gave out-of-state retailers an advantage – consumers would purchase goods from them at an overall discount, because the retailer could not be compelled to collect the sales tax.  Now, with a more fair economic nexus rule, the Court has leveled the playing field as physical presence is no longer necessary to meet the nexus standard or full-test established in Complete Auto Transit v. Brady.

Now, states can require remote sellers to collect state sales tax, as long as the Complete Auto Transit test is met.  The test requires that:  (1) the tax applies to an activity with a substantial nexus with the taxing state; (2) whether the tax is fairly apportioned; (3) whether the tax discriminates against interstate commerce; or (4) whether the tax is fairly related to services provided by the state.[1]

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Supreme Court Decision Further Confirms FATCA Is Here To Stay

One of the key pieces of legislation used by the U.S. government in its effort to combat tax evasion abroad is the Foreign Account Tax Compliance Act (FATCA). To the surprise of many, FATCA remained completely untouched by Trump’s sweeping tax reform passed late last year.

A recent decision by the Supreme Court further evidences that FATCA likely will not be repealed or amended any time soon. Last month, a legal challenge to FATCA was thwarted when the United States Supreme Court refused to review the Sixth Circuit Court’s decision affirming a lower court ruling which dismissed the case brought against FATCA.

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Texas Supreme Court Denies Three-Factor Apportionment In Graphic Packaging

In its Graphic Packaging Corporation v. Hegar decision rendered December 22, 2017, the Texas Supreme Court fell in line with the rejection of the Multistate Tax Commission (MTC) optional three-factor apportionment provisions, citing the California Supreme Court Gillette decision,2 the Minnesota Supreme Court Kimberly Clark decision,3 and the Oregon Tax Court decision in Health Net. Read more

New Supreme Court Justice Gorsuch And His Tax Stance

Kat Jennings

President Donald Trump selected Judge Neil M. Gorsuch of the Tenth Circuit Court of Appeals to fill the vacancy in the Supreme Court. Judge Gorsuch draws much similarities to Judge Anthony Scalia, whom he is replacing, after his death in 2016. There are a lot of political decisions one might get into, but we are going to look at how some of the decisions Judge Gorsuch made on tax-related issues.

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