Justia Civil Rights Opinion Summaries

Articles Posted in Tax Law
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The 2012 Cook County Firearm Tax Ordinance imposed a $25 tax on the retail purchase of a firearm within Cook County. A 2015 amendment to the County Code included a tax on the retail purchase of firearm ammunition at the rate of $0.05 per cartridge for centerfire ammunition and $0.01 per cartridge for rimfire ammunition. The taxes levied on the retail purchaser are imposed in addition to all other taxes imposed by the County, Illinois, or any municipal corporation or political subdivision. The revenue generated from the tax on ammunition is directed to the Public Safety Fund; the revenue generated from the tax on firearms is not directed to any specified fund or program.Plaintiffs alleged that the taxes facially violate the Second Amendment to the U.S. Constitution and the Illinois Constitution concerning the right to bear arms and the uniformity clause, and are preempted by the Firearm Owners Identification Card Act and the Firearm Concealed Carry Act. The trial court rejected the suit on summary judgment. The appellate court affirmed.The Illinois Supreme Court reversed. To satisfy scrutiny under a uniformity challenge, where a tax classification directly bears on a fundamental right, the government must establish that the tax classification is substantially related to the object of the legislation. Under that level of scrutiny, the firearm and ammunition tax ordinances violate the uniformity clause. View "Guns Save Life, Inc. v. Ali" on Justia Law

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The Supreme Court held that a tax imposed solely upon a small number of billboard operators is a discriminatory tax that violates the rights to freedom of speech and a free press protected by the First Amendment to the United States Constitution.The City of Cincinnati imposed a tax on outdoor advertising signs, but through definitions and exemptions within the city's municipal code, the tax burdens feel predominantly on two billboard operators only. The two billboard operators (Appellants) sought a declaration that the tax violated their constitutional rights to free speech and a free press and requesting an injunction against the tax's enforcement. The trial court permanently enjoined the City from enforcing the tax. The court of appeals reversed in part. The Supreme Court reversed and reinstated the injunction, holding that the billboard tax did not survive strict scrutiny and therefore impermissibly infringed on Appellants' rights to free speech and a free press. View "Lamar Advantage GP Co. v. City of Cincinnati" on Justia Law

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The Supreme Court affirmed the decision of the Board of Tax Appeals (BTA) affirming the City of Cleveland's taxation of Hazel Willacy's stock-option income that she realized in 2016, holding that Willacy's propositions of law lacked merit.Willacy earned the disputed stock options in 2007 from her former employer while she was working in Cleveland. In 2009, Willacy retired and moved to Florida without having exercised any of the options. In 2014 and 2015, Willacy exercised the majority of the options and immediately resold the shares. In 2016, Willacy exercised the remaining options. Her former employer withheld her municipal-income-tax obligation and paid it to Cleveland. Willacy sought a refund on the grounds that she did not live or work in Cleveland. The refund was denied, and the BTA affirmed the denial. The Supreme Court affirmed, holding that Cleveland's taxation of Willacy's 2016 compensation was required under municipal law and did not violate her due process rights under either the United States or Ohio constitutions. View "Willacy v. Cleveland Board of Income Tax Review" on Justia Law

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In 2011, Folajtar pled guilty to a federal felony: willfully making a materially false statement on her tax returns, which is punishable by up to three years’ imprisonment and a fine of up to $100,000, 26 U.S.C. 7206(1). She was sentenced to three years’ probation, including three months of home confinement, a $10,000 fine, and a $100 assessment. She also paid the IRS over $250,000 in back taxes, penalties, and interest. Folajtar was then subject to 18 U.S.C. 922(g)(1), which prohibits those convicted of a crime punishable by more than one year in prison from possessing firearms.Folajtar sued, asserting that applying section 922(g)(1) to her violated her Second Amendment right to possess firearms. The district court dismissed, finding that Folajtar did not state a plausible Second Amendment claim because she was convicted of a serious crime. The Third Circuit affirmed, noting the general rule that laws restricting firearm possession by convicted felons are valid. There is no reason to deviate from this long-standing prohibition in the context of tax fraud. View "Folajtar v. Attorney General of the United States" on Justia Law

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Freed owed $735.43 in taxes ($1,109.06 with penalties) on his property valued at about $97,000. Freed claims he did not know about the debt because he cannot read well. Gratiot County’s treasurer filed an in-rem action under Michigan's General Property Tax Act (GPTA), In a court-ordered foreclosure, the treasurer sold the property to a third party for $42,000. Freed lost his home and all its equity. Freed sued, 42 U.S.C. 1983, citing the Takings Clause and the Eighth Amendment.The district court first held that Michigan’s inverse condemnation process did not provide “reasonable, certain, and adequate” remedies and declined to dismiss the suit under the Tax Injunction Act, which tells district courts not to “enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had" in state court, 28 U.S.C. 1341. The court reasoned that the TIA did not apply to claims seeking to enjoin defendants from keeping the surplus equity and that Freed was not challenging his tax liability nor trying to stop the state from collecting. The TIA applied to claims seeking to enjoin enforcement of the GPTA and declare it unconstitutional but no adequate state court remedy existed. The court used the same reasoning to reject arguments that comity principles compelled dismissal. After discovery, the district court sua sponte dismissed Freed’s case for lack of subject matter jurisdiction, despite recognizing that it was “doubtful” Freed could win in state court. The Supreme Court subsequently overturned the "exhaustion of state remedies" requirement for takings claims.The Sixth Circuit reversed without addressing the merits of Freed’s claims. Neither the TIA nor comity principles forestall Freed’s suit from proceeding in federal court. View "Freed v. Thomas" on Justia Law

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CSX argued that SCVA impermissibly discriminates against railroads in violation of the Railroad Revitalization and Regulatory Reform Act of 1976. The Fourth Circuit reversed the district court's determination that South Carolina had provided sufficient justification for the discriminatory tax. The court held that CSX has made a prima facie showing of discriminatory tax treatment based on the appropriate comparison class of other commercial and industrial real property taxpayers in South Carolina. Furthermore, the state's three justifications -- the equalization factor applied to railroad assessments, the combined effect of other tax exemptions applied to rail carriers, and assessable transfers of interest which trigger new appraisals -- were insufficient to justify the discriminatory tax scheme. View "CSX Transportation, Inc. v. South Carolina Department of Revenue" on Justia Law

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The Supreme Court affirmed the decision of the tax court reducing Hennepin County's valuation of a Lowe's store in Plymouth, Minnesota for the 2015 tax year, holding that the tax court did not inflate the property's fair market value and did not violate Lowe's due process rights.Lowe's petitioned the tax court asserting that Hennepin County's assessment for the 2015 tax year overstated the fair market value of the property. The tax court agreed and reduced the County's valuation. The Supreme Court affirmed, holding (1) the tax court did not violate Lowe's due process rights by failing to rely on evidence in the record in reaching its conclusions; and (2) because the record supported the tax court's decision to place greater weight on the cost approach rather than on the sales approach and its adjustments under both approaches, the tax court did not violate Lowe's due process rights. View "Lowe's Home Centers, LLC (Plymouth) v. County of Hennepin" on Justia Law

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Before 2008, Cook County ordinances required the Assessor to assess single-family residential property at 16%, commercial property at 38%, and industrial property at 36% of the market value. In 2000-2008, the Assessor actually assessed most property at rates significantly lower than the ordinance rates. In 2008, the Assessor proposed to “recalibrate” the system. The plaintiffs claim that their assessment rates may have been lawful but were significantly higher than the actual rates for most other property owners and that they paid millions of dollars more in taxes in 2000-2008 than they would have if they were assessed at the de facto rates. The taxpayers exhausted their remedies with the Board of Review, then filed suit in state court, citing the Equal Protection Clause, Illinois statutory law and the Illinois Constitution. Years later, their state suit remains in discovery.Claiming that Illinois law limits whom they can name as a defendant, what evidence they can present, and what arguments they can raise, the taxpayers filed suit in federal district court, which held that the Tax Injunction Act barred the suit. The Act provides that district courts may not “enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State,” 28 U.S.C. 1341. The Seventh Circuit reversed, noting the County’s concession that Illinois’s tax-objection procedures do not allow the taxpayers to raise their constitutional claims in state court. This is the “rare case in which taxpayers lack an adequate state-court remedy.” View "A.F. Moore & Associates, Inc. v. Pappas" on Justia Law

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Freedom From Religion Foundation (FFRF), a nonprofit organization, “[t]akes legal action challenging entanglement of religion and government, government endorsement or promotion of religion.” FFRF paid its co-presidents a portion of their salaries in the form of a housing allowance, seeking to challenge 26 U.S.C. 107, which provides: In the case of a minister of the gospel, gross income does not include— (1) the rental value of a home furnished to him as part of his compensation; or (2) the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home. Having unsuccessfully sought refunds from the IRS based on section 107 they sued. The district court granted FFRF and its employees summary judgment, finding that the statute violates the Establishment Clause of the First Amendment. The Seventh Circuit reversed, applying the “Lemon” test. The law has secular purposes: it is one of many per se rules that provide a tax exemption to employees with work-related housing requirements; it is intended to avoid discrimination against certain religions in favor of others and to avoid excessive entanglement with religion by preventing the IRS from conducting intrusive inquiries into how religious organizations use their facilities. Providing a tax exemption does not “connote[] sponsorship, financial support, and active involvement of the [government] in religious activity.” FFRF offered no evidence that provisions like section 107(2) were historically viewed as an establishment of religion. View "Gaylor v. Peecher" on Justia Law

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The Fifth Circuit vacated the district court's final judgment in an action alleging that an IRS test for determining certain liabilities was facially unconstitutional. The court held that Freedom Path did not have standing to bring this facial challenge and therefore the court dismissed the action based on lack of jurisdiction. In this case, plaintiff's claimed chilled speech injury was not fairly traceable to the text of Revenue Ruling 2004-6. View "Freedom Path, Inc. v. IRS" on Justia Law