Smith v. Commissioner, a pending research credit case in the United States Tax Court, presents an issue of first impression: Is a partner’s self-employment income in a partnership allowable as a qualified research expense...more
The Michigan Department of Treasury released a draft of a notice regarding the new research and development credit. ...more
The United States Tax Court skillfully dodged answering the headline question with a holding on standing. The court decided, however, that IRS appeals officers and IRS appeals team managers are not officers of the United...more
2/20/2025
/ Appointments Clause ,
Article II ,
Constitutional Challenges ,
Government Agencies ,
Internal Revenue Code (IRC) ,
IRS ,
Separation of Powers ,
Standing ,
Tax Appeals ,
Tax Court ,
Tax Liability
Taxpayers whose tax returns the IRS examines may experience long administrative delays in working with the IRS to resolve unagreed issues. About twenty years ago, the IRS developed a procedure – fast track settlement – to...more
Taxpayers had mixed success in two recent research credit cases in the United States Tax Court.
In Smith v. Commissioner, the taxpayer was an architectural firm....more
A potential refund opportunity under the Michigan corporate income tax may justify taking action before year end. The issue concerns the Michigan Department of Treasury’s position that the Internal Revenue Code (“IRC”) 163(j)...more
HB 5100 and HB 5101, as passed by the Michigan House of Representatives and Senate, and to be signed by Governor Gretchen Whitmer, provide a new income tax credit. For tax years beginning on and after January 1, 2025,...more
In Grigsby v. United States, the Justice Department used discovery procedures in federal district court essentially to audit a taxpayer’s federal income tax credits for research activities. The court found that the taxpayer...more
Conflicting Decisions: In August, the U.S. Court of Appeals for the Eleventh Circuit held in United States v. Schwarzbaum that a monetary civil penalty imposed for willfully failing to file a foreign bank account report...more
10/2/2024
/ Civil Monetary Penalty ,
Double Jeopardy ,
Eighth Amendment ,
Excessive Fines Clause ,
FBAR ,
Fines ,
Foreign Bank Accounts ,
IRS ,
Offshore Funds ,
Petition for Writ of Certiorari ,
Reporting Requirements
In Libitzky v. United States, the United States Court of Appeals for the Ninth Circuit affirmed disallowance of a $700,000 federal income tax refund claim. The court said that this was an “unfortunate” case, but they were...more
The rules relating to delegated authority are complex. A taxpayer is well advised to ensure that the scope of a closing agreement the taxpayer signs is what the taxpayer expects, and that an IRS official who signs the...more
At issue in Continuing Life Thousand Oaks, LLC. v. Commissioner, affirmed May 21, 2024, was the year of inclusion in gross income of an income item. The disputed years were 2008, 2009, and 2010 -- taxable years that preceded...more
Issue: In Meyer, Borgman, and Johnson, Inc. v. Commissioner, the issue was whether the taxpayer’s (“MBJ” or “MBJ’s”) customers funded MBJ’s research activities. The court found that its customers did so, with the consequence...more
Over an objection by the IRS, the Tax Court recently ruled in Kapur v. Commissioner that it could limit discovery and permit statistical sampling of voluminous data related to a claimed research credit. The court refused,...more
Congress perhaps made an unintended drafting error in the Tax Cuts and Jobs Act (TCJA) when it required a taxpayer to decrease its deduction for research and experimental expenditures....more
Altria Group, Inc. v. United States, a federal income tax case pending in federal district court in Virginia, shows the importance of laying groundwork for litigation long before a complaint is filed. At issue is a difficult...more
In Private Letter Ruling 202352011 (December 30, 2023), the taxpayer asked the IRS to determine the amount that it will realize in a property transaction. The taxpayer will receive the property in an arm’s length exchange...more
As previously reported by Miller Canfield, in October 2023 the IRS launched a withdrawal program for Employee Retention Credit (ERC) claims for employers who now doubt the validity of their claim. Unfortunately, employers who...more
As described in our October 24 article “IRS Offers Forgiveness for Erroneous Employee Retention Credit Claims” the IRS has increased scrutiny on claims for the Employee Retention Credit (“ERC”). The IRS halted processing...more
The IRS recently issued guidance explaining that OSHA communications regarding COVID-19 precautions alone do not allow employers to qualify for the Employee Retention Credit (“ERC”).
Other than some start-up businesses,...more
The stream of cases challenging disallowance of research tax credits continues in the Tax Court with Phoenix Design Group, Inc. v. Commissioner. The taxpayer in Phoenix Design designs mechanical, electrical, and plumbing...more
In Lee v. United States, the Federal Court of Appeals for the Eleventh Circuit held that a taxpayer could not avoid late filing and late payment penalties because of the failure of his CPA to electronically file his returns...more
The Employee Retention Credit (“ERC”) is a popular COVID-19 tax break that was targeted by some unscrupulous and aggressive tax promoters. These promoters flooded the IRS with ERC claims for many taxpayers who did not qualify...more
The recent Tax Court opinion in Hyatt Hotels Corporation v. Commissioner of Internal Revenue informs a federal income taxpayer about its tax responsibility for funds for a guest reward program: when the taxpayer will be...more
If a taxpayer calculates research tax credits using an appropriate statistical sampling method on its tax return, does the taxpayer then make a prima facie case in the Tax Court by introducing evidence of that statistical...more