Justia Government & Administrative Law Opinion Summaries

A corporation owned by a federally recognized Indian tribe, along with several tribal officials, was alleged by the State of California to have violated state cigarette tax laws and regulations. The corporation manufactured and distributed cigarettes in California, including to non-tribal consumers, without collecting or remitting required state excise taxes or payments under the Master Settlement Agreement. California claimed that the corporation and its officials distributed contraband cigarettes not listed on the state’s approved directory and failed to comply with shipping, recordkeeping, and tax collection requirements under the federal Prevent All Cigarette Trafficking Act (PACT Act). Despite warnings and being placed on a federal non-compliance list, the corporation continued its operations.The United States District Court for the Eastern District of California considered the defendants’ motion to dismiss. The court found that the corporation, as an arm of the tribe, was shielded by tribal sovereign immunity and dismissed claims against it. However, the court allowed claims for injunctive relief against the individual tribal officials in their official capacities to proceed, holding that the Ex parte Young doctrine permitted such relief under the PACT Act. The court also denied the officials’ claims of qualified immunity for personal capacity claims, reasoning that qualified immunity did not apply to enforcement actions brought by a state under a federal statute.On interlocutory appeal, the United States Court of Appeals for the Ninth Circuit affirmed the district court’s rulings. The Ninth Circuit held that the PACT Act does not preclude Ex parte Young actions for prospective injunctive relief against tribal officials, as the Act does not limit who may be sued or the types of relief available, nor does it contain a sufficiently detailed remedial scheme to displace Ex parte Young. The court also held that qualified immunity does not shield tribal officials from California’s claims for civil penalties and money damages under the PACT Act. View "STATE OF CALIFORNIA V. DEL ROSA" on Justia Law

The dispute centers on groundwater management in the Tulare Lake groundwater subbasin, a high-priority basin under California’s Sustainable Groundwater Management Act (the Act). Local groundwater agencies developed and submitted a sustainability plan for the subbasin, but the Department of Water Resources twice found the plan inadequate. Following these determinations, the State Water Resources Control Board designated the Tulare subbasin as probationary, triggering state intervention and new monitoring, reporting, and fee requirements. In response, Kings County Farm Bureau and other parties filed a writ of mandate and complaint, challenging the State Board’s authority and actions, including the probationary designation and associated fees.The Superior Court of Kings County reviewed the Farm Bureau’s claims. It granted a preliminary injunction halting the State Board’s implementation of the probationary designation and denied in part the State Board’s demurrer to the complaint. Specifically, the trial court dismissed the equal protection claim with leave to amend but allowed the Farm Bureau to proceed on claims alleging improper underground regulations, unconstitutional fees, and general declaratory relief. The State Board then sought appellate review of the trial court’s order overruling its demurrer.The California Court of Appeal, Fifth Appellate District, reviewed the trial court’s decision de novo. It held that the Act exempts the State Board’s actions under the relevant statutory sections from the Administrative Procedures Act, precluding claims based on alleged underground regulations. The court further found that challenges to the extraction fees as unlawful taxes are barred by the “pay first” rule, requiring payment before judicial review. Finally, the court determined that declaratory relief is unavailable where the Legislature has provided a writ of mandate as the exclusive remedy. The appellate court issued a writ of mandate directing the trial court to vacate its order overruling the demurrer and to grant the demurrer without leave to amend as to the sixth, seventh, and ninth causes of action. View "State Water Resources Control Bd. v. Super. Ct." on Justia Law

The case concerns a challenge to the validity of Measure C, a citizens’ initiative placed on the ballot by the City of San Diego for the March 2020 election. Measure C proposed an increase in the city’s transient occupancy tax, with revenues earmarked for homelessness programs, street repairs, and convention center improvements. The measure also authorized the City to issue bonds repaid from the new tax revenues. Measure C received 65.24 percent of the vote, and the city council subsequently passed resolutions declaring the measure approved and authorizing the issuance of related bonds.After the election, Alliance San Diego and other plaintiffs filed actions challenging the City’s resolution declaring Measure C had passed, arguing it was invalid. The City responded with a validation complaint seeking judicial confirmation of the validity of Measure C and the related bond resolutions. California Taxpayers Action Network (CTAN) and other opponents answered, contending that Measure C required a two-thirds vote and was not a bona fide citizens’ initiative. The Superior Court of San Diego County initially granted a motion for judgment on the pleadings, finding that a two-thirds vote was required, and entered judgment against the City. On appeal, the California Court of Appeal, Fourth Appellate District, Division One, reversed and remanded for further proceedings to determine whether Measure C was a bona fide citizens’ initiative.On remand, the trial court conducted a bench trial and rejected CTAN’s arguments, finding that it had subject matter jurisdiction, the case was ripe, the special fund doctrine exempted the bonds from the two-thirds vote requirement, and Measure C was a bona fide citizens’ initiative requiring only a simple majority vote. The California Court of Appeal affirmed the trial court’s judgment, holding that Measure C and the related bond resolutions were valid, and that the trial court properly excluded certain hearsay evidence. View "Alliance San Diego v. California Taxpayers Action Network" on Justia Law

Two police officers employed by a city were injured in separate incidents while on duty. After their injuries, both received payments from the city under section 1(b) of the Illinois Public Employee Disability Act, which provides that eligible employees unable to work due to a duty-related injury must continue to be paid “on the same basis” as before the injury, without deductions from sick leave, compensatory time, or vacation. The city continued to pay their salaries as before, including withholding federal and state income taxes, Social Security, and Medicare taxes. The officers filed suit, alleging that the city violated the Disability Act by withholding employment taxes and, for one officer, by deducting accrued leave time.The Circuit Court of Tazewell County granted summary judgment for the officers, finding that section 1(b) prohibited the withholding of employment taxes and required payment of “gross pay.” The court also found the city had improperly deducted leave time and held that the ten-year statute of limitations for breach of contract applied, awarding damages and fees to the plaintiffs. On appeal, the Illinois Appellate Court, Fourth District, reversed, holding that section 1(b) does not prohibit withholding employment taxes, and that the five-year statute of limitations applied. The appellate court also found a genuine issue of fact regarding whether leave time was improperly deducted and remanded for further proceedings.The Supreme Court of Illinois reviewed the case and affirmed the appellate court’s judgment. The court held that section 1(b) of the Disability Act does not prohibit a public employer from withholding employment taxes from payments made to an injured employee under that provision. The court reasoned that the statute’s language requires payment “on the same basis” as before the injury, which includes continued tax withholding, and expressly prohibits only certain deductions, not taxes. The case was remanded for further proceedings on the leave time deduction claim. View "Bitner v. City of Pekin" on Justia Law

An electric utility company operating both within and outside Oregon was subject to central assessment for property tax purposes. For the 2020-21 tax year, the company and the Oregon Department of Revenue disagreed on the company’s overall value and the portion attributable to Oregon. The dispute centered on the methods used to determine real market value, specifically whether certain deductions and valuation models used by the company’s appraiser were consistent with the Department’s adopted standards. The Department relied on an administrative rule that incorporated the Western States Association of Tax Administrators (WSATA) Handbook, which prescribes valuation methods for centrally assessed properties.The Oregon Tax Court heard the case and considered expert testimony from both parties. The Department argued that the WSATA Handbook, as adopted by administrative rule, was binding and should control the valuation methods used. The company contended that the Tax Court, conducting a de novo review, was not bound by the Handbook. The Tax Court agreed with the company, holding that it was not required to defer to the Department’s rule and could determine real market value using other methods if it found them more accurate. The court ultimately adopted some of the company’s valuation approaches and set a value lower than the Department’s assessment.The Supreme Court of the State of Oregon reviewed the case on appeal. It held that, absent a finding that the Department’s rule is invalid on its face or as applied, the rule has the force of law and must be given legal effect by the Tax Court. The Supreme Court found that the Tax Court erred by not treating the Department’s rule as binding unless its application would conflict with constitutional or statutory definitions of real market value. The Supreme Court reversed the Tax Court’s judgment and remanded the case for further proceedings under the correct legal standard. View "PacifiCorp v. Dept. of Rev." on Justia Law

Starbuzz International, Inc. and Starbuzz Tobacco, Inc. distributed shisha, a product containing less than 50 percent tobacco, in California between October 2012 and September 2015. During this period, they paid over $2.8 million in excise taxes under the state’s Tobacco Products Tax Law, which imposed taxes on “tobacco products” as defined by statute. Starbuzz later filed refund claims, arguing their shisha did not meet the statutory definition and was not taxable. The Office of Tax Appeals (OTA) agreed, finding the definition ambiguous and resolving it in Starbuzz’s favor, granting full refunds. After a rehearing, a second OTA panel reaffirmed this decision.Following these administrative victories, Starbuzz requested payment of the refunds from the California Department of Tax and Fee Administration. The Department, however, declined to issue the refunds immediately, citing a statutory requirement to review whether Starbuzz had collected the excise tax from its customers and, if so, whether those amounts had been returned to them. Starbuzz filed a petition for writ of mandate in the Superior Court of Sacramento County, arguing the Department had a ministerial duty to pay the refunds and was barred by res judicata from conducting further review. The trial court rejected Starbuzz’s arguments and denied the petition, entering judgment for the Department.The California Court of Appeal, Third Appellate District, reviewed the case and affirmed the trial court’s judgment. The court held that the Department’s obligation to review for excess tax reimbursement under section 30361.5 was distinct from the refund claim adjudicated by the OTA. The court found that res judicata did not apply because the primary right at issue in the OTA proceedings (freedom from improper taxation) was different from the right asserted in the current action (immediate refund without review for excess reimbursement). Thus, the Department could require a review before issuing refunds. View "Starbuzz International v. Department of Tax and Fee Administration" on Justia Law

A Virginia-based company provided tax debt relief services to clients in Idaho, assisting them in negotiating settlements or payment plans for tax debts owed to the IRS and the State of Idaho. The company did not offer services for other types of debt and employed IRS-enrolled agents to represent clients in administrative tax proceedings. Despite conducting substantial business in Idaho, the company did not register as a corporation in the state or obtain a license under the Idaho Collection Agency Act (ICAA). After receiving multiple complaints from Idaho residents about the company’s practices, the Idaho Department of Finance investigated and determined that the company was operating as a “debt counselor” under the ICAA and required a license.The Department initiated an administrative enforcement action, resulting in a hearing officer’s order imposing civil penalties and restitution. The company appealed to the Director of the Department of Finance, who largely upheld the hearing officer’s findings but reduced the restitution amount. The company then sought judicial review in the District Court of the Fourth Judicial District, which affirmed the Director’s final order. The company appealed to the Idaho Supreme Court.The Supreme Court of the State of Idaho held that the company’s activities—negotiating and managing tax debts—fell within the ICAA’s definition of a “debt counselor,” and that unpaid taxes constitute “debt” or “indebtedness” under the Act’s plain language. The Court also found that the ICAA was not preempted by federal law, that the Director did not abuse her discretion in evidentiary or sanction decisions, and that the civil penalties and restitution were supported by substantial evidence. The Court affirmed the district court’s decision and awarded costs, but not attorney fees, to the Department on appeal. View "Wall & Associates, Inc. v. Idaho Department of Finance" on Justia Law

Several individuals who allegedly owed debts to Kentucky public institutions—either for medical services at the University of Kentucky or for educational services at the University of Kentucky, Morehead State University, or the Kentucky Community & Technical College System—challenged the referral of their debts to the Kentucky Department of Revenue for collection. The plaintiffs argued that the statutes used to justify these referrals did not apply to their debts and that the Department unlawfully collected the debts, sometimes without prior court judgments or adequate notice. The Department used its tax collection powers, including garnishments and liens, to recover these debts, and in some cases, added interest and collection fees.In the Franklin Circuit Court, the plaintiffs sought declaratory and monetary relief, including refunds of funds collected. The Circuit Court ruled that the Department was not authorized by statute to collect these debts and held that sovereign immunity did not protect the defendants from the plaintiffs’ claims. The court also certified the medical debt case as a class action. The Court of Appeals reviewed these interlocutory appeals and held that while sovereign immunity did not bar claims for purely declaratory relief, it did bar all claims for monetary relief, including those disguised as declaratory relief.The Supreme Court of Kentucky reviewed the consolidated appeals. It held that sovereign immunity does not bar claims for purely declaratory relief or for a refund of funds that were never due to the state, nor does it bar constitutional takings claims. However, the court held that sovereign immunity does bar claims for a refund of funds that were actually due to the state, even if those funds were unlawfully or improperly collected. The court affirmed in part, reversed in part, and remanded for further proceedings to determine which funds, if any, were never due to the state and thus subject to refund. The court also found that statutory changes rendered prospective declaratory relief in the medical debt case moot, but not retrospective relief. View "LONG V. COMMONWEALTH OF KENTUCKY" on Justia Law

After Congress enacted the Tax Cuts and Jobs Act in 2017, which capped the federal deduction for state and local taxes (SALT) at $10,000, New Jersey, New York, Connecticut, and the Village of Scarsdale created or planned programs allowing residents to make contributions to state-administered charitable funds in exchange for significant state or local tax credits. These programs were designed to help residents recover some of the lost federal tax benefit by allowing them to claim a federal charitable deduction for the full amount contributed, despite receiving a state or local tax credit in return. In response, the Internal Revenue Service (IRS) and Treasury Department issued a regulation (the “Final Rule”) requiring taxpayers to reduce their federal charitable deduction by the amount of any state or local tax credit received for the contribution.The States and Scarsdale sued the IRS and Treasury in the United States District Court for the Southern District of New York, arguing that the Final Rule exceeded the IRS’s statutory authority under 26 U.S.C. § 170 and was arbitrary and capricious under the Administrative Procedure Act. The district court granted summary judgment for the government, finding the IRS’s interpretation reasonable under Chevron deference and holding the rule was not arbitrary or capricious.On appeal, the United States Court of Appeals for the Second Circuit determined that New York and Scarsdale had Article III standing, and that the Anti-Injunction Act did not bar the suit because there was no alternative procedure for the plaintiffs to challenge the rule. Applying the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, which overruled Chevron, the Second Circuit independently interpreted § 170 and concluded that the IRS’s rule was consistent with the statute’s quid pro quo principle. The court also found the rule was not arbitrary or capricious. The Second Circuit affirmed the district court’s judgment. View "New Jersey v. Bessent" on Justia Law

Mayo Clinic, a Minnesota nonprofit corporation and tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code, sought a refund of unrelated business income tax (UBIT) imposed by the IRS for tax years 2003, 2005-2007, and 2010-2012. The IRS assessed Mayo $11,501,621 in unpaid UBIT, concluding that Mayo was not a qualified educational organization under IRC § 170(b)(1)(A)(ii) because its primary function was not the presentation of formal instruction, and its noneducational activities were not merely incidental to its educational activities. Mayo paid the assessed amount and filed a refund action.The United States District Court for the District of Minnesota granted Mayo summary judgment, holding that Mayo is an educational organization as defined in § 170(b)(1)(A)(ii) and invalidating Treasury Regulation § 1.170A-9(c)(1) for adding requirements not present in the statute. The United States appealed, and the Eighth Circuit reversed the invalidation of the regulation and remanded for further proceedings. On remand, the district court concluded that Mayo had a substantial educational purpose and no substantial noneducational purpose, granting Mayo judgment for the full refund amount plus interest.The United States Court of Appeals for the Eighth Circuit affirmed the district court's decision. The court held that "primary" in this context means "substantial" and that Mayo's substantial patient care activities are not noneducational due to the integration of education and clinical practice. The court concluded that Mayo qualifies as an educational organization under § 170(b)(1)(A)(ii) and that its patient care function does not disqualify it from this status. The judgment of the district court was affirmed. View "Mayo Clinic v. United States" on Justia Law