Articles Posted in Tax Law

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Petitioner Marin Metropolitan District (the “District”) was a special district created as a vehicle to finance the infrastructure of a proposed residential community. In late 2007, the organizers of the District held an election and approved the creation of the District. At the same time, pursuant to Colorado’s Taxpayer Bill of Rights (“TABOR”), the organizers voted to approve the issuance of bonds and to impose property taxes to pay the bonds on landowners within the District. A group of condominium owners subsequently learned that their properties had been included in the District under what they believed to be suspicious circumstances and that they had been assessed property taxes to pay the bonds. Acting through their homeowners’ association, respondent Landmark Towers Association, Inc., (“Landmark”) the owners brought two lawsuits: one to invalidate the creation of the District and the other (this case) to invalidate the approval of the bonds and taxes and to recover taxes that they had paid to the District, among other things. The district court ultimately ordered a partial refund of the taxes paid by the condominium owners and enjoined the District from assessing future taxes on the owners in order to pay its obligations under the bonds. Both sides appealed, and the court of appeals concluded, in pertinent part, that Landmark’s challenge to the bond and tax election was timely and that the election violated TABOR and applicable statutes. At issue before the Colorado Supreme Court was whether Landmark’s challenge to the bond and tax election was timely and the election was validly conducted. The Supreme Court reversed, finding Section 1-11-213(4), C.R.S. (2017), required a party seeking to contest an election like that present here to file a written statement of intent to contest the election within ten days after the official survey of returns has been filed with the designated election official. Without that statement, no could had jurisdiction over the contest. Landmark’s challenge to the bond and tax election at issue was time barred, and thus, the Court reversed the judgment below and remanded for further proceedings. View "UMB Bank, N.A. v. Landmark Towers Association, Inc." on Justia Law

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In 2011, OXY USA Inc. (“Oxy”), made a mistake that caused it to overpay its property taxes on oil and gas produced from leaseholds. Oxy failed to deduct certain costs it was entitled to deduct. By the time it realized the mistake, the protest period had expired. The company nonetheless contended it was entitled to abatement and refund of the overpayment pursuant to section 39-10-114(1)(a)(I)(A), C.R.S. (2017). The county board of commissioners maintained that the abatement-and-refund provision did not apply because Oxy was the sole source of the error. Relying on Colorado Supreme Court precedent, the court of appeals held that Oxy couldn't receive abatement and refund for overpayment due to its own mistake. The Supreme Court held section 39-10-114(1)(a)(I)(A) gave taxpayers the right to seek abatement and refund for erroneously or illegally levied taxes resulting from overvaluation caused solely by taxpayer mistake. Therefore, Oxy was entitled to abatement and refund for its overpayment of taxes in the tax year at issue in this appeal. View "OXY USA Inc. v. Mesa County Board of Commissioners" on Justia Law

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Petitioner Ann Hardegger filed a complaint in the district court seeking contribution from respondents Daniel and Cheryl Clark, for their proportionate share of a payment she made to the Internal Revenue Service (“IRS”) in full satisfaction of the parties’ joint and several tax liabilities. In October 2010, the Clarks filed a joint voluntary Chapter 7 bankruptcy petition and gave notice to their creditors, including the Hardeggers. The Hardeggers did not file a proof of claim in the bankruptcy proceeding, and the bankruptcy court granted the Clarks a discharge. In Hardegger’s case, the district court found the Clarks responsible for one-half of the IRS indebtedness and entered summary judgment in Hardegger’s favor. A division of the court of appeals reversed, however, concluding that Hardegger’s contribution claim constituted a pre-petition debt that had been discharged in the Clarks’ bankruptcy case. Applying the “conduct test,” under which a claim arises for bankruptcy purposes at the time the debtor committed the conduct on which the claim is based, the Colorado Supreme Court concluded that Hardegger’s claim for contribution arose when the parties’ jointly owned company incurred federal tax withholding liability between 2007 and 2009, rendering Hardegger and Clark potentially responsible for that debt. Because this conduct occurred before the Clarks filed their bankruptcy petition in 2010, Hardegger’s claim constituted a pre-petition debt that was subject to discharge. View "Hardegger v. Clark" on Justia Law

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The Colorado Supreme Court granted certiorari review to determine whether “Blunt Wraps,” a type of cigar wrapper made in part of tobacco and designed to be filled with smoking material and smoked, could be taxed as “tobacco products,” as that term was defined in section 39-28.5-101(5), C.R.S. (2016). The Court concluded Blunt Wraps fell within the plan language of the definition of “tobacco products” in the statue at issue, and are taxable accordingly. View "Colo. Dep't of Revenue v. Creager" on Justia Law

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The Colorado Supreme Court concluded that the statutory scheme property taxation of oil and gas leaseholds authorized the retroactive tax assessment in this case. Petitioner Kinder Morgan CO2 Company, L.P., operated oil and gas leaseholds in Montezuma County, Colorado. In 2009, the assessor for Montezuma County issued a corrective tax assessment on these leaseholds for the previous tax year, retroactively assessing over $2 million in property taxes, after an auditor concluded that Kinder Morgan underreported the value of gas produced at the leaseholds. Kinder Morgan appealed, arguing the assessor lacked authority to retroactively assess these taxes because Colorado law did not authorize a retroactive assessment when an operator has correctly reported the volume of oil and gas sold but has underreported the selling price at the wellhead. In affirming the court of appeals in this matter, the Supreme Court further concluded that the Board of Assessment Appeals did not err in determining that Kinder Morgan underreported the selling price by claiming excess transportation deductions, given Kinder Morgan’s relationship to the owner of the pipeline through which the gas was transported. View "Kinder Morgan CO2 Co., L.P. v. Montezuma Cty. Bd. of Comm'rs" on Justia Law

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Creager Mercantile Co., Inc., a wholesale distributor of groceries and tobacco products, sells Blunt Wraps, a type of cigar wrapper made of thirty to forty-eight percent tobacco. Blunt Wraps are designed to be filled with additional tobacco or marijuana and then smoked. The Colorado Supreme Court was called on the determine whether Blunt Wraps could be taxed as “tobacco products,” as that term was defined in section 39-28.5-101(5), C.R.S. (2016). Because Blunt Wraps are a “kind” or “form” of tobacco, and are “prepared in such manner as to be suitable . . . for smoking,” the Court held Blunt Wraps fell within the plain language of the definition of “tobacco products” under section 39-28.5-101(5) and were taxable accordingly. View "Colo. Dept. of Revenue v. Creager" on Justia Law

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In July 2010, the City and County of Denver issued nine Notices of Final Determination, Assessment and Demand for Payment against various online travel companies: Expedia, Inc.; Hotels.com LP; Hotwire, Inc.; Orbitz, LLC; Trip Network, Inc.; Priceline.com Incorporated; Travelweb, LLC; Site59.com, LLC; and Travelocity.com LP. The Notices claimed unpaid taxes, penalties, and interest due according to the city lodger’s tax article, for the period from January 2001 through April 2010, totaling over $40 million. These online companies filed nearly identical protests, requesting hearings before a Denver Department of Finance hearing officer, and the protests were consolidated by stipulation. Denver petitioned for review of the court of appeals opinion reversing the judgment of the district court and remanding with directions to vacate the subject tax assessments against respondent online travel companies (“OTCs”). The district court had largely upheld the hearing officer’s denial of protests. Unlike the hearing officer and district court, the court of appeals concluded that the city lodger’s tax article was at least ambiguous with regard to both the purchase price paid or charged for lodging, upon which the tax is to be levied, and the status of the OTCs as vendors, upon which the ordinance imposes the responsibility to collect the tax and remit it to the city; and the intermediate appellate court considered itself obligated to resolve all ambiguities in the lodger’s tax article, being a tax statute, in favor of the OTCs. The Colorado Supreme Court found the “fair and reasonable interpretation” of Denver’s lodger’s tax article was that it imposed a duty on the OTCs to collect and remit the prescribed tax on the purchase price of any lodging they sell, to include not only the amount they have contracted with the hotel to charge and return but also the amount of their markup. The judgment of the court of appeals was therefore reversed, and the matter was remanded for consideration of the remaining issues raised on appeal by the parties. View "City & Cty. of Denver v. Expedia, Inc." on Justia Law

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The issue this case presented for the Supreme Court's review centered on whether 39-29-105(1)(a) permitted a deduction for the “cost of capital” associated with natural gas transportation and processing facilities. In general terms, the cost of capital was defined as the amount of money that an investor could have earned on a different investment of similar risk. In this case, the cost of capital was the amount of money that BP America Production Company’s (“BP”) predecessors could have earned had they invested in other ventures rather than in building transportation and processing facilities. BP claimed it could deduct the cost of capital because it was a cost associated with transportation and processing activity. Respondent Colorado Department of Revenue argued that the cost of capital was not a deductible cost because it was not an actual cost. The court of appeals held that the cost of capital as not a deductible cost under the statute. BP appealed, and the Colorado Supreme Court reversed, holding that the plain language of section 39-29-102(3)(a) authorized a deduction for any transportation, manufacturing, and processing costs and that the cost of capital was a deductible cost that resulted from investment in transportation and processing facilities. The appellate court was reversed and the case remanded back to the district court for further proceedings. View "BP Am. v. Colo. Dept. of Revenue" on Justia Law

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At issue in this case was whether several food and beverage concessionaires at the City-owned airport held taxable possessory interests under the test in "Board of County Commissioners v. Vail Associates, Inc.," (19 P.3d 1263 (Colo. 2001)). Relying on "Vail Associates," the City and County of Denver assessed property taxes on the concessionaires' possessory interests in their airport concession spaces. The concessionaires protested the valuation and eventually sued. The court of appeals affirmed, concluding that the concessionaires' interest were taxable under Vail Associates. The Supreme Court also affirmed: the concessionaires' interests were sufficiently exclusive because the concessionaires had the right to exclude others from using their respective concessions spaces; the totality of the circumstances reflected that the concessionaires' revenue-generating capability was independent of the City; and the valuation of the interests was consistent with the General Assembly's possessory interest valuation scheme set forth by statute, and supported by the record. View "Cantina Grill, JV v. City & Cty. of Denver Cty. Bd of Equalization" on Justia Law

Posted in: Business Law, Tax Law

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Public Service Company of Colorado applied for a tax refund from the state Department of Revenue. The company argued that it was entitled to a refund because it paid taxes when it was actually eligible for an exemption. The district court held in favor of the company, concluding that electricity was tangible personal property and that the production of electricity constituted manufacturing, thus entitling the company to the exemption (the "manufacturing exemption" under 39-26-709(1)(a)(II) C.R.S. (2013)). Upon review of the Department's argument on appeal, the Supreme Court reversed, finding that section 39-26-104(1)(d.1) applied in this case: electricity did not qualify as tangible personal property, and that the Code "contemplate[d] that 'electricity furnished and sold'" was to be taxed as a service. View "Department of Revenue v. Public Service Co." on Justia Law