Justia U.S. 4th Circuit Court of Appeals Opinion Summaries

Maryland enacted a statute imposing a tax on digital advertising revenues, targeting only large companies with at least $100 million in global annual gross revenues. In response to concerns that these companies would pass the tax cost onto customers and potentially blame the state for price increases, Maryland amended the law to include a “pass-through provision.” This provision prohibited companies from directly passing the tax cost to customers by means of a separate fee, surcharge, or line-item on invoices, though it did not prevent companies from raising prices or otherwise recouping the tax cost in a non-itemized way.A group of trade associations challenged the pass-through provision, arguing that it violated the First Amendment by restricting their ability to communicate with customers about the tax and its impact on pricing. The United States District Court for the District of Maryland initially dismissed the First Amendment claims for lack of jurisdiction under the Tax Injunction Act. On appeal, the United States Court of Appeals for the Fourth Circuit determined that the Act did not bar the claims and remanded for consideration on the merits. On remand, the district court found that the provision regulated speech but dismissed the facial challenge, reasoning that the provision had constitutional applications.The United States Court of Appeals for the Fourth Circuit reviewed the case and held that the pass-through provision is a content-based restriction on speech, as it prohibits companies from communicating certain truthful information to customers. The court found that the provision could not survive even intermediate scrutiny under the First Amendment, as it was not adequately tailored to any substantial government interest. The Fourth Circuit reversed the district court’s decision and remanded the case for consideration of the appropriate remedy, holding that the pass-through provision is facially unconstitutional in all its applications. View "Chamber of Commerce v. Lierman" on Justia Law

Bank of America Corporation, after merging with Merrill Lynch in 2013, sought to recover interest on its pre-merger tax underpayments by netting them against pre-merger overpayments made by Merrill Lynch. The bank argued that the post-merger integration rendered it the "same taxpayer" as Merrill Lynch for purposes of the interest netting provision under 26 U.S.C. § 6621(d) of the Internal Revenue Code.The United States District Court for the Western District of North Carolina initially held jurisdiction over all of the Bank's claims. However, the Federal Circuit determined that the Court of Federal Claims had exclusive jurisdiction over claims for overpayment interest exceeding $10,000, leading to the severance and transfer of those claims. The district court then addressed the remaining claims, granting partial summary judgment in favor of the government. The court concluded that the "same taxpayer" requirement applies at the time the payments were made, and since Bank of America and Merrill Lynch were distinct entities when the payments were made, the interest netting provision did not apply.The United States Court of Appeals for the Fourth Circuit reviewed the case and affirmed the district court's decision. The Fourth Circuit held that the interest netting provision under § 6621(d) requires that the same taxpayer must have made the underpayments and overpayments at the time they were made. Since Bank of America and Merrill Lynch were separate entities when the relevant payments were made, they could not be considered the "same taxpayer" for the purposes of interest netting. The court also rejected the Bank's arguments based on state merger law and legislative history, emphasizing that the statutory text was clear and did not support the Bank's interpretation. View "Bank of America Corp. v. United States" on Justia Law

In late 2008, the IRS assessed Arthur and Gigi Stover a significant tax bill, which they could not pay. The Government waited until 2020 to initiate a collection suit, nearly twelve years later. Generally, the Government has ten years to sue for unpaid taxes, but this period can be extended if the taxpayer requests an installment agreement. The IRS records indicated that the Stovers requested such an agreement on December 12, 2008. However, Arthur Stover testified that they did not contact the IRS about a payment plan until 2009 through their CPA.The United States District Court for the Western District of North Carolina granted summary judgment to the Government, finding no genuine issue of material fact regarding the date of the installment agreement request. The court held that the request tolled the statute of limitations, making the Government's collection action timely.The United States Court of Appeals for the Fourth Circuit reviewed the case and found that there was a genuine dispute of material fact regarding the date of the installment agreement request. Arthur Stover's deposition testimony suggested that the request could not have been made until 2009, contradicting the IRS records. The court concluded that summary judgment was improper because the conflicting evidence created a genuine issue of fact that should be resolved by a factfinder.The Fourth Circuit vacated the district court's grant of summary judgment and remanded the case for further proceedings. The main holding was that summary judgment is not appropriate when there is a genuine dispute of material fact regarding the date that dictates the timeliness of the Government's suit. View "United States v. Stover" on Justia Law

A former employee of Credit Suisse, John Doe, filed a qui tam action under the False Claims Act (FCA) alleging that the bank failed to disclose ongoing criminal conduct to the United States, thereby avoiding additional penalties. This followed Credit Suisse's 2014 guilty plea to conspiracy charges for aiding U.S. taxpayers in filing false tax returns, which included a $1.3 billion fine. Doe claimed that Credit Suisse continued its illegal activities post-plea, thus defrauding the government.The United States District Court for the Eastern District of Virginia granted the government's motion to dismiss the case. The government argued that Doe's allegations did not state a valid claim under the FCA and that continuing the litigation would strain resources and interfere with ongoing obligations under the plea agreement. The district court dismissed the action without holding an in-person hearing, relying instead on written submissions from both parties.The United States Court of Appeals for the Fourth Circuit affirmed the district court's decision. The court held that the "hearing" requirement under 31 U.S.C. § 3730(c)(2)(A) of the FCA can be satisfied through written submissions and does not necessitate a formal, in-person hearing. The court found that Doe did not present a colorable claim that his constitutional rights were violated by the dismissal. The court emphasized that the government has broad discretion to dismiss qui tam actions and that the district court properly considered the government's valid reasons for dismissal, including resource conservation and the protection of privileged information. The Fourth Circuit concluded that the district court's dismissal was appropriate and affirmed the judgment. View "United States ex rel. Doe v. Credit Suisse AG" on Justia Law

Maggie Anne Boler was convicted of six counts of presenting false claims against the United States by submitting fraudulent tax returns to the IRS and one count of making a false statement on a Paycheck Protection Program (PPP) loan application. Boler submitted six fraudulent tax returns, receiving refunds on four, totaling $116,106. Additionally, she falsely claimed a $20,833 PPP loan. She was sentenced to 30 months in prison.The United States District Court for the District of South Carolina calculated Boler's sentencing range based on the total intended financial harm, including the two denied tax returns, amounting to $180,222. Boler objected, arguing that only the actual loss should be considered, not the intended loss. The district court overruled her objection, holding that the term "loss" in the Sentencing Guidelines could include both actual and intended loss.The United States Court of Appeals for the Fourth Circuit reviewed the case. The court concluded that the term "loss" in the Sentencing Guidelines is genuinely ambiguous and can encompass both actual and intended loss. The court deferred to the Sentencing Guidelines' commentary, which defines "loss" as the greater of actual or intended loss. The court found that the district court correctly included the full intended loss in Boler's sentencing calculation. Therefore, the Fourth Circuit affirmed the district court's judgment, upholding Boler's 30-month sentence. View "United States v. Boler" on Justia Law

Kenneth and Anita Wolke Brooks purchased 85 acres of land in Georgia for $1.35 million, subdivided it, and granted a conservation easement on a 41-acre parcel to Liberty County. They claimed a $5.1 million charitable deduction on their tax returns for this easement. The IRS disallowed the deductions for 2010, 2011, and 2012, citing non-compliance with the Internal Revenue Code and regulations, and imposed accuracy-related penalties for gross valuation misstatements.The Brookses challenged the IRS's notice of deficiency in the United States Tax Court. The Tax Court upheld the IRS's disallowance of the deductions and the imposition of penalties. The court found that the Brookses failed to provide a contemporaneous written acknowledgment of the donation, did not submit an adequate baseline report to Liberty County, and misrepresented their basis in the property. The court also found that the valuation of the easement was grossly overstated.The United States Court of Appeals for the Fourth Circuit reviewed the case and affirmed the Tax Court's decision. The court held that the Brookses did not meet the statutory requirements for a charitable deduction due to the lack of a proper contemporaneous written acknowledgment and an inadequate baseline report. The court also agreed with the Tax Court's finding that the Brookses' valuation of the easement was speculative and unsupported, justifying the 40 percent penalty for gross valuation misstatements. The court concluded that the Tax Court did not abuse its discretion in admitting the IRS Civil Penalty Approval Form into evidence despite its late disclosure. View "Brooks v. Commissioner of Internal Revenue" on Justia Law

The case involves United Therapeutics Corporation (UTC), a biotechnology company, and the Commissioner of Internal Revenue. The dispute centers on the interpretation of a tax provision that coordinates two tax credits: the research credit and the orphan drug credit. The Commissioner claimed that UTC disregarded one of the provision’s two commands, improperly reducing its tax liability by over a million dollars. UTC argued that the relevant half of the coordination provision lost effect in 1989 and has been moribund since.The United States Tax Court disagreed with UTC's argument. The court interpreted the statute’s terms by reference to their ordinary meaning, giving effect to the full coordination provision. The court rejected UTC's argument that changes to the tax law since its enactment rendered part of the coordination provision ineffective. The court also disagreed with UTC's interpretation of two regulations it relied on for support.The United States Court of Appeals for the Fourth Circuit affirmed the tax court's decision. The appellate court agreed with the tax court's interpretation of the coordination provision according to its ordinary meaning. The court also found that the tax court correctly rejected UTC's arguments based on the interpretation of predecessor statutes and regulations. The court concluded that the tax court correctly resolved the case in favor of the Commissioner. View "United Therapeutics Corporation v. Commissioner of Internal Revenue" on Justia Law

Patrick Sutherland was convicted of three counts of filing false tax returns and one count of obstructing an official proceeding. He managed several insurance businesses and routed his international transactions through a Bermuda company, Stewart Technology Services (STS), which he claimed was owned and controlled by his sister. However, evidence showed that Sutherland managed all its day-to-day affairs. Between 2007 and 2011, STS sent Sutherland, his wife, or companies that he owned more than $2.1 million in wire transfers. Sutherland treated these transfers as loans or capital contributions, which are not taxable income, while STS treated them as expenses paid to Sutherland. Sutherland did not report the $2.1 million as income on his tax returns. In 2015, a federal grand jury indicted Sutherland for filing false returns and for obstructing the 2012 grand jury investigation. The jury found Sutherland guilty on all charges.Sutherland appealed his convictions, but the Court of Appeals affirmed them. He then filed a 28 U.S.C. § 2255 petition to vacate his obstruction conviction and a petition for a writ of error coram nobis to vacate his tax fraud convictions. The district court denied both petitions without holding an evidentiary hearing. Sutherland appealed this decision.The United States Court of Appeals for the Fourth Circuit affirmed the district court's decision. The court found that Sutherland failed to show how the proffered testimony from his brother and a tax expert would have undermined his obstruction conviction. The court also found that Sutherland had not demonstrated ineffective assistance of counsel and thus could not show an error of the most fundamental character warranting coram nobis relief. View "United States v. Sutherland" on Justia Law

The case involves Donald Herrington, who was charged with multiple counts of perjury, obtaining money by false pretenses, filing false or fraudulent income tax returns, failure to file an income tax return, and drug possession. Herrington chose to represent himself in court, waiving his right to counsel. He was eventually convicted on several charges and sentenced to twelve years' imprisonment. Herrington appealed his conviction, arguing that his Sixth Amendment right to counsel was violated and that his appellate counsel was ineffective for failing to bring two meritorious arguments on direct appeal.The case was initially heard in the United States District Court for the Eastern District of Virginia, which rejected Herrington's arguments and denied his petition. Herrington then appealed to the United States Court of Appeals for the Fourth Circuit.The Fourth Circuit affirmed the district court's decision in part, reversed in part, and remanded with instructions. The court found that Herrington knowingly, unequivocally, and voluntarily waived his right to counsel, thus affirming that aspect of the district court's decision. However, the court agreed with Herrington that his appellate counsel was ineffective for failing to argue that the jury was erroneously instructed on the requirements for a conviction for failure to file a tax return. The court reversed this part of the district court's decision and remanded the case with instructions to issue a writ of habeas corpus unless Herrington is afforded a new state court appeal in which he may raise this claim. View "Herrington v. Dotson" on Justia Law

The case revolves around Ronald Lee Morgan, who filed for Chapter 7 bankruptcy in North Carolina. Morgan owned a home jointly with his wife as tenants by the entirety. He sought to exempt this home from the bankruptcy estate to the extent of his outstanding tax debt to the Internal Revenue Service (IRS). However, the bankruptcy court disallowed the exemption. Morgan's wife did not jointly owe the debt to the IRS and did not file for bankruptcy. The trustee of the bankruptcy estate objected to Morgan's claim for an exemption, arguing that under North Carolina state law, tenancy by the entireties property is generally exempt from execution by creditors of only one spouse, but this rule does not apply to tax obligations owing to the United States.The bankruptcy court sustained the trustee's objection, and on appeal, the district court affirmed this decision. Morgan then appealed to the United States Court of Appeals for the Fourth Circuit, arguing that for his IRS debt to override the entireties exemption, the IRS must have obtained a perfected tax lien on the property prior to the filing of the bankruptcy petition.The Court of Appeals for the Fourth Circuit affirmed the district court's ruling. The court concluded that Morgan's interest in his home as a tenant by the entirety is not "exempt from process" under "applicable nonbankruptcy law." The court rejected Morgan's argument that the IRS must have actually obtained a lien prior to the bankruptcy filing, stating that the absence of a judgment or lien has no bearing on the hypothetical issue of whether the debtor's interest would be exempt from process. The court also dismissed Morgan's contention that the IRS must perfect a lien against his property before he filed for bankruptcy. The court concluded that nothing in the Supreme Court's decision in United States v. Craft limits its holding to instances where the IRS has perfected a tax lien against the property. View "Morgan v. Bruton" on Justia Law