Articles Posted in Tax Law

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Jefferson County and the Jefferson County Commission (collectively "the County parties") appealed a circuit court judgment denying a petition for validation of the warrants filed by the County parties, pursuant to section 6-6-750 et seq., Ala. Code 1975, and opposed by the taxpayers and citizens of Jefferson County. Andrew Bennett, Mary Moore, John Rogers, and William Muhammad cross-appealed the portion of the trial court's judgment declining to address alternative arguments they raised. In 2004 and 2005, Jefferson County issued warrants to raise funds to make certain grants to local boards of education to construct school buildings and to retire other debt. All the revenue from Jefferson County's existing 1% education sales and use taxes levied under section 40-12-4, Ala. Code 1975, was pledged and required to pay the debt service on the outstanding warrants and certain related costs. Jefferson County experienced severe financial difficulties in recent years that eventually resulted in the County's filing a petition in bankruptcy. In 2009, the Alabama Supreme Court held that Jefferson County's occupational tax, imposed since 1987, was unconstitutional. In 2015, Jefferson County and its legislative delegation proposed local legislation in an effort to bolster the County's finances without an occupational tax. Jefferson County proposed a new 1% sales tax and a 1% use tax to replace its existing 1% education sales and use taxes, the purpose of which was to fund new warrants at lower interest rate and a lower required debt service that would allow the County to retire its existing warrants. In 2015, Bennett, Moore, Rogers, and Muhammad ("the class plaintiffs") filed a class action against Jefferson County challenging the constitutionality of Act No. 2015-226 which enacted the new Jefferson County sales and use taxes. The circuit court declared Act 2015-226 unconstitutional, and the County parties appealed. Finding that the circuit court erred in finding the Act unconstitutional, and finding no merit in the alternative grounds on which the taxpayers argued the Act was unconstitutional, the Supreme Court reversed (Case No. 1150326) and dismissed (Case No. 1150327). View "Bennett v. Jefferson County" on Justia Law

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Michael Howard appealed the grant of summary judgment entered against him in the action he commenced on behalf of himself and all other similarly situated taxpayers in Cullman County against Cullman County and its Revenue Commissioner Barry Willingham, in his official capacity. Howard sought a refund of property taxes he and other taxpayers paid in 2013. Howard sought a judgment declaring that, pursuant to former section 40-7-42, the Commission's levy of property taxes for October 1, 2012, through September 30, 2013, was invalid because it was done in May 2013 rather than at the Commission's first regular meeting in February 2013. He also sought the return of property taxes collected in 2013. The Supreme Court found that the trial court correctly concluded that the Commission's failure to follow the timing provision of former 40-7-42 did not invalidate its subsequent levy in 2013 of property taxes upon Howard and other property owners in Cullman County. Therefore, the Court affirmed summary judgment on all of Howard's claims in favor of Cullman County and the revenue commissioner. View "Howard v. Cullman County" on Justia Law

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The City of Birmingham sued "Bonedaddy's of Lee Branch" for failing to pay its business-license taxes, occupational taxes, interest, penalties and fees for multiple years since the business' formation in 2007. The City alleged that the defendants had failed and refused to submit business records and tax returns for the periods that were the subject of the complaint; that the defendants were currently engaged in business in the City of Birmingham in violation of the City's business-license code; and that notice of the final tax assessments had been mailed but that no payments had been forthcoming. The City asked the trial court to enter a preliminary injunction directing the defendants to refrain from further conducting business within the City and causing the sheriff to padlock the defendants' place of business in the City. The trial court ultimately granted the City's request, and Bonedaddy's was prohibited from further business until its back-taxes were paid. Cowan and Bonedaddy's argued on appeal that the trial court did not have subject-matter jurisdiction to enter a final judgment against defendant John Cowan in this case because, they say, the City did not comply with certain provisions of the Alabama Taxpayers' Bill of Rights and Uniform Revenue Procedures Act. Upon review, the Supreme Court found that the City had issued a final sales-tax assessment against Bonedaddy's. The notice of final assessment, however, did not name Cowan individually as the taxpayer nor was the notice mailed to Cowan. Additionally, the City did not present any evidence at trial to indicate that it had ever issued a final sales-tax assessment against Cowan per se. Based on the evidence presented at trial, it did not appear that the City complied with the requirements of the TBOR with regard to Cowan. The Court reversed the trial court with respect to Cowan's responsibility to pay Bonedaddy's outstanding sale taxes, but affirmed with regard to the tax assessments against Bonedaddy's itself. View "Bonedaddy's of Lee Branch, LLC v. City of Birmingham" on Justia Law

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Edwin B. Lumpkin, Jr. appealed several Circuit Court orders dismissing three cases he had initiated challenging property-tax assessments made by the Jefferson County Board of Equalization and Adjustments. Lumpkin owned and operated Metro Mini Storage, a chain of self-storage facilities with locations throughout the Birmingham metropolitan area. In 2012, Lumpkin received notice from Jefferson County regarding the assessed value of three of his properties located in that county. Believing the assessed values of these properties to be too high, Lumpkin elected to protest their valuation, and the Board heard his arguments. Acting pro se, Lumpkin filed three appeals in the Jefferson Circuit Court (one for each of the three locations), arguing that the Board's decisions did not reflect the true market value of the properties and that a reduction in assessed value was warranted based on the evidence he had presented. Because Lumpkin's appeals are governed by section 40-3-25 and because he failed to comply with all the requirements of section 40-3-25 for perfecting his appeals, the Supreme Court concluded the trial court properly dismissed the cases. View "Lumpkin, Jr. v. Alabama" on Justia Law

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First United Security Bank and its wholly owned subsidiary, Paty Holdings, LLC (collectively, "the bank"), brought suit to recover excess funds received by Tuscaloosa County from the tax sale of real estate owned by Wayne Allen Russell, Jr., and on which First United had a mortgage. The bank foreclosed on its mortgage after the tax sale but before the demand for excess proceeds was made. The issue presented for the Supreme Court's review was whether a purchaser at a foreclosure sale is an "owner" entitled under 40-10-28, Ala. Code 1975, to receive the excess proceeds from a tax sale of the real property foreclosed upon. After review, the Supreme Court concluded that the bank was entitled to the excess tax-sale proceeds. The Court reversed the judgment of the Court of Civil Appeals and remanded the case for further proceedings. View "First United Security Bank v. McCollum" on Justia Law

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The Shelby County Board of Equalization petitioned the Supreme Court for a writ of mandamus, or, in the alternative, a writ of prohibition, to direct the Shelby Circuit Court to dismiss as untimely an appeal filed by Central Shelby LTD. challenging a final ad valorem tax assessment issued by the Board. In response to Central Shelby's objection to the Board's 2013 assessed value of real property owned by Central Shelby, the Board entered a final ad valorem assessment. The clerk of the Shelby Circuit Court mailed a copy of the notice of appeal to the Board, which received the notice on July 8, 2013. Thereafter, the Board moved to dismiss the appeal on the ground that Central Shelby had not filed with the secretary of the Board its notice of appeal within 30 days of the final assessment as, the Board contended, section 40-3-25 requires. The trial court, without stating the findings on which its decision was based, denied the Board's motion. In response, the Board filed this petition alleging that, as a result of the alleged untimely notice to it of Central Shelby's appeal, the trial court lacked subject-matter jurisdiction over the underlying appeal. Central Shelby faulted the circuit clerk for her alleged untimely mailing of the notice of appeal to the secretary of the Board. The Supreme Court concluded the appealing taxpayer is charged with the responsibility of filing the notice of appeal with the secretary of the Board. As a result of Central Shelby's failure to comply with the provisions of 40-3-25, its appeal was not perfected and the trial court's jurisdiction was never invoked. The Supreme Court therefore granted the Board's petition and directed the trial court to vacate its order denying the Board's motion to dismiss and to dismiss Central Shelby's appeal as untimely. View "Central Shelby LTD. v. Shelby County Board of Equalization" on Justia Law

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Two petitions for a writ of mandamus came before the Supreme Court. Both sought review of orders that found plaintiffs lacked of standing and, in turn, found the trial courts lacked subject-matter jurisdiction. In case no. 1111567, U.S. Bank National Association ("U.S. Bank"), sought a writ to require the Walker Circuit Court to dismiss an action filed by Walker County. In case no. 1111370, MERSCORP, Inc. ("MERSCORP"), and Mortgage Electronic Registration Systems, Inc. ("MERS") sought a writ to require the Barbour Circuit Court to dismiss an action filed by Barbour Probate Judge Nancy Robertson. Upon careful consideration of the underlying trial court cases, the Supreme Court concluded that these cases did not fall within the subject-matter-jurisdiction exception to the general rule that the Supreme Court would not engage in mandamus review of a trial court's denial of a motion to dismiss. The Court therefore denied the request for mandamus relief in both of the cases. View "Robertson v. MERSCORP, Inc." on Justia Law

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Ann Whitty, Tratillia McCall, and other class-action plaintiffs filed suit against Montgomery County and Janet Buskey (in her capacity as Montgomery County Revenue Commissioner. Plaintiffs appealed the dismissal of their case by the Montgomery Circuit Court. Whitty and McCall, on behalf of themselves and a purported class of similarly situated property owners, filed suit seeking class certification of Montgomery County property owners whose properties were sold because of delinquent ad valorem taxes, where the sales produced an excess over the taxes, interest, penalties and costs due. Following discovery, a question of standing arose with regard to the class representatives. The County and the revenue commissioner moved to dismiss and/or to strike amended complaints, arguing that Whitty and McCall lacked "standing" to pursue the claims in their original complaint and, therefore, that the trial court lacked subject-matter jurisdiction over the action at its outset. Upon review, the Supreme Court affirmed the trial court's dismissal of the complaint insofar as it related to the claims alleged by Whitty and McCall. However the Court reversed the trial court's judgment insofar as it included a dismissal of the claims of the additional plaintiffs added by amendments to the original complaint. The trial court was not without subject-matter jurisdiction over claims originally alleged by McCall; therefore, the various amendments to the complaint adding additional plaintiffs were viable. View "Whitty et al. v. Montgomery County et al. " on Justia Law

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Cocina Superior, LLC owned a restaurant in Birmingham that sold alcoholic beverages to the public. Cocina appealed two final assessments of the Jefferson County Department of Revenue. The assessments reflected that, for the years 2008-2010, Cocina owed money pursuant to the "Alabama Liquor Tax." The parties filed cross-motions for a summary judgment at the circuit court, agreeing that there were no disputed issues of fact and that the issue to be resolved was a question of law. Cocina argued that the applicable legislation called for the imposition of a tax on the gross receipts derived from the sale of "alcoholic beverages," but, it said, the Department's assessments were erroneously based upon the taxpayer's gross sales of mixed drinks that were composed of both alcoholic beverages and nonalcoholic mixing agents such as colas, sodas, and juices. Cocina asserted that its internal policy and procedure dictated that each mixed drink contain 1.25 ounces of alcohol, and, it maintained, the taxes were due only on the alcohol portion of the mixed drinks, exclusive of any nonalcoholic mixing agent. Cocina also argued that the Department's assessments denied it due process and equal protection of the law because its restaurant was a more upscale establishment with higher overhead expenses than many other facilities that sell alcoholic beverages and was therefore required to charge higher prices and, consequently, pay more taxes for the mixed drinks it sold. Upon review, the Supreme Court concluded that the circuit court correctly held that the plain meaning of "alcoholic beverage" was a beverage containing alcohol, and that the Department's assessments did not violate the restaurant's right to due process or equal protection of the law. View "Cocina Superior, LLC v. Jefferson County Dept. of Revenue " on Justia Law

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One petition for the writ of mandamus and three appeals were brought before the Supreme Court to challenge a judgment of the Montgomery Circuit Court awarding Hugh McInnish $196,625 in attorney fees and costs in his action against: (1) the Governor of the State of Alabama, (2) the State finance director, (3) the State comptroller, and (4) the State treasurer, all in their official capacities. The underlying case involved a challenge to the constitutionality of the community-services grant-making process set forth in Ala. Code 1975, section 29-2-123. There, the Court held that "section 29-2-123, which authorizes a permanent joint legislative committee to award community-services grants, [as well as that portion of the annual education-appropriations act] by which those grants are funded," violated the separation-of-powers provisions of the Alabama Constitution of 1901, 925 So. 2d at 188, and the Court reversed the trial court's judgment and remanded the case. Subsequently, McInnish filed a series of motions in the trial court, seeking "an award of attorney fees, reasonable expenses, and costs against the [State officials]." He also sought an order declaring that he was "a prevailing party, that this litigation provided a common benefit to all taxpayers of the state of Alabama, and that the amount that was prohibited from being disbursed illegally was in an amount of approximately $13.4 million." The State officials opposed McInnish's motions, arguing that "[t]he clear holding in Ex parte Town of Lowndesboro[, 950 So. 2d 1203 (Ala. 2006),] is that section 14 of the Alabama Constitution prohibits the awarding of attorney fees and expenses in any state court action against the State of Alabama or against state officials in their official capacities." The trial court entered a judgment awarding "counsel for Plaintiff McInnish a judgment for attorney's fees and costs in the amount of $196,625.00 to be paid by the [State officials]." Upon review, the Supreme Court held that section 14 bars an award of attorney fees and costs even if a plaintiff has prevailed on a claim against State officials in their official capacities for a violation of the State constitution that results in preservation of significant funds in the State treasury. The trial court lacked authority to award such attorney fees and costs. Consequently, the judgment was reversed. View "McInnish v. Bentley " on Justia Law