Justia Virginia Supreme Court Opinion Summaries

At issue in this case was the extent to which a corporate taxpayer must include in its Virginia taxable income royalties paid to an intangible holding company. The Virginia Supreme Court held that the circuit court correctly determined that only the portion of the royalties that was actually taxed by another state falls within the subject-to-tax exception. However, the circuit court erred by failing to hold, in accordance with Kohl's alternative argument, that Kohl's Illinois need not be the entity that pays this tax for the exception to apply. Accordingly, the court reversed the circuit court's judgment and remanded for a determination of what portion of the royalty payments was actually taxed by another state and thus excepted from the add back statute. View "Kohl's Department Stores, Inc. v. Virginia Department of Taxation" on Justia Law

Where an income tax return has not been filed by the return date on a writ of fieri facias, any potential income tax refunds for the applicable tax year are not “in possession of or under the control of the debtor” so as to be reachable by the lien under Va. Code 8.01-501 and -507.Creditors obtained separate judgments against Debtors and issued to Debtors writs of fieri facias. The general district court entered transfer orders in favor of Creditors requiring Debtors to turn over their 2015 income tax refunds to Creditors. Debtors appealed the transfer orders to the circuit court, arguing that the general district court lacked subject matter jurisdiction to enter the transfer orders because Debtors had not filed their 2015 income tax returns as of the return date of the writ. The circuit court ruled in favor of Creditors. The Supreme Court reversed, holding that, for purposes of Va. Code 8.01-507, Debtors were not entitled to, nor did they have a fixed property interest in, the 2015 income tax refunds at the time of the return date on the writ of fieri facias. View "Shifflett v. Latitude Properties, Inc." on Justia Law

The Supreme Court reversed the judgment of the circuit court sustaining the Tax Department’s decision to rescind $4.9 million in land preservation tax credits it had previously awarded to the Woolford family on the grounds that the Woolfords’ appraiser was not a “qualified appraiser.” Specifically, the circuit court found that the Woolfords’ appraiser lacked the necessary education and experience, as required by applicable federal law incorporated by Va. Code 58.1-512(B), to offer a qualified appraisal. The Supreme Court disagreed and remanded the case, holding (1) the trial court erred in ruling that the Woolfords’ appraiser was not a “qualified appraiser”; and (2) the Department was not constrained from auditing the value of the tax credits claimed by the Woolfords after initially awarding them those tax credits. View "Woolford v. Virginia Department of Taxation" on Justia Law

Kohl’s Department Stores, Inc. entered into a license agreement with Kohl’s Illinois, Inc., an affiliate of Kohl’s that operates retail stores in select states, but not Virginia, for the use of intellectual property managed and licensed by Kohl’s Illinois. Kohl’s paid royalties to Kohl’s Illinois, and when calculating its federal taxable income, Kohl’s deducted these royalty payments from its income as an ordinary and necessary business expense. Kohl’s Illinois, however, did not pay state income taxes on a substantial portion of the royalties. Kohl’s claimed that the royalty payments fell within the “subject-to-tax” exception to the add back statute. The Virginia Department of Taxation auditor required that the untaxed portion be added back to Kohl’s taxable income and issued a notices of assessment to Kohl’s for certain taxable years. The circuit court affirmed, concluding that only the portion of the royalties that was actually taxed by another state fell within the subject-to-tax exception. The Supreme Court reversed, holding that the circuit court erred by failing to hold that Kohl’s Illinois need not be the entity that pays the tax for the subject-to-tax exception to apply. Remanded for a determination of what portion of the royalty payments was actually taxed by another state and therefore excepted from the add back statute. View "Kohl's Department Stores, Inc. v. Virginia Department of Taxation" on Justia Law

The Tax Commissioner of Virginia directed Chesterfield County to issue refunds to Verizon Online LLC for local taxes it paid for tax years 2008, 2009 and 2010 on set top boxes it owned. The circuit court upheld the Tax Commissioner’s determination that the set top boxes were not subject to local taxation but concluded that Verizon was not entitled to refunds for tax years 2008 and 2009 due to its failure to file a timely appeal with the local commissioner of revenue. The Supreme Court affirmed in part and reversed in part, holding (1) the circuit court did not err in ruling that Verizon’s set top boxes are not subject to local taxation; but (2) the issue of the timeliness of Verizon’s local appeal was not preserved for review by the circuit court, and therefore, the circuit court erred in ruling that Verizon was not entitled to refunds for tax years 2008 and 2009. View "Verizon Online LLC v. Horbal" on Justia Law

Plaintiffs, two Arlington County taxpayers, challenged the County’s inclusion of transferrable development rights (TDRs) in their real estate assessment, arguing that the County had no authority assess and tax TDRs on their properties for tax years 2012 through 2015. The circuit court ruled in favor of the County. The Supreme Court reversed, holding (1) the County may not tax TDRs under Va. Code 15.2-2316.2 unless it enacts an ordinance that conforms to the detailed requirements of that statute; and (2) the County lacks the authority to tax TDRs under section 15.2-750 and its ordinance until it has approved and accepted a site plan. View "Johnson v. Arlington County" on Justia Law

Western Refining Yorktown, Inc. was the owner of a refinery that was subject to the machinery and tools tax. Western challenged the Commissioner of Revenue’s 2010 and 2011 assessments in the circuit court. The trial court upheld the valuation of the refinery’s machinery and tools for purposes of levying the machinery and tools tax, concluding that Western did not carry its burden of proof to show that the property in question was valued at more than its fair market value. The Supreme Court affirmed, holding (1) the trial court did not err in upholding the assessment; and (2) the County of York did not assume inconsistent positions in successive litigation. View "Western Refining Yorktown v. County of York" on Justia Law

Miller & Rhoads Building, LLC (MRB) purchased a building that was subject to a city-wide real estate tax and an annual special district tax. MRB sought a partial exemption from real estate taxes for the property under the City of Richmond’s Tax Abatement for Rehabilitated Real Estate Program (the Partial Exemption). The City applied the Partial Exemption to the base real estate tax but refused to apply it to the special district tax. MRB paid the special district taxes under protest and brought an action to correct the alleged erroneous assessments. At issue at trial was whether the Partial Exemption also applied to the City’s computation of the special district tax. The trial court ruled in favor of the City, concluding that the Partial Exemption did not apply to the special district tax. The Supreme Court affirmed, holding that the special district tax, while a real estate tax, is a different type of real estate tax that is not subject to the Partial Exemption. View "Miller & Rhoads Bldg., LLC v. City of Richmond" on Justia Law

Virginia Electric and Power Company (VEPCO) operated a gas-fired electric general station located in the City of Richmond. The City assessed tax for natural gas consumed at the station. VEPCO challenged the assessments, arguing that it was not subject to the tax. The Tax Commissioner affirmed the City’s decision that VEPCO was subject to the tax. VEPCO appealed, arguing that it was not subject to the tax because its consumption was outside the scope of Va. Code Ann. 58.1-3814(H). The circuit court concluded that VEPCO was not subject to the tax because it consumed natural gas at the station to generate electricity, rather than to furnish heat or light. The Supreme Court affirmed, holding that the circuit court did not err in its interpretation of section 58.1-3814(H). View "City of Richmond v. Va. Elec. & Power Co." on Justia Law

A Suffolk developer set aside an Equestrian Center Parcel (ECP) for lease to a riding school and stable, with the stable to pay real estate taxes owed on the ECP. The lease expressly anticipated that ownership of the ECP would later be conveyed to a property owners’ association, which was subsequently organized. Although the stable could sell services to non-members, the lease required preferential treatment for Association members. The Association’s declaration included the ECP as Association’s property but noted that it was leased. The city began assessing real estate tax on the ECP in 2009. In 2012, the city exonerated the Association of liability for tax years ending in 2009, 2010, and 2011. The city again assessed tax on the ECP for tax years ending in 2012, 2013, 2014, and 2015. No one paid the assessments. The city published notice that the ECP would be sold for non-payment of taxes. The Association sought a declaratory judgment that the ECP could not be directly assessed because, under Code 58.1-3284.1(A), any tax due was payable only by the Association’s individual members. The court ruled that the stable was a commercial enterprise and that the statute did not intend “open or common space” to include real estate used for commercial enterprises open to nonmembers of an owners’ association. The Supreme Court of Virginia reversed; nothing in the statutory definition excludes commercial property. Association members who did not board horses at the Stable used its picnic tables, trails, and parking area. View "Saddlebrook Estates v. City of Suffolk" on Justia Law