Losantiville Country Club hosted unprofitable nonmember events for many years, consistently using those losses to avoid paying tax on its investment income. Because the Internal Revenue Service determined that Losantiville did not hold nonmember events for the primary purpose of making a profit, the club could not offset its income from investments with losses from those nonmember activities. Invalidating those deductions resulted in Losantiville having underpaid tax on its unrelated business income between 2010 and 2012. Plus, the IRS imposed accuracy-related penalties. On appeal, the Tax Court upheld this determination, reasoning that Losantiville did not intend to profit from its nonmember events. Finding no reversible error in that decision, the Sixth Circuit affirmed. View "Losantiville Country Club v. Comm'r of Internal Revenue" on Justia Law
Detroit Medical Center consists of several not-for-profit hospitals incorporated under Michigan law. The Center overpaid its taxes, entitling it to a refund plus interest. Under the Internal Revenue Code, “corporations” receive lower interest rates on such refunds (the federal short-term interest rate plus as little as 0.5%) than other taxpayers (the federal short-term interest rate plus 3%), 26 U.S.C. 6621(a)(1). The IRS rejected the Center’s claim that, as a not-for-profit corporation, it should not be treated as a corporation and should be eligible for the higher interest rate, increasing its refund by $9.1 million. The district court and Sixth Circuit affirmed, reasoning that a nonprofit entity incorporated under state law amounts to a corporation, and that the Code contains no indication to the contrary. View "United States v. Detroit Medical Center" on Justia Law
The Authority was formed under Ga. Code 46-4-82(a) to provide member municipalities with natural gas. It operates as a non-profit, distributing profits and losses to member municipalities: 64 in Georgia, two in Tennessee, 12 in other states. It pays its own operating expenses and judgments; it is exempt from state laws on financing and investment for state entities and has discretion over accumulation, investment, and management of its funds. It sets its governance rules; members elect leaders from among member municipalities. Smyrna, Tennessee has obtained gas from the Authority since 2000, using a pipeline that does not run through Georgia. The Authority entered a multi-year “hedge” contract for gas acquisition, setting price and volume through 2014, and passed the costs on. The market price of natural gas then fell due to increased hydraulic fracturing (fracking), but Smyrna was still paying the higher price. Smyrna sued for breach of contract, violations of the Tennessee Consumer Protection Act, breach of fiduciary duty, and unjust enrichment. The district court denied the Authority’s motion to dismiss based on sovereign immunity under Georgia law and the Eleventh Amendment. The Sixth Circuit affirmed, stating that the Authority’s claim that any entity referred to as a state “instrumentality” in a Georgia statute is entitled to state-law sovereign immunity “requires quite a stretch of the imagination.” View "Town of Smyrna, TN v. Mun. Gas Auth. of GA" on Justia Law
Posted in: Contracts, Energy, Oil & Gas Law, Government & Administrative Law, Government Contracts, Non-Profit Corporations, U.S. 6th Circuit Court of Appeals
Plaintiff is a non-profit, member-owned, water company serving rural areas of Ross County, Ohio. To finance its system, plaintiff borrowed nearly $10.6 million from the USDA. The disputed area of the county includes properties served by the city and properties served by plaintiff. Each has objected to the other's extension of new lines to the area. The district court granted plaintiff summary judgment, finding that the company is protected under the Agriculture Act, 7 U.S.C. 1926(b)(2), based on its obligations under the USDA contract, had a legal right to serve the area under a contract with the county, and did not have unclean hands. The Sixth Circuit affirmed.
Posted in: Government Contracts, Non-Profit Corporations, Real Estate & Property Law, U.S. 6th Circuit Court of Appeals, Utilities Law