Tax News

CCH (cch.taxgroup.com) reports:

  Taxpayers have asked the U.S. Supreme Court whether the federal courts lack jurisdiction over the taxpayers' action challenging the District of Columbia unincorporated business tax. The taxpayers are nonresidents of the District who paid unincorporated business tax on their personal incomes as a result of their membership in real estate limited liability companies in the District. They filed an action in the U.S. District Court for the District of Columbia seeking a declaration that the tax violates federal law and the U.S. Constitution.

  The federal court dismissed the action, holding that challenges to District tax assessments, including the imposition of tax, are by federal statute not within federal jurisdiction because Congress granted exclusive jurisdiction over such cases to the District's courts. The court added that this result parallels the mandate of the federal Tax Injunction Act, 28 U.S.C. §1341. This result is not affected by the fact that the District's courts already have rejected an identical challenge in Bender, 906 A.2d 277 (D.C. 2006), cert. denied, 127 S. Ct. 1356 (2007). The U.S. Court of Appeals for the District of Columbia Circuit summarily affirmed the lower court.

  The taxpayers ask the high court whether the exclusive jurisdiction of the District's courts extends beyond challenges to the "assessment" of a tax to challenges to the imposition of a tax, where a tax refund is not sought.

Fernebok v. District of Columbia, U.S. Supreme Court, Dkt. 08-391, petition for certiorari filed September 22, 2008.