Daily Tax Update - April 19, 2016: Supreme Court Vacates Nevada's $1 Million Award Against California FTB

Supreme Court Vacates Nevada’s $1 Million Award Against California FTB:  In a 6-2 ruling, the US Supreme Court vacated Nevada’s award of $1 million in damages for fraud to Gilbert P. Hyatt in his dispute with the California Franchise Tax Board (FTB), holding that the Constitution does not permit Nevada to apply a rule of Nevada law that awards damages against California that are greater than it could award against Nevada in similar circumstances.  Justice Stephen Breyer delivered the opinion of the Court, in which Justices Anthony Kennedy, Ruth Bader Ginsburg, Sonia Sotomayor, and Elena Kagan joined.  Justice Samuel Alito concurred in the judgment.  Justice John Roberts filed a dissenting opinion, in which Justice Clarence Thomas joined.

The Court found that the rule of unlimited damages applied by Nevada is not only opposed to California’s law of complete immunity, but is also inconsistent with the general principles of Nevada immunity law, which limited damages awards to $50,000.  Further, the Court rejected Nevada’s argument that departing from its own rules was necessary because California’s own system of controlling its agencies is an inadequate remedy for Nevada’s citizens.  Writing for the majority, Justice Breyer stated that Nevada failed to offer the “sufficient policy considerations” to justify the application of a special rule of Nevada law that discriminates against its sister states.  

International Organizations Release Details of Joint Effort to Cooperate on Tax Issues:  Today the International Monetary Fund (IMF), the Organization for Economic Co-operation and Development (OECD), the United Nations (UN), and the World Bank Group (WBG) released a concept note providing the details of their joint effort to intensify their cooperation on tax issues.  The concept note indicates that the organizations propose to create a new “Platform for Collaboration on Tax” as a central vehicle for their enhanced cooperation, thus enabling them to “develop a common approach, deliver joint outputs, and respond to requests for global dialogue on tax matters.”  

One of the platform’s first tasks will be to deliver a number of “toolkits” designed to help developing countries implement the measures developed under the G20/OECD Base Erosion and Profit Shifting Project and on other international tax issues.

Senate Votes to Pass FAA Reauthorization:  Today the Senate voted 95-3 to pass an 18-month Federal Aviation Administration (FAA) reauthorization, which includes provisions to extend aviation taxes that fund FAA operations.  Attempts to include a package of renewable energy extenders left out of last year's extenders law were abandoned; thus, the reauthorization does not include these provisions.

Miscellaneous Guidance:
Today the IRS released Revenue Ruling 2016-11, announcing the applicable federal interest rates and adjusted applicable federal rates for May.