Articles Posted in US Court of Appeals for the Seventh Circuit

by
In 1999, after deregulation of the energy industry in Illinois, Exelon sold its fossil-fuel power plants to use the proceeds on its nuclear plants and infrastructure. The sales yielded $4.8 billion, $2 billion more than expected. Exelon attempted to defer tax liability on the gains by executing “like-kind exchanges,” 26 U.S.C. 1031(a)(1). Exelon identified its Collins Plant, to be sold for $930 million, with $823 of taxable gain, and its Powerton Plant, to be sold for $870 million ($683 million in taxable gain) for exchanges. Exelon identified as investment candidates a Texas coal-fired plant to replace Collins and Georgia coal-fired plants to replace Powerton. In “sale-and-leaseback” transactions, Exelon leased an out-of-state power plant from a tax-exempt entity for a period longer than the plant’s estimated useful life, then immediately leased the plant back to that entity for a shorter sublease term. and provided to the tax-exempt entity a multi-million-dollar accommodation fee with a fully-funded purchase option to terminate Exelon’s residual interest after the sublease. Exelon asserted that it had acquired a genuine ownership interest in the plants, qualifying them as like-kind exchanges. The Commissioner disallowed the benefits claimed by Exelon, characterizing the transactions as a variant of the traditional sale-in-lease-out (SILO) tax shelters, widely invalidated as abusive tax shelters. The tax court and Seventh Circuit affirmed, applying the substance over form doctrine to conclude that the Exelon transactions failed to transfer to Exelon a genuine ownership interest in the out-of-state plants. In substance Exelon’s transactions resemble loans to the tax-exempt entities. View "Exelon Corp. v. Commissioner of Internal Revenue" on Justia Law

by
Regional transmission organizations manage the interstate grid for electricity, conduct auctions through which many large generators of electricity sell most or all of their power, and are regulated by the Federal Energy Regulatory Commission (FERC) Illinois subsidizes nuclear generation facilities by granting “zero emission credits,” which generators that use coal or gas to produce power must purchase from the recipients at a price set by the state. Electricity producers and municipalities sued, contending that the price‐adjustment aspect of the system is preempted by the Federal Power Act because it impinges on the FERC’s regulatory authority. They acknowledge that a state may levy a tax on carbon emissions; tax the assets and incomes of power producers; tax revenues to subsidize generators; or create a cap‐and‐trade system requiring every firm that emits carbon to buy credits from firms that emit less carbon. They argued that the zero‐emission‐credit system indirectly regulates the auction by using average auction prices as a component in a formula that affects the credits' cost. The Seventh Circuit affirmed summary judgment for the defendants. Illinois has not engaged in discrimination beyond that required to regulate within its borders. All Illinois carbon‐emitting plants need to buy credits. The subsidy’s recipients are in Illinois. The price effect of the statute is felt wherever the power is used. All power (from inside and outside Illinois) goes for the same price in an interstate auction. The cross‐subsidy among producers may injure investors in carbon‐ releasing plants, but only plants in Illinois. View "Village of Old Mill Creek v. Star" on Justia Law

by
Through a Department of Energy grant, Naperville received $11 million to update its grid and began replacing its residential, analog energy meters with digital “smart meters.” Traditional energy meters typically collect monthly energy consumption in a single lump figure once per month. Smart meters often collect thousands of readings every month, showing the amount of electricity being used inside a home and when it is used. This data reveals information about the happenings inside a home because individual appliances have distinct energy-consumption patterns; researchers can predict the appliances that are present in a home and when they are used. While some cities allow residents to decide whether to adopt smart meters, Naperville’s residents cannot opt out of the smart-meter program. Naperville stores the data for up to three years. Concerned citizens sued, alleging that Naperville’s smart meters reveal “intimate personal details and that collection of this data constitutes an unreasonable search under the Fourth Amendment as an unreasonable search and invasion of privacy under the Illinois Constitution. The Seventh Circuit affirmed dismissal. The data collection constitutes a search but, given the significant government interests in the program and the diminished privacy interests at stake, the search is reasonable. View "Naperville Smart Meter Awareness v. City of Naperville" on Justia Law

by
In July 2014, Allen‐Gregory filed a putative class action alleging that Fortville violated class members’ due process rights by terminating their water service without a hearing. Fortville revised its procedures, instituting a hearing process effective November 2014. In December 2014, the plaintiffs again sought a preliminary injunction, alleging that the new procedures did not comport with due process. The parties agreed to a settlement. In September 2015, the court approved the settlement and dismissed the case with prejudice. The settlement stated that its purpose was to “fully, finally, and forever resolve, discharge and settle all claims released herein on behalf of the named plaintiffs and the entire class.” It defined the class as “[a]ll customers of the Town of Fortville ... from July 9, 2012 through October 31, 2014 who had their water service terminated and who paid a reconnection fee,” and included an expansive, global release of all claims. Kilburn‐Winnie, a member of the class, received settlement proceeds. In November 2015, Kilburn‐Winnie filed this case alleging that Fortville disconnected her water service again for failure to timely pay her water bill in March and April of 2015 and that the hearing procedures implemented in November 2014 were so complicated and burdensome that they violated her procedural due process rights. The court granted Fortville summary judgment. The Seventh Circuit affirmed; res judicata barred the claim because the parties settled a prior class action that involved the same claim. View "Kilburn-Winnie v. Town of Fortville" on Justia Law