Opinion ID: 46232
Heading Depth: 2
Heading Rank: 2

Heading: Tax Credit

Text: 15 Section 44 of the I.R.C. provides that an eligible small business may take a disabled access credit for eligible access expenditures. 26 U.S.C. § 44(a). An eligible access expenditure is defined generally as an amount paid or incurred for the purpose of compliance with the ADA. Id. § 44(c)(1). The statute provides that the amount must be reasonable and includes expenditures for modifying equipment. Id. § 44(c)(2)(d), (c)(3). The ADA requires that [n]o individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation. 42 U.S.C. § 12182(a). In order to claim a disabled access credit, a taxpayer must show that he has made an eligible access expenditure. 26 U.S.C. § 44(c); see also Crooks, 453 F.3d at 656 (noting that the I.R.C. permits a tax credit if the business made expenditures to enable it to comply with the ADA); Galyen v. Comm'r, 91 T.C.M. (CCH) 762, at , 2006 WL 416404 (U.S.Tax Ct. Feb.22, 2006). 16 Before the Tax Court, the parties stipulated that Arevalo was not provided with a list of the modifications allegedly made to the phones or the costs of the modifications. It was a salesperson who represented to Arevalo that the phones were modified by adjusting the cord length and installing volume controls. There is also no record evidence of the location of the phones or whether they were in fact leased to a place of public accommodation. Arevalo lacks essential information in support of his case and has not shown that he made an eligible access expenditure. 17 Further, even if we assumed that the phones were located at places that qualified as public accommodations under the ADA, we agree with the Tax Court's conclusion that Arevalo was not entitled to a disabled access credit because he did not have any obligation to comply with the ADA. See Crooks, 453 F.3d at 657 (noting that the appellants were not violating the ADA before they purchased the phones, so purchasing them did not enable the appellants to become ADA-compliant). The Tax Court reasoned that because Arevalo did not own the phones, he did not own anything that would require him to comply with the ADA. 18 We observe that, consistent with this reasoning, it was Alpha Telecom, not Arevalo, who had the duty to comply with the ADA because Alpha Telecom was responsible for all decisions related to the phones, including their lease to a place of public accommodation. See id. at 657 (noting that the appellants did not have a duty to be compliant with the ADA). We hold that the Tax Court correctly concluded that Arevalo did not have an obligation to comply with the ADA and his investment in the payphones did not qualify as an eligible access expenditure. 19 We also note that the SEC's conclusion that interests like Arevalo's are securities is not necessarily determinative of the tax nature of such investments, but it is consistent with the Tax Court's conclusions regarding ownership of the pay phones for tax purposes and for ADA compliance responsibility as well.