Talking Tax

The Moore Supreme Court Case and Its Potential Impact

Nov 1, 2023

A Supreme Court case challenging the constitutionality of the mandatory repatriation tax provision could have broad implications on the tax code. The potential outcome could result in refunds to multinational companies and disrupt other taxes on foreign income. The arguments in the case focus on the distinct nature of the mandatory repatriation tax and whether it can be struck down without affecting the rest of the tax code. The podcast also explores the impact on partnership taxation, LLCs, and mark to market regimes, as well as the potential consequences on revenue, litigation, and tax policy.

16:50

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Quick takeaways

If the Supreme Court rules in favor of the plaintiffs, it could have significant implications for the Tax Cuts and Jobs Act and the broader tax code, potentially affecting partnerships, LLCs, and various market-to-market regimes.

If the mandatory repatriation tax is deemed unconstitutional, multinational companies may seek refunds for substantial taxes paid on repatriated foreign profits, leading to a significant budgetary impact and raising questions about the implications for the rest of the Tax Cuts and Jobs Act and the broader tax code.

Deep dives

Moors case challenges constitutionality of mandatory repatriation tax

The Supreme Court is set to hear a case brought forth by Charles and Kathleen Moore, a retired couple from Washington State. The case centers around the mandatory repatriation tax provision in the Tax Cuts and Jobs Act (TCJA), which required the Moors to pay taxes on the earnings of an Indian machine tool company in which they had invested. The plaintiffs argue that this provision violates the 16th Amendment, which authorizes Congress to impose income taxes. If the Supreme Court sides with the Moors, it could have significant implications not just for the TCJA but for the broader tax code, potentially affecting partnerships, LLCs, and various market-to-market regimes.

Introduction

2min

The Significance of the Moors Case and the Issue of Realization in Tax Law

4min

Impacts of the Moore Supreme Court Case on the Transition Tax and Tax Code Provisions

4min

Potential Impact of Ruling on Taxation and Uncertainty

2min

The Potential Impact of the Moore Supreme Court Case on Tax Policy

5min

It isn't every day that a dispute over a $14,729 tax bill gets every corner of the tax world paying attention—but the potential ramifications of the dispute now before the Supreme Court go far beyond that.

The court will hear oral arguments next month in Moore v. United States, in which Charles and Kathleen Moore, a retired couple from Washington state, are arguing that the “mandatory repatriation tax” should be declared unconstitutional. That tax, enacted as part of the 2017 tax-overhaul law, imposed a one-time levy on accumulated foreign corporate profits when the US changed its tax system so as to tax foreign profits going forward. It also led to the Moores’ $14,729 tax bill, which they had to pay on earnings of an Indian machine-tool company in which they’d invested, even though the earnings weren’t distributed to them.

If the high court rules in the Moores’ favor, it could lead to hundreds of billions of dollars in refunds to giant multinational companies that paid the mandatory repatriation tax. Some observers think it could also play havoc with other taxes on foreign income, partnership taxes, and other forms of tax that are similarly based on undistributed income.

The Moores and their supporters distinguish the mandatory repatriation tax from other provisions, and contend it can be struck down without disrupting the rest of the tax code. The US Chamber of Commerce said in a brief supporting the Moores that such concerns were "badly overblown."

Bloomberg Tax senior reporter Michael Rapoport spoke about the Moore case with Reuven Avi-Yonah, a law professor at the University of Michigan, who specializes in corporate and international taxation. Avi-Yonah filed a friend-of-the-court brief with two other law professors last month urging the Supreme Court to reject the Moores’ challenge.

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Talking Tax

The Moore Supreme Court Case and Its Potential Impact

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Moors case challenges constitutionality of mandatory repatriation tax

Potential impacts of ruling for the Moors in the case

Broader implications and uncertainty surrounding the case

Remember Everything You Learn from Podcasts