U.S. Supreme Court Decides Moore v. United States on Mandatory Repatriation Tax

June 20, 2024

The Moore v. United States addressed whether Congress may tax certain corporate earnings attributed to shareholders even when those earnings have not been distributed as cash. The dispute centered on the Mandatory Repatriation Tax introduced by the Tax Cuts and Jobs Act, which required U.S. shareholders of certain foreign corporations to pay tax on accumulated profits held offshore.

The taxpayers, Charles and Kathleen Moore, held shares in an Indian company that had reinvested its profits rather than distributing dividends. When the Mandatory Repatriation Tax applied to those retained earnings, the Moores argued that the tax violated the Sixteenth Amendment to the United States Constitution because it effectively taxed unrealized income.

The U.S. government maintained that Congress has long taxed shareholders on certain categories of corporate income attributed to them, even without a direct distribution.

According to the government, the Mandatory Repatriation Tax fit within this tradition and represented a permissible method of taxing previously untaxed foreign earnings.

The U.S. Supreme Court ultimately upheld the tax. The Court concluded that Congress may attribute realized corporate income to shareholders for tax purposes and impose tax liability accordingly, even if the shareholders have not personally received the income.

The decision has attracted considerable attention in tax policy discussions, particularly in debates surrounding proposals to tax unrealized gains or wealth. While the ruling addressed a specific international tax provision, it also clarified the constitutional boundaries of Congress’s authority to tax income attributed through corporate structures.

The case illustrates the continuing interaction between constitutional principles and modern international tax rules, as policymakers and courts navigate how evolving tax systems apply to complex global business arrangements.

Read the full English translation: 22-800 Moore v. United States (06/20/2024)