Supreme Court upholds mandatory repatriation tax in Moore case

The mandatory repatriation tax (MRT) was enacted in 2017 as part of the Tax Cuts and Jobs Act and the provision has raised more than $300 billion of revenue for the federal government since then.

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In a 7-2 decision, the Supreme Court upheld the mandatory repatriation tax provision in the 2017 tax law passed during former President Donald Trump’s term. The mandatory repatriation tax (MRT), which was part of the Tax Cuts and Jobs Act, has raised more than $300 billion of revenue for the federal government since then.

The MRT decided in the Moore v. United States case “imposed a one-time tax on Americans who owned shares in foreign corporations, even if the corporation hadn’t distributed any earnings to the taxpayer,” The Hill reported.

“So the precise and narrow question that the Court addresses today is whether Congress may attribute an entity’s realized and undistributed income to the entity’s shareholders or partners, and then tax the shareholders or partners on their portions of that income,” Kavanaugh said. “This Court’s longstanding precedents, reflected in and reinforced by Congress’s longstanding practice, establish that the answer is yes.”

Charles and Kathleen Moore challenged the provision in the Supreme Court after paying roughly $15,000 in taxes for their ownership of 13 percent of the stock of KisanKraft, an Indian company that manufactures farm equipment.

The seven justices ruled against the Moores because they found the income they invested in KisanKraft was realized—income earned by the offshore corporation—because KisanKraft realized the income, and therefore, Congress attributed the income to “shareholders” and taxed that income appropriately.

While Congress can levy taxes “on incomes, from whatever source derived” under the 16th Amendment, the Supreme Court’s recent decision “leaves unresolved whether income must be realized for it to fall under the Amendment’s carveout,” The Hill reported.

The Court concluded that it “need not resolve” the parties’ disagreement over realization, instead it would leave those “potential issues for another day.”

Supporters of the provision are calling the Supreme Court’s ruling an important victory for fair taxation.

“Today’s ruling is a win for anyone who didn’t shelter income in offshore tax havens before 2018,” Amy Hanauer, ITEP executive directory, said. “It preserves close to $300 billion of tax revenue paid by some of the biggest and most profitable corporations in human history. If the Court had retroactively repealed this one-time tax, any other way of making up the resulting shortfall would have fallen far more heavily on middle-and-low-income families and small businesses. The Supreme Court also could have taken an activist turn of the worst kind by preemptively ruling federal wealth taxes unconstitutional today. To its credit, the Court did not do so.”

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