Moore v. United States
Issues
Can Congress pass a statute under the Sixteenth Amendment taxing income that is not yet realized by the taxpayer without apportioning the tax among the states in proportion to their populations?
This case asks the Supreme Court to determine whether a taxpayer must realize income under the Sixteenth Amendment before the federal government can tax it without apportionment among the states. In 2017, as part of the Tax Cuts and Jobs Act, Congress enacted a new, one-time Mandatory Repatriation Tax on taxpayers based on their ownership stake in a controlled foreign corporation. The tax applied retroactively on all income earned by the corporation after 1986, regardless of whether the corporation distributed its earnings to its shareholders. Charles and Kathleen Moore argue that the Mandatory Repatriation Tax, which they were forced to pay, is unconstitutional because the Sixteenth Amendment imposes a realization requirement on income for the federal government to tax it without apportionment. The United States contends that no such realization requirement exists, and that Congress has long taxed individuals based on their share of undistributed corporate earnings without constitutional challenge. The outcome of this case has important ramifications for Congress’s power to impose income taxes and on the complexity and certainty of tax planning.
Questions as Framed for the Court by the Parties
Whether the 16th Amendment authorizes Congress to tax unrealized sums without apportionment among the states.
In 2005, Petitioners Charles and Kathleen Moore bought an 11% stake in KisanKraft, a Controlled Foreign Corporation (“CFC”) based in India. Moore v. United States at 4–5. A CFC is a corporation in which U.S. persons possess more than 50% ownership or voting rights. Id. at 5. KisanKraft made profits every year but never distributed any of those profits to its shareholders.
The authors would like to thank Professor Robert A. Green for his insights into this case.
Additional Resources
- Guide to Amicus Briefs Filed in Moore v. United States, The Tax Law Center, NYU Law.
- Thomas A. Barthold, Letter to U.S. Representative Richard E. Neal on Impact of Moore on Tax Code Provisions, Joint Committee on Taxation, Congress (October 3, 2023).
- Daniel Bunn et al., How the Moore Supreme Court Case Could Reshape Taxation of Unrealized Income, Tax Foundation (August 30, 2023).
- Eric Toder, The Potential Economic Consequences of Disallowing the Taxation of Unrealized Income, Tax Policy Center (October 11, 2023).