Moore v. United States: The Supreme Court’s Tax Dilemma
Dec 13, 2023
In the world of taxes, all eyes have been on the Supreme Court and the case of Moore v. United States. What makes this case so monumental, you ask? It’s not every day that the Supreme Court hears arguments around tax laws affecting individuals, much less a high-stakes case that could redefine the meaning of taxable income.
At the heart of Moore v. United States is a provision of the Tax Cuts & Jobs Act (TCJA) enacted in 2017, requiring companies to pay taxes on foreign profits that had previously been untaxed. This mandatory repatriation tax is now being called unconstitutional by one Washington state couple.
In 2005, Charles and Kathleen Moore invested $40,000 in KisanKraft, a farm equipment retailer based out of India. The couple alleges that they never received any foreign profit payments from the company because all such profits were reinvested by KisanKraft. The Moores argue that such “unrealized gains” are not actually income and therefore should not be taxed. Their case argues that the TCJA provision violates apportionment requirements under the 16th Amendment because it allegedly taxes them on ownership of personal property — in this case, their KisanKraft shares — rather than on realized or received income.
While the Moores are simply seeking a refund of the one-time $15,000 increase in their tax bill due to the change in the law, the case carries much broader implications. A ruling in their favor could threaten other provisions of the tax code. The Justice Department has also noted that a ruling by the Supreme Court invalidating the mandatory repatriation tax could cost the U.S. government $340 billion over the next decade. That amount could grow exponentially if the decision invalidates other tax provisions as well.
While a ruling is not expected until June of 2024, some justices have signaled the possibility of upholding the tax by attributing the income earned by the foreign company to its shareholders. William Vaughan Company’s tax team is closely monitoring updates in the Moore v. United States case. Be sure to subscribe to our insights as we continue to share any breaking news on the ruling.
Categories: Tax Compliance
The Affordable Care Act Survives Yet Another Supreme Court Challenge
Jun 22, 2021
Last week, the U.S. Supreme Court ruled once again on the constitutionality of the Affordable Care Act (ACA) rejecting arguments that the ACA was unconstitutional under Congress’ taxing power. Last year, the Supreme Court heard testimony in California v. Texas which focused on whether the ACA’s individual mandate to maintain health insurance was beyond Congress’s powers given that it no longer raises tax revenues and, if so, whether other parts of the law would need to be struck down along with the mandate. This case marked the third time the court had heard a significant challenge to the law.
Justice Stephen Breyer delivered the 7-2 opinion which stated the individuals that brought the lawsuit challenging the ACA’s individual mandate did not have the standing to challenge the law: “ we conclude the plaintiffs in this suit failed to show a concrete, particularized injury fairly traceable to the defendants’ conduct in enforcing the specific statutory provision they attack as unconstitutional,” wrote Breyer.
What does this mean?
The Supreme Court upheld the ACA, including its many tax provisions.
Protective claims
If you filed a protective claim in hopes the Supreme Court would rule the ACA, and its many tax provisions, retroactively unconstitutional, these protective claims are no longer valid. Protective claims are filed to preserve the taxpayer’s right to claim a refund when that right is contingent on future events and may not be determinable until after the statute of limitations expires.
If you have questions regarding your individual circumstance, please contact your William Vaughan Company representative or call our office at the number below.
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Categories: Tax Compliance