For roughly a couple of hours earlier this month, the justices of the Supreme Court sounded like a group of financial advisors or tax professionals.
The slideshow below contains more than a dozen excerpts from the Dec. 5 arguments in Moore v. U.S. In the case, which revolves around the extent to which the 16th Amendment gives the federal government the “power to lay and collect taxes on incomes, from whatever source derived,” two investors in an India-based corporation are challenging a provision of the 2017 Tax Cuts and Jobs Act called the “mandatory repatriation tax” (MRT) that imposed a one-time duty on the earnings of foreign companies. The petitioners, a Washington state couple, argue that their $14,729 payment is unconstitutional because they never realized the earnings in a distribution.
That nominal sum could carry massive implications, if the Court were to hand down a decision defining “unrealized” income that is no longer subject to taxes or prohibiting the idea of a wide-ranging federal toll on wealth. Based on their questions and observations in discussions with Andrew Grossman — the lawyer representing the Moores — and U.S. Solicitor General Elizabeth Prelogar, speaking on behalf of President Joe Biden’s administration and the federal government, most experts said the justices sounded unlikely to deliver sweeping tax changes.
“While many lawyers and economists feared that a far-reaching opinion in an otherwise insignificant dispute could undermine the foundations of much of U.S. tax law, the justices seemed to realize they had fired up an earthmover when a shovel would do,” Urban Institute and Brookings Institution Tax Policy Center Senior Fellow Howard Gleckman wrote in a blog post.
The following lightly edited excerpts from the official transcript include questions and statements for Grossman and Prelogar from Justices Sonia Sotomayor, Brett Kavanaugh, Elena Kagan, Neil Gorsuch, Samuel Alito and Amy Coney Barrett. While part of the arguments dealt with precedent case law and legal distinctions, advisors and tax professionals will easily recognize terminology from their industry, such as the structure of companies known as S-corporations, references to mutual funds and retirement investment accounts, and the rules for foreign income under Subpart F of the Tax Code. The Court will decide the case in late spring or early summer.
To see more than a dozen excerpts from the Supreme Court arguments in Moore v. U.S., scroll down the slideshow. For a summary of the key takeaways from the case’s day at the Court, click here. And, for a look at the potential stakes of the case, follow this link.
