Today the Supreme Court of the United States ruled in a 7-2 decision in the case of Moore v. United States that the Mandatory Repatriation Tax (MRT) was constitutional. The MRT was part of the Tax Cuts and Jobs Act (TCJA) of 2017. The National Taxpayers Union Foundation (NTUF) filed an amicus brief in support of neither party in the case, rejecting the Ninth Circuit Court of Appeals ruling that would have open the floodgates to additional taxes including a wealth tax but upholding the MRT as constitutional. Today the Supreme Court took much of the same tack, holding in a narrowly-tailored decision that the MRT was constitutional but declining to bless future wealth taxes.
The MRT was a one-time tax on deferred foreign income in closely-held corporations. The Moores had an ownership stake in an India-based company, and had deferred taking any distribution from their overseas investment. But the India company, which made farm equipment, was quite successful and grew. At issue was the MRT’s one-time tax to settle out assets held in foreign corporations and switch the United States to a territorial tax system.
Fortunately, while ruling against the Moore’s was upheld, Justice Brett Kavanaugh, who wrote the decision stressed several times that the court’s opinion pertained exclusively to the MRT and TCJA and did not mean any other tax scheme would be held constitutional. Justices Barrett and Alito wrote concurrences to emphasize that wealth taxes, not at issue here, would not necessarily be upheld by today’s decision.
“This is a narrow decision focused on the one-time international tax that was challenged. But the Court makes clear it is not opening the door to a wealth tax, which would still face constitutional problems as a tax on property,” said Joe Bishop-Henchman, executive vice president of NTUF.
NTUF’s brief, while not in favor of either party, did argue that the lower court’s ruling was unconstitutional in its broad approach to collecting taxes. The Supreme Court agreed by focusing this case solely on the merits of the MRT.
