(Daily360.com) – The Supreme Court of the United States (SCOTUS) has a case before it that could have major tax ramifications going forward. The case was brought on behalf of a retired couple named Charles and Kathleen Moore and their dispute of the assessed tax liabilities on foreign investments. The couple is appealing a ruling by a lower court upholding the $15,000 charged in taxes relating to the investments.
At issue is the “mandatory repatriation tax (MRT),” which was created in 2017 under the Trump administration. The MRT is a tax payment to the U.S. government for shares held in certain foreign corporations. The Moore’s paid their $15,000 tax bill but then sued to get it back on the grounds that the MRT is unconstitutional. They say they never realized any gains from their investments. They show that they never took a profit from the business but instead constantly re-invested in the company.
The SCOTUS is hearing arguments from both sides of the matter. The lawyers for the United States said that ruling for the Moore’s would cause a “sea change” in tax law and cost the nation trillions of dollars in lost tax revenue. The Moore’s attorneys are making their case that the founders of the nation never intended for citizens to pay taxes on an income they never received.
Justices of the court took turns peppering the lawyers with questions. Justice Elena Kagan asked why the MRT was different from the long-standing history of taxes being charged on foreign investments. Justice Brett Kavanaugh questioned why this matter would be different from the way realized income attributed to shareholders was always treated by Congress and the courts. Kavanaugh also noted that they could decide this case in a narrow way, ruling it would fall under the 16th amendment and be a permissible tax.
Justice Neil Gorsuch pressed the U.S. attorney to specifically lay out what the limits of the Congress to tax its citizens are. Justice Samuel Alito questioned how far the government’s powers reach in deciding what someone must pay who has not actually taken a profit from their investments. However the SCOTUS decides, the decision will likely have a significant impact on the tax code and governmental power relating to taxes in the future.
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