The US Supreme Court in Washington, DC, on June 27, 2023.
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The Supreme Court will soon hear a case that could affect broad swaths of the U.S. tax code, corporate revenue and federal wealth tax proposals.
The case, Moore v. United States, is slated for the next court term and challenges a levy enacted through President Donald Trump’s 2017 signature tax overhaul. Originally designed as a transition tax, the levy aimed to collect a one-time tax from U.S. corporations that deferred income by keeping profits in foreign subsidiaries.
The plaintiffs are fighting taxes incurred via their investment in an India-based company by arguing about the definition of income. But experts say the Supreme Court decision may have broader implications.
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The Moore’s challenge revisits the law’s definition of income, as outlined by the 16th Amendment, and whether individuals and companies must “realize” or receive profits before incurring taxes on unrealized gains. It’s a lingering question amid past billionaire tax proposals.
While experts say Trump’s 2017 tax works differently than a wealth tax, there are still concerns about the Moore case. “This is taking a case with a completely different set of facts, and could have these very, very broad implications for other parts of the tax code,” said Amanda Parsons, an associate professor at the University of Colorado Law School who specializes in tax law.
“This is just a very dangerous thing that they’re playing with here,” she added.
What the case means for corporations
The Supreme Court ruling could invite litigation about Congress’ approach to taxing so-called pass-through entities, such as partnerships, limited liability corporations, and S-corporations, explained Chye-Ching Huang, the executive director of the Tax Law Center at New York University Law.
“That would create uncertainty and confusion about the correct tax treatment,” she said.
Other experts point to the possible implications for future corporate tax revenue.
“What this case is about is trying to make sure that corporations also pay the amount of tax that they’re supposed to pay,” said Susan Morse, a law professor and associate dean for academic affairs at the University of Texas at Austin School of Law.
“It’s a good illustration of how difficult it can be to resist corporations’ inclination and the push to try to avoid taxes and reduce their tax bills,” she said.
