The Supreme Court on Friday rejected a challenge to the constitutionality of the mandatory repatriation tax, a provision of the 2017 corporate tax reform law that critics have dubbed the Biden administration‘s “wealth tax.”
The 7-2 decision by Justice Brett Kavanaugh upheld the tax, which imposes a one-time levy on undistributed profits from U.S. shares of foreign corporations majority-owned by Americans.
“The question is whether that 2017 tax (known as the Mandatory Repatriation Tax or MRT) is constitutional under Article I, §§8 and 9 and the Sixteenth Amendment. This Court’s longstanding precedents establish that the answer is yes,” Kavanaugh wrote.
The decision stems from a case known as Moore v. United States brought by Charles and Kathleen Moore, a Washington state couple who argued that the $15,000 increase in their tax bill, due to the tax, was unconstitutional because it taxed unrealized income.
The Court’s majority sided with the Biden administration, which primarily argued that the Sixteenth Amendment permits Congress to tax income that foreign corporations actually received, even if it was attributed to U.S. shareholders.
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This decision supports the government’s position that the mandatory repatriation tax is a legitimate means of preventing U.S. shareholders from avoiding taxes by stashing profits in foreign corporations.
During oral arguments in the case, U.S. Solicitor General Elizabeth Prelogar contended that maintaining the corporate tax reform law would avert disruptions to the tax code and avoid what the government warned could be “several trillion dollars” in lost revenue.
This is a developing story and will be updated.
