Most constitutional arguments happen in law schools and appellate briefs. This one happened in my clients’ portfolios.Moore v. United States, decided by the Supreme Court in June 2024, asked a question that sounds technical and isn’t: can the federal government tax income that has never been received? The case involved Charles and Kathleen Moore, who held a minority stake in KisanKraft Machine Tools Private Limited, an American-controlled corporation based in Bangalore, India. They had never received a dividend, never repatriated a dollar, never seen the earnings in their bank account. Under the 2017 Tax Cuts and Jobs Act’s Mandatory Repatriation Tax, Congress deemed those retained foreign earnings to have been distributed anyway and taxed the Moores on income they hadn’t actually received. The Moores argued that the Sixteenth Amendment only authorizes taxation of realized income — money actually received — and that taxing unrealized, undistributed corporate earnings exceeded Congress’s constitutional authority.
JUDGE BLOCKS TRANSFER OF TRANSGENDER INMATES BACK TO MEN’S PRISONS, SETTING THE STAGE FOR BROADER JUDICIAL CLASH
The Court ruled seven to two against them. Justice Brett Kavanaugh, writing for the majority, held that the Sixteenth Amendment permits taxation of an individual’s pro-rata share of corporate income, realized or not, when Congress so directs. Justices Clarence Thomas and Neil Gorsuch dissented, arguing that the majority had effectively blessed a wealth tax without saying so, and that the constitutional line between an income tax and a direct tax on property, which the Sixteenth Amendment was designed to address, had been quietly erased.
