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Thursday, August 3, 2023
Hemel: The Low And Excessive Stakes Of Moore
Daniel J. Hemel (NYU: Google Scholar), The Low and Excessive Stakes of Moore, 180 Tax Notes Fed. 563 (July 24, 2023):
Moore, the problem to the constitutionality of the obligatory repatriation tax slated for argument on the Supreme Court docket subsequent time period, seems at first look like a battle between two completely different definitions of earnings.
On one facet, petitioners Charles and Kathleen Moore — cheered on by the Chamber of Commerce and the Wall Road Journal editorial board — argue that, for sixteenth Modification functions, “earnings” requires a realization occasion such because the receipt of cash or an alternate of property. That idea, if it prevails, would forged doubt on quite a few code provisions starting from the unique situation low cost guidelines to the mark-to-market regime for regulated futures contracts.
On the opposite facet, the solicitor normal argues that the sixteenth Modification permits Congress to tax earnings on a realization foundation and an accrual foundation, with each sorts of taxes passing constitutional muster. That view has represented the standard knowledge amongst tax students for many years, although the Supreme Court docket has by no means endorsed it in as many phrases.
However there’s extra to Moore than meets the attention.
Even when the Moores persuade the Court docket that the sixteenth Modification embeds a realization requirement, the petitioners gained’t essentially prevail on their refund declare — the justices might maintain that earnings taxation requires realization and that the obligatory repatriation tax satisfies that requirement, although many different code provisions won’t.
Inversely, even when the justices agree with the federal government that the sixteenth Modification authorizes accrual-based in addition to realization-based taxation, the Moores may nonetheless win their case: The Court docket might maintain that the sixteenth Modification permits an accrual tax like an annual mark-to-market earnings tax however that the obligatory repatriation tax, due to its unusually lengthy temporal attain, lies outdoors Congress’s sixteenth Modification energy.
The upshot is that for nearly everybody besides the Moores themselves, the end result within the case issues lower than the reasoning that the justices embrace. A win for the federal government could develop into a Pyrrhic victory for proponents of expansive congressional energy underneath the sixteenth Modification. And a win for the Moores on a slim idea of the case may go away Congress’s taxing energy largely intact.
Prior TaxProf Weblog protection:
https://taxprof.typepad.com/taxprof_blog/2023/08/hemel-the-low-and-high-stakes-of-moore.html
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