Supreme Court Will Hear Case That Could Upend The Current Tax System

All eyes will be on the Supreme Court on Tuesday, Dec. 5, 2023, as oral arguments are presented in Moore v. United States. The case centers on a 2017 Tax Cuts and Jobs Act provision that requires companies to pay tax on previously untaxed foreign profits.


The petitioners, Charles and Kathleen Moore, own a 13% stake in an Indian corporation, KisanKraft Machine Tools Private Limited.

In 2018, the Moores learned that they were subject to a mandatory repatriation tax, or MRT, under the 2017 tax reform law (sometimes referred to as the Tax Cuts and Jobs Act, or TCJA). They had never paid tax on their earnings because previous tax law allowed income earned abroad to remain deferred until it was repatriated—they had never claimed their earnings. Under the new law, the Moores were subject to tax going back to their original investment at a 15.5% tax rate—netting them a tax bill of $14,729.

The Moores paid the tax and sued for a refund, claiming the tax is unconstitutional.

(You can read more about the facts of the case and the MRT in my previous article here.)

Question in Moore

Several articles have been written about what the Supreme Court will address in Moore. As noted on the docket, the question presented is simply: Whether the Sixteenth Amendment authorizes Congress to tax unrealized sums without apportionment among the states.

Moores’ Arguments

The Moores argue that the MRT violates the Constitution’s apportionment requirements because it taxes them on ownership of personal property—their KisanKraft shares—and not on income they had realized or received.

They further argue that the Sixteenth Amendment refers to the ordinary meaning of income that typically requires realizing a gain. The lower court’s decision, they claim, is at odds with historical decisions that have found the Sixteenth Amendment’s exemption from apportionment to be limited to taxes on realized gains.

And importantly for tax policy, they allude to a suggested wealth tax being touted by the White House and some in Congress as another example of an unconstitutional tax on unrealized gains.

Others Weigh In

These arguments feel like bigger questions than simply whether the MRT is constitutional, which may explain why everyone from taxpayers to tax professors to tax pundits have weighed in—dozens of amicus briefs have been submitted in favor of and opposed to the arguments made in Moore.

When cases like this attract additional attention, those with interest or expertise in the subject, but aren’t a party to the litigation, may also file briefs to explain their point of view. It generally happens where matters of public interest are at stake. These briefs are called amicus briefs or, since we lawyers love Latin so much, amicus curiae. It means, literally, “friend of the court.”

Those who have submitted an amicus brief include George A. Callas, who helped develop section 965 (central to the case) as Senior Tax Counsel for former Speaker of the House of Representatives Paul Ryan, and Mindy Herzfeld, a professor of tax practice at the University of Florida Levin College of Law. Counsel of Record in the case is Amit Agarwal, co-chair of Holland & Knight’s appellate litigation team and a partner in the firm’s Tallahassee and Washington, D.C., offices.

Callas filed his amicus brief in October of 2023, noting that many in the tax world “felt caught off-guard” when the Supreme Court granted cert earlier in the year.

(If the Supreme Court decides to hear the matter, it’s called a grant of certiorari—by practice, at least four justices must vote to hear the case to be granted cert. Usually, cert is granted in a case of considerable importance, or one involving a circuit split. A circuit split happens when the appellate courts disagree on a matter of federal law, reaching different conclusions about its application—that did not happen here.)

Callas worked directly on the TCJA and was a congressional Republican staffer for nearly 15 years. Notably, from April 2009 until the end of 2015, he served as senior tax staff on the House Committee on Ways and Means under three Republican chairmen, including Chairman David L. Camp (R-MI) and Paul D. Ryan (R-WI). He says that section 965 is “compliant with the Sixteenth Amendment and not analogous to a wealth tax.”

Despite efforts by some to hijack the case as left-versus-right, Callas firmly believes that the issue is not partisan. And, he says, efforts to characterize the tax as a tax on unrealized gains on property are flawed—the tax was designed to capture previously untaxed foreign profits.


The TCJA marked a dramatic change in how foreign profits were taxed. For years, the U.S. had struggled with how to treat companies that earned profits overseas. Generally, our global tax system imposes tax on all income earned by U.S. taxpayers no matter where earned. However, in some circumstances, companies could avoid U.S. tax by holding foreign profits overseas indefinitely. The TCJA made significant changes to encourage companies to repatriate earnings. And to ensure that foreign profits that had not yet been taxed didn’t completely escape tax, the new law imposed a tax on existing foreign profits that had not yet been repatriated.

The Moores claim that the tax is unconstitutional, essentially arguing that income should never be taxed unless it’s actually in hand. According to Callas, if that argument were found to be valid, it would upend large swaths of the tax code. Pass-through entities like partnerships, for example, do not pay tax—they pass the tax characteristics to the owners. Owners report their share of income on a Schedule K-1, even if they don’t have the payment in hand. To do otherwise would mean that the income would escape taxation altogether, which Callas suggests would be an absurd result.

As Callas noted in his brief, Ryan has estimated that as much as a third of the tax code could be deemed unconstitutional if the petitioners prevail. The consequences, Callas says, are enormous.

What To Watch For

The framing of the issue at oral arguments could influence how the Supreme Court rules. Callas notes that it’s essential that the justices understand that the tax is focused on income, not property. That distinction is not only meaningful for the Moores’ immediate case, but for future tax policy. As has been widely discussed, some of those in support of the petitioners are hoping for a more significant ruling that could preemptively strike down future legislation. Callas says that those supporters have made clear that they’re trying to get an advisory opinion ruling opposing a wealth tax through the back door. That’s not, he stresses, what section 965 is about.

While it’s often difficult to parse how a justice might be leaning during oral arguments, Callas is hopeful that at least two or three more conservative justices will ask questions skeptical of the petitioners. If he hears questions from the justices that describe the provision as the inclusion of previously deferred income, that would be a good sign. But, he says, focusing on the word realization “makes me more nervous.”

Agarwal agrees, noting that he hopes to hear some questions that test the petitioners and push back on some of their arguments. He also expects some engagement on the practical implications of the case, noting that Supreme Court cases can often have an impact that reach beyond the immediate issue.

Callas will also be looking for questions that reveal the framing of section 965. A considerable portion of his brief focuses on that history, going back to 2011 when members of Congress were trying resolve some of the problems with multinational corporations that the TCJA also sought to address.

If the focus is on the broader arguments made by the petitioners, Callas believes that it would weaken the chances that they will prevail. It could be difficult for the petitioners to explain why other parts of the tax code (like the taxation of pass-through entities and global intangible low-taxed income, or GILTI, provisions) are Sixteenth Amendment compliant under some of their arguments—and he would expect skepticism from the justices that those other parts of the tax code could be distinguished.

Additionally, a broad Supreme Court ruling favoring the petitioners would result in chaos, says Callas. And a Justice Roberts-led court “is not going to want chaos.”

A worst-case scenario, according to Callas, would be to see the Court take Moore’s theory literally. A best-case scenario, he suggests, would be to see some of the conservative justices on the Court trying to find their way to a narrow ruling. There is, he claims in his brief, only one answer: the text of Section 965(a) is clear and does not violate the Constitution.

More Info

The case is Moore v. United States.

You can read Callas’ amicus brief here. Other amicus briefs can be found on the docket available on the Supreme Court website.

Oral arguments are scheduled for Tues., Dec. 5, 2023, at 10 a.m. ET. An audio feed will be live-streamed, and the audio will be available on the Supreme Court’s website later in the day. The Forbes tax team will also have coverage of the arguments.

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