As the Supreme Court begins its new term, experts are keeping a close eye on a case that could have far-reaching effects on the U.S. tax code, including corporate revenue and future proposals for wealth taxation. This summer, the Supreme Court consented to hear Moore v. United States, a case involving a Washington couple with a controlling interest in KisanKraft, a profitable Indian agricultural company.
According to policy analysts, the plaintiffs’ dispute over the definition of income could have far-reaching ramifications. Matt Gardner, a senior fellow at the Institute on Taxation and Economic Policy who recently co-authored a report on the case, stated, “This could have the greatest fiscal policy implications of any court decision in the modern era.”
The case challenges a tax known as “deemed repatriation” that was enacted as part of the Republican tax revision of 2017. Designed as a transitional tax, the law imposed a one-time levy on foreign revenues and profits accumulated after 1986.
Despite the fact that the 16th Amendment outlines the legal definition of income, the Moore case queries whether individuals must “realize” or receive profits prior to being taxed. This issue has been raised during previous federal billionaire tax debates and may influence future proposals.
Read Also: Controversy Erupts as Men Infiltrate Women-Centric Tech Job Fair Under False Pretenses
A decision may affect pass-through enterprises.
Daniel Bunn, president and CEO of the Tax Foundation and author of a recent article on the subject, says that depending on how the court determines this case, the tax code could experience either minor ripples or significant changes.
If the court determines that the Moores incurred a tax on unrealized income and rules that the tax is unconstitutional, it could have implications for the future taxation of pass-through entities, such as partnerships, limited liability companies, and S-corporations, he said.
Bunn stated, “You must consider how the rules will affect your business, especially if you operate internationally.”
There is also the possibility of a “substantial impact” on federal revenue, which could affect future tax policy, according to Bunn. The Tax Foundation estimates that federal revenue would decrease by $346 billion over the next decade if declared repatriation were completely repealed for both corporations and non-corporations.
As a decision is not anticipated until 2024, it is difficult to foresee how the Supreme Court will rule on this case. Gardner added, “There is considerable uncertainty about the scope of this matter.”
Read Also: Biden Highlights Student Debt Relief Initiatives, Including $9 Billion in Loan Forgiveness
Source: CNBC
