The Supreme Court upheld a tax law on foreign income, expected to generate $340 billion, which mainly affects foreign subsidiaries of domestic corporations.
The 2017 tax law provision applies a one-time tax on investors’ shares of profits that were not distributed to offset other tax benefits.
The big picture: The ruling by a 7-2 vote rejected a challenge supported by business and anti-regulatory interests that aimed to challenge the tax on foreign income.
- Justice Brett Kavanaugh emphasized in his majority opinion that the ruling was specific to the 2017 law and should not be interpreted as authorizing a broader effort to tax both entities and their shareholders.
- The case involved Charles and Kathleen Moore from Washington challenging a $15,000 tax bill on an investment in an Indian company, which they argued violated the 16th Amendment.
The other side: Justice Clarence Thomas, joined by Justice Neil Gorsuch, dissented, stating that the Moores paid taxes on an investment that never yielded any returns, and the tax should only apply to income realized by the taxpayer.
Go deeper: Despite ethical concerns and questions raised about the Moores’ case, the Supreme Court decision sided with upholding the tax law on foreign income.
- The case, known as Moore v. U.S., 22-800, had implications that could have jeopardized several provisions of the tax code and resulted in significant losses to the U.S. Treasury if decided in favor of the Moores.
