Amicus Brief: Moore v. United States

Does Congress have the power to tax citizens on their ownership of corporate shares that appreciate without being sold? The Ninth Circuit said that the answer is yes, announcing that realization of income “is not a constitutional requirement” for Congress’s exercise of its power to tax “incomes” without apportionment among the states (which is the constitutional requirement for direct taxes on property).

The case arose when Charles and Kathleen Moore, who 20 years ago invested $40,000 in a friend’s start-up to supply agricultural equipment to rural farmers in India, were assessed a one-time “deemed repatriation tax” under the 2017 Tax Cuts and Jobs Act. If that assessment is sustained, it would potentially open the door to an Elizabeth Warren-style federal wealth tax and otherwise represent a serious expansion of Congress’s taxing power. It would also stand at odds with the original meaning of the Sixteenth Amendment—which enabled the federal income tax—and a long line of U.S. Supreme Court precedents holding that realization is necessary for a taxpayer to have taxable “income.”

After the Ninth Circuit ruled against the Moores, they successfully petitioned the Supreme Court to take the case (which petition MI supported with an amicus brief). MI has now filed an amicus brief on the merits, joined by originalist professors Erik Jensen and James W. Ely. We argue that the Framers intended the Apportionment Clause to be a hard limit on the central government’s taxing powers; the drafters of the Sixteenth Amendment intended a narrow definition of “incomes” as traditionally understood; and thus, the Mandatory Repatriation Tax is unconstitutional. In this case, to be argued late this fall, the Court should preserve the free enterprise that a constitutionally limited federal government facilitates.

Ilya Shapiro is a senior fellow and director of Constitutional Studies at the Manhattan Institute. Follow him on Twitter here.

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