Davis Polk partner Michael Mollerus discussed the Supreme Court decision in Moore v. United States with Law360.

The court ruled 7-2 that a provision of the 2017 Tax Cuts and Jobs Act known as the “mandatory repatriation tax,” does not violate the Constitution, affirming a decision by the Ninth Circuit. The provision required U.S. taxpayers who owned shares in foreign corporations to pay a one-time tax on their share of the corporation’s earnings. The court emphasized that its ruling is narrow and limited in nature, and did not answer the question of whether a wealth tax would be constitutional. It is limited to: (i) taxation of the shareholders of an entity, (ii) on the undistributed income realized by the entity, (iii) which has been attributed to the shareholders, and (iv) when the entity itself has not been taxed on that income.

The article notes that the court’s decision will likely not prevent lawmakers who are proponents of a wealth tax or a billionaire income tax from attempting to enact them.

“I don’t think it will have a chilling effect,” Michael said. “I think the people that are in favor of a wealth tax or a billionaires’ tax think it’s constitutional and will probably go ahead and adopt it and see if the court strikes it down.”

Supreme Court Leaves Lifeline For Billionaire Income Tax,” Law360 (June 21, 2024) (subscription required)