The U.S. Supreme Court recently upheld the constitutionality of the mandatory repatriation tax, known as the MRT, which was implemented in 2017 under section 965 of the Internal Revenue Code. This decision came after the Ninth Circuit’s ruling in Moore v. United States.
The MRT imposed a one-time tax on certain U.S. shareholders of foreign corporations based on their share of the foreign corporation’s earnings accumulated since 1986. It was part of the Tax Cuts and Jobs Act of 2017.
The Court’s decision was based on the challenge presented by the Moores regarding the MRT being considered an unapportioned direct tax on property under the Sixteenth Amendment. The Court ruled in favor of upholding the MRT, citing precedents that allow Congress to tax equity holders on their pro rata share of income attributed to them.
While this decision did not have the far-reaching implications some expected, it could impact future challenges to tax laws and policies. The Court did not address the constitutionality of a wealth tax on unrealized income or the attribution of a U.S. company’s income subject to corporate taxation to individual shareholders.
The opinions expressed by Jones Day provide insights into the implications of this decision for taxpayers and potential future challenges to tax laws. It is important for taxpayers to stay informed as this may not be the final word on the matter.