Clarke: What Issues Are Fair Game In Moore v. United States?

Conor Clarke (Washington University; Google Scholar), What Issues Are Fair Game in Moore v. United States?, 40 Yale J. on Reg.: Notice & Comment (Dec. 16, 2023):

On December 5th, the Supreme Court heard oral argument in Moore v. United States, a constitutional challenge to the mandatory repatriation tax (“MRT”) in the 2017 Tax Cuts and Jobs Act.  The case raises basic questions about the scope of Congress’s taxing power, and has the potential to reshape and limit federal taxation. ...

I came away from the argument with the feeling that the government was going to win:  The swing justices seemed to have little interest in a decision that might upset longstanding aspects of the Internal Revenue Code, and seemed unpersuaded by the petitioner’s efforts to distinguish the MRT from existing federal taxes that attribute entity-level earnings to the entity’s owners.  But I was also struck by the confusion and controversy over what theory might uphold the MRT—and, indeed, what theories were even properly before the Court.  Several Justices expressed view that two seemingly appealing theories had been forfeited, insufficiently briefed, or not included in the question presented.  So it’s worth asking:  What issues are actually fair game?  My answer is that the two ‘compromise’ theories in question are properly before the Court, and the Court can address them as needed.

The first issue is whether the MRT can be construed as a “duty” or “excise” under Article I Section 8—sometimes referred to as an “indirect tax”—and therefore not subject to the constitutional apportionment requirement that applies to “direct taxes.”  I’ve written about the excise argument elsewhere, and I consider it the best frame for the MRT:  The Article I power to impose duties and excises has always been the natural framework for taxing business activities, including foreign-affiliated business activities. ...

The second issue concerns whether there was “realization” in this case or not.  In its brief at the Supreme Court, the government’s primary submission is that it doesn’t matter, because the Sixteenth Amendment doesn’t require “realization” at all.  But in her oral argument the solicitor general made the pitch that “the Court doesn’t actually need to resolve any fundamental questions in this case about whether the Sixteenth Amendment requires realization,” because “[t]he MRT taxes income that was actually realized by the foreign corporations, and Congress permissibly attributed the tax on that realized income to U.S. shareholders.” The Court, she continued, “could say only that and affirm.”  ...

Even if you’re unpersuaded on the specifics above, it’s worth noting that the Court has discretion here.  Ordinarily, the Court does not decide questions not raised or argued.  But refusing to consider arguments not waived is prudential and not mandatory—and, as Justice Scalia once put it, “there are times when prudence dictates the contrary.” It would be imprudent for the Court to pass judgment on the constitutionality of an important federal law while holding up blinders to some of the most important constitutional arguments.

Prior TaxProf Blog coverage:

• Christopher Cox (Former Rep. (1989-2005) & SEC Chair (2005-2009)) & Hank Adler (Chapman), The Ninth Circuit Upholds A Wealth Tax (Jan. 30, 2023)
• Reuven Avi-Yonah (Michigan), If Moore Is Reversed, 179 Tax Notes Fed. 2215 (June 26, 2023)
• John Brooks (Fordham) & David Gamage (Indiana), Moore v. United States and the Original Meaning of Income (June 27, 2023) (reviewed by Michelle Layser (San Diego) here) (presented at Columbia workshop)
• Daniel Hemel (NYU), The Low And High Stakes Of Moore, 180 Tax Notes Fed. 563 (July 24, 2023) (reviewed by Young Ran (Christine) Kim (Cardozo) here)
• Alex Zhang (Emory), Moore, Eisner v. Macomber, and the Future of Structural Tax Reform, 92 Geo. Wash. L. Rev. __ (2024) (Aug. 29, 2023)
• Joseph J. Thorndike (Tax Analysts), Moores Lean On 1916 Tax Expert To Argue No Realization Means No Income
• Thomas Lee (BYU), Lawrence Solum (Virginia), James Cleith Phillips (Chapman) & Jesse Egbert (Northern Arizona), Moore, Corpus Linguistics, And The Original Public Meaning Of The Sixteenth Amendment (Sept. 14, 2023)
• Reuven Avi-Yonah (Michigan), Moore Questions Than Answers, 180 Tax Notes Fed. 2256 (Sept. 25, 2023)
• Christopher Hanna (SMU), Moore, The 16th Amendment, And The Underpinnings Of The TCJA’s Deemed Repatriation Provision (Sept. 28, 2023) (reviewed by Mirit Eyal-Cohen (Alabama) here)
• Joint Committee on Taxation, Tax Code Provisions Implicated In Moore (Oct. 3, 2023)
• Natasha Sarin (Yale), The Supreme Court Tax Case That Could Blow A Hole In The Federal Budget (Oct. 7, 2023)
• John Brooks (Fordham) & David Gamage (Indiana), “From Whatever Source Derived”: The Sixteenth Amendment and Congress’s Income Tax Power (Oct. 9, 2023) (reviewed by David Elkins (Netanya) here and Blaine Saito (Ohio State) here) (presented at Loyola-L.A. workshop and San Diego workshop)
• Steven Rosenthal (Tax Policy Center), Moore Could Invalidate Decades Of Tax Rules, 181 Tax Notes Fed. 285 (Oct. 9, 2023)
• Lawrence Zelenak (Duke), Reading The Taxpayers’ Brief In Moore (Oct. 18, 2023)
• NYU Tax Law Center, Guide To Moore (Oct. 25, 2023)
• Blaine Saito (Ohio State), Review Of  “From Whatever Source Derived”: The Sixteenth Amendment and Congress’s Income Tax Power, by John Brooks (Fordham) & David Gamage (Indiana) (Oct. 27, 2023)
• Tax Prof Amicus Briefs In Moore v. United States, 23 For Government, 1 For Taxpayer (Oct. 31, 2023)
• Steven Calabresi (Northwestern), Moore: Taxes On Wealth And Unrealized Capital Gains Are Unconstitutional (Nov. 1, 2023)
• Michael Graetz (Columbia), To Avoid The Moore Morass, The Court Should DIG It (Dismiss As Improvidently Granted), 181 Tax Notes Fed. 1253 (Nov. 13, 2023)
• Taxpayer's Reply Brief In Moore v. United States, 'Macomber Decided The Question Of Realization, Decided It Correctly, And That Holding Remains Good Law' (Nov. 17, 2023)
• Steven Calabresi (Northwestern), Amar Brothers' Moore Amicus Brief Ignores Constitution's Plain Meaning To Justify Taxing Unrealized Gains (Nov. 25, 2023)
• Listen To Moore v. United States Supreme Court Oral Argument Today At 10:00 AM ET (Dec. 5, 2023)
• Hot Takes On Yesterday's Moore v. United States Supreme Court Oral Argument (Dec. 6, 2023)
• More Reaction To The Supreme Court Oral Argument In Moore v. United States (Dec. 8, 2023)
• Joseph Fishkin (UCLA) & William E. Forbath (Texas), Moore, The Rich, And The Supreme Court (Dec. 12, 2023)