Moore v. United States: Avoiding A Damaging Limiting Principle In The 16th Amendment

Ari Glogower (Northwestern; Google Scholar), David Kamin (NYU), Rebecca Kysar (Fordham; Google Scholar), Darien Shanske (UC-Davis; Google Scholar), & Thalia T. Spinrad (NYU), Moore v. United States: Avoiding a Damaging Limiting Principle in the Sixteenth Amendment, 41 Yale J. on Reg.: Notice & Comment (Jan. 12, 2024):

The Supreme Court heard argument last month in Moore v. United States, a case with potentially broad implications for the income tax system. The case involves a challenge by the Moores, two individual taxpayers, to 26 U.S.C. 965, known as the Mandatory Repatriation Tax (“MRT”), which is a provision of the 2017 tax reform legislation. As the justices seemed to appreciate in the oral argument, however, a decision in the case could have effects far beyond that provision — and has the potential to undermine large swaths of the existing tax code enacted on a bipartisan basis over decades.

At oral argument, justices from across the ideological spectrum seemed focused on avoiding that outcome. However, even as the justices for the most part approached the petitioners’ claim skeptically, they raised questions for both sides in the case as to the appropriate limiting principle for determining what Congress can tax as income under the 16th Amendment.

In our amicus brief submitted to the Court, we explained why the Court does not have to define a limiting principle for the income tax in order to resolve this case.

Whatever those limiting principles could or should be, the tax at issue here is well within those boundaries. The petitioners claim that the MRT is a tax on property rather than on income since, they say, it taxes value that the petitioners did not directly realize. But, in fact, the income was realized at the corporate level by their company KisanKraft and then attributed to the petitioners as its owners. This attribution of an entity’s income to its owners is consistent with many other provisions in the income tax code governing the taxation of entities and their owners. The Court need only decide that this widespread form of taxation is well within the bounds of the 16th Amendment.

The justices should proceed with extreme caution in drawing new boundaries to the 16th Amendment that are unnecessary to resolve this case. In our amicus brief, we explain why, and the oral argument further evidenced the dangers of the Court engaging in line drawing that could undercut the income tax code in ways that the Court may not fully appreciate. The Court may eventually decide to address those boundaries, but it should wait until there is a case squarely presenting the issue and that allows the Court to fully wrestle with the implications.

In this post, we analyze several “limiting principles” to the 16th Amendment that were discussed in oral argument, and explain how many—though not all—of these could significantly undercut the income tax. 

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 (New York Times Op-Ed) (Dec. 12, 2023)
• Conor Clarke (Washington University), What Issues Are Fair Game In Moore v. United States?, 40 Yale J. on Reg.: Notice & Comment (Dec. 16, 2023)
• Seven Tax Experts, The Biggest Implications Of Moore v. United States, 181 Tax Notes Fed. 2147 (Dec. 18, 2023)
• Marie Sapirie, 2023 Persons Of The Year: Kathleen And Charles Moore, 181 Tax Notes Fed. 2091 (Dec. 18, 2023)