Grewal: The Mandatory Repatriation Tax Is Not A Tax

Andy Grewal (Iowa; Google Scholar), The Mandatory Repatriation Tax Is Not a Tax:

In Moore v. United States, the Supreme Court has agreed to address whether the Sixteenth Amendment allows Congress to tax unrealized sums. The case arises over Section 965(a). Under that section, taxpayers with substantial equity interests in a foreign corporation must immediately include in income their shares of the corporation’s accumulated earnings. The parties and commentators frequently say that Section 965(a) establishes a “Mandatory Repatriation Tax.”

This amicus brief makes a subtle but critical point: Section 965(a) does not establish a tax. It requires only an income inclusion. The Sixteenth Amendment should apply flexibly when Congress adds an income item to the tax base, even if that item allegedly violates the realization requirement.