Part 50 – Moore: The Government And The Tax Academics Strike Back


The U.S. Supreme Court will hear the case of Charles G. Moore v. United States on December 5, 2023. It is certain to be the most closely watched oral argument ever. I had originally considered travelling to DC to observe the spectacle in person. But, I have no desire to stand in a long line. I will have to settle for listening to audio online.

The government’s reply was filed on October 16, 2023. It has been supported by (so far) a relatively small number of amicus briefs from various tax academics (law professors). The purpose of this post is to offer my impressions of what I have read so far. There is a saying that two good trial lawyers are like two ships passing in the night (each with a different theory of the case). This is also descriptive of the briefs (collectively) in support of the Moores and the briefs (collectively) in support of the government.


Part A – A Review – What is the Moore case actually about?
Part B – Some preliminary questions – in the context of understanding the 16th amendment:
Part C – The government’s reply and the “tax academic” supporters are notable in that they:
Part D – An attempt to consolidate what the government and tax profs are saying …
Part E – Retroactivity – An Uncomfortable Truth
Appendix – The Tax Law Center


Part A – A Review – What is the Moore case actually about?

What the Moore case is actually about is different from the QUESTION PRESENTED that the Court has agreed to hear.

The QUESTION PRESENTED to the Supreme Court is:

“Whether the Sixteenth Amendment authorizes Congress to tax unrealized sums without apportionment among the states.”

Hmmm … the average person would NEVER understand what the question is asking.

Perhaps, we start with the text of the 16th Amendment of 1913:

“ARTICLE XVI. The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

Therefore, the question addressed to the court is whether “unrealized sums” can meet the test of “income” under the 16th Amendment.

To put it another way:

Can one be forced to pay tax on income that has never been received?

Part B – Some preliminary questions – in the context of understanding the 16th amendment:

Assuming both the income and taxation take place in the same tax period

1. Assuming income has NOT actually been received: Does the 16th Amendment require that income actually be realized/received. (Is “deemed income” sufficient to qualify as income even though nothing has been received that would allow the person to pay the tax?)

2. Assuming income has actually been received: Does the 16th Amendment require that the person required to pay the tax on the income be the person who received the income.

Assuming the income was realized in the past when it was not taxable and the legislation retroactively deems that income to be taxable.

3. Does retroactivity matter?

These are theoretical questions. The danger is in trying to answer the question without an understanding of context.

What the Moore case is contextually about is:

As the late tax historian Charles Adams noted: As goes taxation so goes civilization.

– the theoretical QUESTION PRESENTED in in the context of the application of the IRC 965 to individual U.S. citizens (the Moores).

– Contextually, the question is whether Congress can retroactively require an individual to pay tax on 31 years of income earned by a foreign corporation even if the individual never received any of the income from the corporation. Contextually the 965 MRT confiscated the retirement pensions of a significant number of individual Americans abraod.

Part C – The government’s reply and the “tax academic” supporters are notable in that they:

1. Hardly acknowledge that the Moores are individuals and NOT corporations

2. Neither acknowledge nor/discuss the fact that the individuals did NOT receive the benefits that corporations received under the TCJA

3. Do not reference the unbelievable carnage inflicted in individuals generally and Americans abroad particularly.

4. Do not acknowledge that the MRT retroactively attributed the earnings of the corporation to the individual shareholder which is very different from attributing current earnings in real time to individual shareholders.

Collectively these four points are indicative of the disconnect from and the contempt that the government and tax academics have for individual Americans. (Outside the context of their respective briefs various tax academics have used “Tax Notes” as their preferred forum to exhibit ridicule and contempt for individual tax payers generally and toward the Moores specifically.)

Therefore, when analyzing these briefs it’s important to understand that they are completely theoretical and completely disconnected from the reality of the context. In fact, I suggest that no person reading these briefs would understand them to be about the government’s imposing retroactively attributing 30 years of a corporations’s income to an individual shareholder (never received) and then imposing a present day tax on that individual. But then again, maybe the tax academics don’t understand that point either!

Part D – An attempt to consolidate what the government and tax profs are saying …

The general sentiments that unite the government and its supporters appear to be:

The United States has the right to tax all income that is clearly realized. It is the role of the tax laws to (1) ensure that all realized income is taxed and (2) decide which party should bear that tax. There is absolutely no requirement that the party required to pay the tax must be the party who received the income. Contextually, the United States has a long and rich tradition in requiring that the shareholders of a corporation pay the tax on profits earned by the corporation. This is as American as “apple pie”.

The question of “realization” is completely irrelevant because it is clear that Kissankraft did realize income. The real issue is whether that income can be attributed to the Moores.

A fundamental assumption appears to be that that the use of corporations is for the avoidance of taxation. This may be an American perspective. It is not the perspective of how corporations are used in other countries.

They are uncomfortable with the fact of “retroactivity” in Moore.

Part E – Retroactivity – An Uncomfortable Truth

Tax Law Center writes in their brief:

Unable to distinguish the MRT from well-established features of the tax system, petitioners end up retreating to an argument that the MRT reaches too far back in time. But Congress’s decision to end the deferral of taxation on income realized over multiple years does not somehow transform the taxation of that income into something other than an income tax. The underlying tax base is still income because it reaches net gain. That it was realized over multiple years is irrelevant. Indeed, petitioners’ fallback argument has little to do with the Sixteenth Amendment and nothing to do with realization. Rather, it is a repurposed Fifth Amendment argument about retroactivity — and one that petitioners made below, rightly lost under well-established doctrine, and then abandoned. Thus, this alternative claim is not before the Court in this case. The Court should decide only the narrow issue before it: whether Congress may attribute income realized at the corporate level to the corporation’s shareholders and impose a tax on that income. Relying on decades of judicial precedent and congressional action permitting the attribution of income among related parties, this Court should answer yes.”

The Government writes at page 41 …

“There are only two genuine distinctions between the MRT and the Subpart F regime, but neither affects the Sixteenth Amendment analysis. First, the MRT and Subpart F tax different forms of income. See Pet. Br. 45. Whereas the MRT taxes “accumulated post-1986 deferred foreign income,” 26 U.S.C. 965(a)(1) and (2), Subpart F taxes various other categories of income, see p. 28, supra. Yet both taxes are equally consistent with the Sixteenth Amendment, which allows Congress to tax “incomes, from whatever source derived.” U.S. Const. Amend. XVI (emphasis added).

Second, the MRT and Subpart F tax income earned over different time periods. Whereas the MRT applies once and taxes certain income earned and retained since 1986, 26 U.S.C. 965(a), Subpart F primarily taxes income earned annually, 26 U.S.C. 951(a)(1). Petitioners contend (Br. 51) that the MRT’s 30-year time horizon renders it suspect. But they identify nothing in the Sixteenth Amendment’s text or history suggesting that Congress must tax income at any particular frequency—or that Congress relinquishes its power to tax income that has been retained for some unspecified amount of time. See PPL Corp., 569 U.S. at 341 (hold- ing that a retroactive tax on several years of “actual, realized net income in hindsight” is an income tax). In theory, the MRT’s time horizon could be relevant to an argument that it is an impermissibly “retroactive tax provision under the Due Process Clause.” United States v. Carlton, 512 U.S. 26, 30 (1994). But petitioners made that argument in the Ninth Circuit, the court correctly rejected it, and petitioners did not seek certiorari on it. See Pet. App. 18-19. Petitioners cannot now repackage their failed retroactivity argument as a Sixteenth Amendment one.”

Interested in Moore about the § 965 transition tax?

Read “The Little Red Transition Tax Book“.

John Richardson – Follow me on Twitter @Expatriationlaw


Appendix – The Tax Law Center

The Tax Center – @TaxLawCenterNyu

Two interesting articles from the Tax Law Center …

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