Moore v. United States
The Supreme Court upheld a 2017 federal tax requiring American shareholders of foreign companies to pay taxes on a decade of accumulated corporate profits that were never distributed to them — ruling that Congress has long-established power to attribute a corporation's earnings to its shareholders and tax them on that income.
The decision preserves hundreds of billions of dollars in revenue from the 2017 Tax Cuts and Jobs Act and protects the legal foundations of pass-through taxation used for partnerships and S corporations, while deliberately leaving open the larger question of whether Congress could ever tax unrealized investment gains like rising stock values.
How it got here: A federal district court dismissed the Moores' refund suit; the Ninth Circuit affirmed; the Moores sought Supreme Court review on their Direct Tax Clause argument, and the Court agreed to hear it.
The Case in Depth
What happened
In 2006, Charles and Kathleen Moore invested $40,000 in KisanKraft, an American-controlled Indian agricultural tools company, receiving a 13% ownership stake. The company earned substantial profits over the next eleven years but never distributed them to shareholders. When Congress passed the 2017 Tax Cuts and Jobs Act, its new Mandatory Repatriation Tax charged the Moores $14,729 — their share of KisanKraft's decade of accumulated earnings — even though they had never received a cent from the company.
The question before the Court
Could Congress impose a one-time tax on American investors for their portion of a foreign company's accumulated profits that were never actually paid out to them as dividends or other distributions?
The Court's answer
Yes — Congress had the power to impose the Mandatory Repatriation Tax. The Court reframed the question: rather than asking whether the Moores personally realized income, it asked the narrower question of whether Congress can take income a corporation has already earned, attribute it to shareholders, and tax those shareholders on their share. The answer is yes. A consistent line of Supreme Court decisions from 1925 through 1938, reinforced by Congress's practice since 1864, establishes that Congress may treat any business entity as a pass-through — taxing either the entity itself or its shareholders on the entity's undistributed earnings. Either approach is a tax on income and requires no apportionment.
The Court cabined its ruling carefully: it applies only when Congress taxes shareholders on income the entity has already realized, attributes that income to the shareholders, and has not also separately taxed the entity on the same earnings. The Court explicitly declined to decide whether a tax on income that no one has yet realized — for example, a tax on the rising paper value of an investment — would be constitutional.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
American investors in foreign companies will not receive refunds under the Mandatory Repatriation Tax, which raised roughly $340 billion. More broadly, Congress keeps its flexibility to use pass-through tax structures across the entire tax code — including for the millions of partnerships and S corporations used by small businesses. The unresolved question of whether a wealth tax or a tax on unrealized investment gains would be constitutional remains open for future cases.
What changes now
The Ninth Circuit's judgment stands, and the Moores will not receive a refund. The broader MRT framework — and the approximately $340 billion it generated — remains intact. The decision explicitly reserves three questions for future cases: whether realization is a constitutional requirement for income taxes; whether an unapportioned tax on appreciation or unrealized gains would be constitutional; and whether Congress could tax both an entity and its shareholders on the same undistributed earnings.
What this does not decide
The ruling does not decide whether the Sixteenth Amendment requires income to be "realized" before it can be taxed without apportionment — the question on which certiorari was granted. It also does not address taxes on wealth, net worth, or unrealized appreciation in property values, which the Court flagged as potential issues for another day.
Concurrences and dissents
Concurrence — Justice Jackson
Justice Jackson joined the majority fully but wrote separately to stress that the Court wisely took a restrained approach. She highlighted two additional hurdles that would have to be cleared before any court could strike down a tax like the MRT: first, a litigant would need to revive Eisner v. Macomber's realization requirement, which Jackson argued appears nowhere in the Sixteenth Amendment's text and has been severely limited by later decisions; and second, even a Sixteenth Amendment violation would require confirming the tax is a 'direct tax' — the Government's excise-tax argument would still need to be addressed.
Concurrence — Justice Barrett
Justice Barrett, joined by Justice Alito, agreed the MRT is constitutional but reached that result differently. She would have first found that the Moores did not realize income from their KisanKraft shares — no dividend was declared and no shares were sold — because realization is required by the Sixteenth Amendment's use of 'derived.' She argued the majority's attribution precedents are more limited than the majority admits, and that attribution power depends on the shareholder's relationship to the income. She concurred only because the Moores themselves conceded subpart F is constitutional and the MRT is not meaningfully different from subpart F, so the Moores failed to carry their burden.
Dissent — Justice Thomas
“But, if the Court is not willing to uphold limitations on the taxing power in expensive cases, cheap dicta will make no difference.”Justice Thomas criticizes the majority for avoiding the realization question while offering narrowing dicta as a substitute for real constitutional limits.
Justice Thomas, joined by Justice Gorsuch, argued the Court avoided the central question it agreed to answer: whether the Sixteenth Amendment requires realization. In his view it clearly does — 'income' that is 'derived' must be actually received by the taxpayer, and the Moores received nothing. He further argued the majority's 'attribution' doctrine is a new invention unsupported by the cases it cites, which he read as tax-avoidance decisions rather than broad grants of attribution power. He accused the majority of reasoning from fiscal consequences rather than constitutional text.
How the Court got there
The legal reasoning, step by step
- The Court reframed the constitutional question narrowly: not whether the Sixteenth Amendment requires income to be 'realized' by the specific taxpayer being taxed, but whether Congress can attribute income that a corporation has already realized — and not distributed — to that corporation's shareholders and then tax the shareholders on their share of it.
- A line of Supreme Court precedents from 1925 to 1938 — including Burk-Waggoner Oil Assn. v. Hopkins (1925), Heiner v. Mellon (1938), and Helvering v. National Grocery Co. (1938) — established that Congress may choose either to tax a business entity on its income or to treat the entity as a pass-through, taxing its owners instead on the same earnings. The Court held that either choice remains a tax on income and therefore does not require apportionment among the states.
- The Moores argued that Eisner v. Macomber (1920) — which held that a stock dividend was not taxable income because shareholders received nothing of new value — bars attribution of corporate income to shareholders. The Court rejected that reading, noting Macomber never addressed attribution; it only decided that issuing new shares with no net economic gain to shareholders was not income at all.
- Congress's unbroken practice since 1864 of taxing partners, S-corporation shareholders, and American shareholders of foreign corporations on their share of entity earnings reinforced the constitutional rule. Courts of appeals unanimously upheld the structurally similar subpart F tax on foreign-corporation shareholders in light of these precedents, and the Moores themselves conceded that subpart F is constitutional.
- Each of the Moores' three attempted distinctions failed. Partnerships were historically treated as separate legal entities, undercutting the 'no separate existence' argument. Shareholder consent cannot waive a structural constitutional requirement like apportionment, undercutting the S-corporation argument. And because the Moores conceded subpart F is constitutional and the MRT shares subpart F's essential structure and shareholder-control threshold (10%), the Moores' 'constructive realization' theory could not distinguish the MRT from subpart F.
Doctrinal impact
Cases affected by this decision
Distinguishes Eisner v. Macomber (252 U.S. 189)
The Court held that Macomber never addressed whether corporate income can be attributed to shareholders, so it does not bar the MRT.
Reaffirms Heiner v. Mellon (304 U.S. 271)
Reaffirmed that Congress may tax partners on undistributed partnership income even when they could not personally receive it.
Reaffirms Helvering v. National Grocery Co. (304 U.S. 282)
Reaffirmed that Congress may extend the same attribution principle to corporations, taxing shareholders on undistributed corporate income.
Reaffirms Burk-Waggoner Oil Assn. v. Hopkins (269 U.S. 110)
Reaffirmed as the foundational statement that Congress may choose to tax either a business entity or its owners on entity income.