Moore v. United States
The Supreme Court upheld a 2017 one-time federal tax that required American shareholders of certain foreign companies to pay taxes on decades of undistributed profits, ruling that Congress has long had the power to attribute a company's realized income to its shareholders and tax them on it.
The decision preserves the entire legal framework for taxing partnerships, S corporations, and foreign-controlled companies — a system that generates trillions in federal revenue — while deliberately leaving open whether Congress could ever tax purely unrealized gains like the rising value of a stock that has never been sold.
How it got here: A federal district court dismissed the Moores' refund suit; the Ninth Circuit affirmed; the Supreme Court agreed to hear the case.
The Case in Depth
What happened
Charles and Kathleen Moore invested $40,000 in KisanKraft, an India-based farm-equipment company, in 2006 and received a 13-percent ownership stake. The company earned substantial profits over 11 years but never distributed any of that money to shareholders. When the 2017 Tax Cuts and Jobs Act imposed the Mandatory Repatriation Tax on accumulated foreign corporate earnings, the Moores were billed $14,729 on their share of KisanKraft's profits. They paid the tax and sued for a refund, arguing it was unconstitutional because they had never actually received the money.
The question before the Court
Could Congress require Americans to pay taxes on their share of a foreign company's profits that were never actually paid out to them?
The Court's answer
Yes — the Mandatory Repatriation Tax is constitutional. The Court's reasoning centers on a critical distinction: the MRT taxes income that KisanKraft actually earned and realized as corporate profits — it simply attributes that income to American shareholders and taxes them on their share. Long-standing Supreme Court precedents going back to 1925 confirm that Congress can treat a corporation or partnership as a "pass-through," attributing the entity's undistributed profits to shareholders and taxing them on it, and that this qualifies as an income tax not subject to the apportionment requirement.
The Court deliberately stopped short of answering whether Congress could ever tax purely unrealized gains — like the rising value of a stock that has never been sold, or a wealth tax on net worth. The Moores themselves conceded that the existing subpart F tax framework (which works identically to the MRT) is constitutional, and that concession effectively sealed the case against them.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
The ruling validates the $340 billion one-time Mandatory Repatriation Tax and keeps intact the broader pass-through tax system that covers millions of partnership and S-corporation investors. By conspicuously declining to say whether unrealized gains can be taxed, the Court preserved uncertainty about the constitutional limits on future proposals like a federal wealth tax.
What changes now
The Ninth Circuit's judgment affirming the Moores' tax bill stands, and the $14,729 they paid is not refunded. The broader Mandatory Repatriation Tax, which collected roughly $340 billion from U.S. companies, remains valid. The Court's explicit refusal to resolve the realization question means future litigation over wealth taxes or taxes on unrealized appreciation will need to be decided separately. Lower courts will be left to work out the limits of the attribution principle the Court endorsed.
What this does not decide
The Court explicitly declined to say whether Congress can tax unrealized gains — like rising stock prices or appreciated property that has never been sold — without apportionment. It also did not address whether wealth taxes or net-worth taxes would be constitutional, or whether Congress could tax both a company and its shareholders on the same undistributed income.
Concurrences and dissents
Concurrence — Justice Jackson
Justice Jackson joined the majority fully but wrote separately to flag two hurdles future challengers to novel taxes would face. First, she doubted there is any constitutional requirement that income be 'realized' by the taxpayer — that idea comes from Eisner v. Macomber, a decision she said has been significantly limited and may be outmoded. Second, even if a uniform tax somehow failed as an income tax, a challenger would still have to show it qualifies as a 'direct tax' before the apportionment requirement kicks in. Her message: courts should be very reluctant to second-guess Congress's tax choices.
Concurrence in part — Justice Barrett
Justice Barrett agreed with the outcome — affirming the tax — but disagreed with key parts of the majority's reasoning. She believed the Moores had not personally realized income from their KisanKraft shares, because shareholders receive income only through dividends or sale of shares, and neither occurred here. She also found the majority too quick to endorse broad attribution of corporate income to shareholders, reading prior precedents as more limited. But she concurred in affirming because the Moores themselves had conceded that subpart F is constitutional, and the MRT is not meaningfully different from subpart F — so the Moores simply failed to carry their burden.
Dissent — Justice Thomas
Justice Thomas argued that the Sixteenth Amendment's word 'incomes' requires that the taxpayer actually receive the money — a 'realization' requirement rooted in the Amendment's text and the history of its adoption to overturn Pollock v. Farmers' Loan. Because the Moores never received a penny from KisanKraft, the MRT taxes unrealized gains that cannot be called 'income' under the Amendment, and must instead be apportioned as a direct tax. The majority's 'attribution doctrine,' he said, is invented from cases about tax evasion that do not support a broad congressional power to assign any corporation's profits to its shareholders.
How the Court got there
The legal reasoning, step by step
- The constitutional framework divides federal taxes into two classes. Direct taxes — on persons or property — must be apportioned among the states according to population, a cumbersome requirement that has made such taxes politically impossible in the modern era. The Sixteenth Amendment confirmed that income taxes are indirect taxes exempt from apportionment. The Moores argued the MRT was really a tax on their stock (property), not income, because they personally received nothing from KisanKraft.
- The Court reframed the question narrowly: it did not decide whether personal realization by the taxpayer is always constitutionally required. Instead it asked whether Congress may attribute an entity's already-realized, undistributed income to that entity's shareholders and tax them on their share — a technique used in pass-through taxation for over a century.
- Four precedents from 1925 to 1938 established the attribution principle. In Burk-Waggoner Oil (1925), Burnet v. Leininger (1932), Heiner v. Mellon (1938), and Helvering v. National Grocery Co. (1938), the Court held that Congress may choose either to tax an entity on its income or to attribute that income to shareholders or partners and tax them instead. Either way, the tax counts as an income tax under the Sixteenth Amendment.
- The Moores argued that Eisner v. Macomber (1920) — which said a stock dividend issued to shareholders was not taxable income because it created no economic gain — barred attribution. The Court rejected that reading: Eisner was about a stock dividend that changed nothing of economic substance, not about attributing an entity's real profits to its owners. The later attribution cases directly addressed that question and allowed it, while Eisner never did.
- Congress's 160-year practice of taxing shareholders and partners on undistributed entity income — from the 1864 Civil War income tax through modern subpart F — reinforced the constitutional analysis. Long-settled legislative practice carries significant weight in resolving constitutional questions about congressional power.
- The Moores' own litigation concessions were fatal to their case. They explicitly agreed that pass-through taxes on partnerships, S corporations, and subpart F income are constitutional. Because the MRT operates on the same essential logic as subpart F — attributing undistributed foreign corporate income to American shareholders at the same 10-percent ownership threshold — they could not show the MRT was meaningfully different from taxes they had already conceded were valid.
Doctrinal impact
Cases affected by this decision
Distinguishes Eisner v. Macomber (252 U.S. 189)
Eisner addressed a stock dividend that created no economic gain, not attribution of corporate profits to shareholders, so it doesn't control here.
Reaffirms Heiner v. Mellon (304 U.S. 271)
Congress may tax partners or shareholders on an entity's undistributed income even when state law prevents those individuals from receiving the money.
Reaffirms Helvering v. National Grocery Co. (304 U.S. 282)
The principle allowing attribution of partnership income to partners applies equally to corporations and their shareholders.
Reaffirms Burk-Waggoner Oil Assn. v. Hopkins (269 U.S. 110)
Congress can choose to tax either an entity or its owners on the entity's income, regardless of how state law classifies the entity.