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US Supreme Court ponders meaning of 'income' in tax dispute – Reuters

WASHINGTON, Dec 5 (Reuters) – U.S. Supreme Court justices said on Tuesday that a controversial case involving judges could undermine efforts to impose a wealth tax on billionaires running foreign companies. The government seemed reluctant to overturn a tax that targeted many people. Samuel Alito declines.

The justices ruled that Charles Moore and Kathleen, a retired couple from Redmond, Washington, would respond to a lower court’s decision to reject a challenge to taxes on a foreign company’s profits even though the profits were not distributed.・Heared arguments in Moore’s appeal.

The one-time “mandatory repatriation tax” (MRT), which applies to taxpayers who own at least 10% of certain foreign companies, is a 2017 Republican-backed bill signed into law by former President Donald Trump. It was part of the tax bill.

At issue in the case is whether this unrealized gain can be taxed under the 16th Amendment to the U.S. Constitution, which allows Congress to “levy taxes on income.” The Moores, supported by the Institute for Competitive Enterprise and other conservative and business groups, argue that “income” means only profits realized through payments to taxpayers, and does not include mere increases in property value. claims to mean.

Some of the questions the justices posed appeared to be aimed at the possibility of maintaining taxation by attributing corporate profits to shareholders, but they also explored the limits of the government’s broad taxing powers. But there was.

Conservative Justice Brett Kavanaugh wrote, “Whether we assume or leave unresolved whether implementation is a constitutional requirement, it is consistent with Congress’ approach and consistent with what this court has recognized.” “In that manner, there was realized income in the entity attributable to the shareholder.” U.S. Attorney General Elizabeth Preloger defends President Joe Biden’s administration’s taxes.

Some justices expressed concern that a ruling in favor of the Moores could violate a wide range of tax law provisions, including those related to other business entities such as partnerships, limited liability companies, and S corporations. Some people have expressed this.

Liberal Justice Sonia Sotomayor told the Moores’ attorney, Andrew Grossman, “I think your definition impacts the government’s ability to tax…an individual shareholder.”

The Justice Department told the Supreme Court that repealing the mandatory repatriation tax could cost the government $340 billion over the next 10 years, and that overturning other tax provisions would “potentially cost more.” He warned that there could be significant losses.

Such a ruling could also derail policies that tax the net worth (meaning all assets, not just income) of the ultra-wealthy, favored by some Democrats, including Sen. Elizabeth Warren.

The Moores are seeking a refund of about $14,729 in additional taxes they were required to pay under a 2017 law as minority owners of a company called Kisan Craft, which supplies equipment to farmers in Bangalore, India.

The case has become embroiled in an ongoing debate over the judge’s ethical conduct, amid revelations of issues including undisclosed luxury trips funded by wealthy benefactors.

Alito defended the court in a Wall Street Journal opinion column. Alito, a member of the court’s 6-3 conservative majority, said Congress has no policy to regulate the highest ranks of the U.S. judiciary, even as Democrats have called for an ethics bill that would apply to the judiciary. He claimed he had no authority.

Democratic senators have recused Mr. Alito from the case involving the Moores because one of Mr. Alito’s lawyers, David Rivkin Jr., co-authored a Wall Street Journal article. I asked him to do so.

The senators said Rivkin’s attempts to meet with Alito and help the judge “air out a personal grievance” cast doubt on his ability to decide the case fairly. . Mr. Alito refused to recuse him, saying that Mr. Rivkin’s role in the article was “as a journalist, not an advocate.”

The Moores sued the U.S. government in 2019, but the San Francisco-based 9th Circuit Court of Appeals dismissed the lawsuit, pointing out that “realization of revenue is not a constitutional requirement” based on Supreme Court precedent. .

A verdict is expected by the end of June.

Report by Andrew Chan.Editing: Will Dunham

Our standards: Thomson Reuters Trust Principles.

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