On June 20, 2024, the U.S. Supreme Court ruled 7-2 in Moore v. United States, 602 U.S. 572 (2024) ¹, that the Mandatory Repatriation Tax under IRC §965 ², the one-time tax on accumulated earnings of foreign-controlled corporations imposed by TCJA, does not violate the Direct Tax Clause of the Constitution. Justice Brett Kavanaugh's majority opinion (joined by Roberts, Sotomayor, Kagan, and Jackson) characterized the MRT as a tax attributing realized but undistributed income from a controlled foreign corporation to its U.S. shareholders, a familiar pattern dating back to subpart F.
The narrow holding preserved §965 and the constitutional foundations of partnership, S corporation, and CFC taxation regimes that depend on similar attribution. For our international clients with §965 liabilities still being paid in installments through 2025, the decision was a practical relief, but the constitutional reasoning leaves significant questions about future Congressional power to tax unrealized gains.
You've read the first three minutes.
The rest is free. Verify your email to continue.
We send a six-digit code to your inbox. Enter the code below to unlock the full essay and every other essay in the archive. The Journal arrives quarterly. Nothing else.