The Ultra-Wealthy Are Rooting for Charles and Kathleen Moore!

The Ultra-Wealthy Are Rooting for Charles and Kathleen Moore! Episode 239 – The ultra-wealthy are rooting for Charles and Kathleen Moore in their appeal to the U.S. Supreme Court to fight a tax. More SML Planning Minute Podcast Episodes Transcript of Podcast Episode 239 Hello this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode: The Ultra-Wealthy Are Rooting for Charles and Kathleen Moore! On June 26, 2023, the U.S. Supreme Court announced that it will hear the appeal of Charles and Kathleen Moore, Washington State residents, who are fighting a $14,729 tax bill, in the 2023-24 term.[1]  You may be asking – so what? Also, why are they taking the dispute all the way to the Supreme Court on such a relatively small amount of money? Attorneys’ fees and expenses are surely many times higher. If you’re ultra-wealthy, you may want to pay close attention to this case. The Tax Cuts and Jobs Act of 2017 included a provision called the Mandatory Repatriation Act (the “Act”). This provision taxes U.S. citizens on accumulated foreign earnings of foreign corporations that they may own, even if those earnings are never distributed. The Moore’s owned shares of KisanKraft Machine Tools Private Limited, an India-based company founded by a friend. The company reinvested all profits into the company, so the Moore’s never received any income in the form of dividends from the shares, nor did they realize any capital gains from the sale of shares. The IRS, however, assessed a tax based upon the Act. The Moore’s contested the tax bill in U.S. District Court for the Western District of Washington on the theory that the law violated the Sixteenth Amendment of the U.S. Constitution.[2] The Sixteenth Amendment states: “The Congress shall have 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.” The Moore’s argued that since they never realized any income from the ownership interest, there could be no income tax. The tax was obviously not apportioned among the states on an equal per capita basis, so if it was not an income tax, the tax was unconstitutional. The Moore’s lost their case in District Court. They subsequently lost an appeal in the U.S. Court of Appeals for the Ninth District.[3] They were also denied a rehearing before the full judiciary of the Ninth District.[4] So, why is this important to the wealthy? Throughout the last several years, there have been several proposals by Democratic members of Congress to pass a tax based solely upon wealth. President Joe Biden has also proposed a billionaire’s minimum tax in his 2023 budget proposal. Many states have also proposed wealth taxes.[5] The common theme of these wealth taxes is that the wealthy are not paying their fair share of taxes, and therefore, a tax based upon a person’s net worth, or the market value of that person’s assets, even though there are no realized gains, would remedy that. These proposals are also not based upon income earned, although there are several other proposals commonly dubbed the “Millionaire’s Tax”. There are also past U.S. Supreme Court cases that imply that gains must be realized.[6] Depending upon how the Court addresses this case, it may fire up these wealth tax proposals or extinguish them before they become law. Stay tuned! [1] Moore v. United States (Docket 22–800); https://www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/22-800.html [2] Moore v. United States, CASE NO. C19-1539-JCC (W.D. Wash. Nov. 19, 2020) [3] Moore v. United States, 36 F.4th 930 (9th Cir. 2022) [4] Moore v. United States, 53 F.4th 507 (9th Cir. 2022) [5] See generally: Dore, Kate. “There’s a growing interest in wealth taxes on the super-rich. Here’s why it hasn’t happened.” CNBC.com. https://www.cnbc.com/2022/04/09/theres-a-growing-interest-in-wealth-taxes-on-the-super-rich.html (accessed June 30,2023) Taylor, Kelley. “Biden Wants a Wealth Tax: Should Billionaires Pay More?” Kiplinger.com. https://www.kiplinger.com/taxes/biden-billionaire-wealth-tax (accessed June 30, 2023) Walczak, Jared. “Wealth Tax Proposals Are Back as States Take Aim at Investment.” Taxfoundation.org https://taxfoundation.org/state-wealth-tax-proposals/ (accessed June 30, 2023) [6] See Commissioner of Internal Revenue v. Glenshaw Glass Co., 348 U.S. 426 (1955); Eisner v. Macomber, 252 U. S. 189 (1920). More SML Planning Minute Podcast Episodes This podcast is brought to you by Security Mutual Life Insurance Company of New York, The Company That Cares®. The content provided is intended for educational and informational purposes only. Information is provided in good faith. However, the Company makes no representation or warranty of any kind regarding the accuracy, reliability, or completeness of the information. The information presented is designed to provide general information regarding the subject matter covered. It is not to serve as legal, tax or other financial advice related to individual situations, because each individual’s legal, tax and financial situation is different. Specific advice needs to be tailored to your situation. Therefore, please consult with your own attorney, tax professional and/or other advisors regarding your specific situation. To help reach your goals, you need a skilled professional by your side. Contact your local Security Mutual life insurance advisor today. As part of the planning process, he or she will coordinate with your other advisors as needed to help you achieve your financial goals and objectives. For more information, visit us at SMLNY.com/SMLPodcast. If you’ve enjoyed this podcast, tell your friends about it. And be sure to give us a five-star review. And check us out on LinkedIn, YouTube and Twitter. Thanks for listening, and we’ll talk to you next time. The applicability of any strategy discussed is dependent upon the particular facts and circumstances. Results may vary, and products and services discussed may not be appropriate for all situations. Each person’s needs, objectives and financial circumstances are different, and must be reviewed and analyzed independently. 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