ALF Brief Predicts Devasting Impacts If Congress Can Tax Unrealized Gains As “Income”

The Supreme Court has granted certiorari in Moore v. United States, No. 22-800, to review the constitutionality of the Mandatory Repatriation Tax, 26 U.S.C. § 965, a one-time tax which required U.S. taxpayers to treat as income a proportionate share of the undistributed profits of  certain  foreign corporations. The Ninth Circuit upheld the tax, asserting that “realization of income is not a constitutional requirement.”  This holding conflicts with a long line of Supreme Court cases which establish that realization  is an integral part of “income” for purposes of the Sixteenth Amendment—which authorizes Congress to “lay and collect taxes on incomes” without regard to apportionment among the States.

Issue Areas:

Free Enterprise, Limited Government, Property Rights

Read the Amicus Brief:
Question(s) Presented:

Whether taxation of unrealized economic gains violates the Sixteenth Amendment of the Constitution

ALF’s Amicus Brief:

The Atlantic Legal Foundation’s amicus brief was co-authored by ALF Board member Marco Rossi, who is an international tax law expert, and ALF Executive Vice President & General Counsel Larry Ebner. The brief urges the Supreme Court to reverse the Ninth Circuit’s deviant interpretation of the Sixteenth Amendment. Summarizing Ninth Circuit Judge Patrick Bumatay’s lucid and persuasive dissent from denial of rehearing en banc, ALF’s brief discusses why as a matter of constitutional history, text, and case law, economic gains must be realized to be taxed as income under the Sixteenth Amendment. Equally important, the amicus brief highlights some of the many major adverse impacts that taxing unrealized gains as income likely would have on individual and corporate taxpayers, as well as the  repercussions  on the American economy.

As Judge Bumatay explained in his dissent, “[d]ivorcing income from realization opens the door to new federal taxes on all sorts of wealth and property.” ALF’s brief argues that “[u]nless the Court reverses the Ninth Circuit’s ruling, Congress will be emboldened, and arguably empowered, to define ‘income’ however it chooses. Unbounded by the Sixteenth Amendment’s well-established requirement that economic gains be realized to qualify as taxable income, Congress could levy financially devastating “income” taxes on the appreciated value of numerous types of individual and corporate investments and other property, thereby seriously impairing the nation’s economic health.”




Merits briefing is underway, and the case is expected to be argued prior to the end of 2023.


Email ALF Executive Vice President & General Counsel Lawrence Ebner.

Date Originally Posted: September 6, 2023

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