IRS Case On Wealth Tax Heads To SCOTUS

Charles and Kathleen Moore are looking for a positive outcome in a case they will bring before the Supreme Court to challenge a tax bill of $15,000 they claim is unconstitutional. This couple insists that they were compelled to pay this sum for investing in an Indian company, from which they claim they never received any dividends, distributions, or payments, as stated in an affidavit by Charles Moore, aged 62.

However, substantial portions of their narrative leading to this juncture appear to be at odds with publicly available records. This case could cast doubt on various aspects of the U.S. tax code and even have implications for the proposed but unenacted wealth tax. The case is scheduled for arguments on December 5.

Underlining the case’s significance at a recent Heritage Foundation event, lawyer Paul Clement remarked, “The constitutionality of a wealth tax may well be decided in the context of this case.”

Initial details of Moore’s’ involvement with the company, initially KisanKraft Machine Tools Private Limited, were reported by Tax Notes, a publication catering to tax professionals. These details stem from public documents filed with the Indian government.

At the heart of the case is a provision enacted when Republicans controlled Congress and signed into law by now-former President Donald Trump contained in the 2017 tax bill. This law applies to companies owned by Americans conducting business overseas and imposes a one-time tax on investors’ shares of unallocated profits to offset other tax benefits. This provision is expected to generate $340 billion in tax revenue.

Contrary to portraying themselves as passive investors with no influence over the company, Charles Moore, who had a career in software development at Microsoft, served on KisanKraft’s board of directors for five years.

Additionally, there are indications of Moore’s more extensive involvement with KisanKraft than suggested by his testimony. The company covered his travel expenses to India on four occasions, and he made at least two additional investments beyond the initial $40,000 from 2006. Moore was also prepared to invest around an additional $250,000, which was eventually refunded by KisanKraft, along with 12 percent interest.

Surprisingly, none of this information was disclosed by the couple or their legal representatives in their legal filings across three different federal courts, including the Supreme Court.
A wealth tax would not be based on the incomes of the wealthiest Americans but on their assets, such as stock holdings, which are currently only taxed upon sale. Some experts suggest that the Supreme Court’s decision on this case could have repercussions for other provisions in the tax code, including those concerning partnerships, limited liability companies, and various business structures.