Supreme Court Rejects a Challenge to Trump-Era Tax

The Supreme Court on Thursday upheld a tax on foreign income over a challenge backed by business and anti-regulatory interests, declining their invitation to weigh in on a broader, never-enacted tax on wealth. The justices, by a 7-2 vote, left in place a provision of a 2017 tax law that's expected to generate $340 billion, mainly from the foreign subsidiaries of domestic corporations that parked money abroad to shield them from US taxes, per the AP. The law, passed by a Republican Congress and signed by then-President Trump, includes a provision that applies to companies that are owned by Americans but do their business in foreign countries. It imposes a one-time tax on investors' shares of profits that haven't been passed along to them, to offset other tax benefits.

But the larger significance of the ruling is what it didn't do. The case attracted outsize attention because some groups allied with the Washington couple who brought the case argued that the challenged provision is similar to a wealth tax, which would apply not to the incomes of the very richest Americans but to their assets that now get taxed only when they're sold. Justice Brett Kavanaugh wrote in his majority opinion that "nothing in this opinion should be read to authorize any hypothetical congressional effort to tax both an entity and its shareholders or partners on the same undistributed income realized by the entity."

The court ruled in the case of Charles and Kathleen Moore, who challenged a $15,000 tax bill based on Charles Moore's investment in an Indian company, arguing that the tax violates the 16th Amendment. Ratified in 1913, the amendment allows the federal government to impose an income tax on Americans. A ruling for the Moores could have called into question other provisions of the tax code and threatened losses to the US Treasury of several trillion dollars, the Biden administration told the court. Justice Samuel Alito rejected calls from Senate Democrats to step away from the case because of his ties to David Rivkin, a lawyer who's representing the Moores.

(More US Supreme Court stories.)