SC Upholds Tax On Foreign Income Over Business-Backed Challenge

The Supreme Court (SC) has 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, Mark Sherman reported for the Associated Press (AP).

The law, passed by a Republican Congress and signed by then-President Donald Trump, includes a provision that applies to companies that are owned by Americans but do their business in foreign countries.

The justices, by a 7-2 vote, left in place a provision of a 2017 tax law that is expected to generate $340 billion, mainly from the foreign subsidiaries of domestic corporations that parked money abroad to shield it from US taxes.

The law, passed by a Republican Congress and signed by then-President Donald 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 have not 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 outsized 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 very rich Americans but to their assets, like stock holdings, that now get taxed only when they are sold.

The court ruled in the case of Charles and Kathleen Moore, of Redmond, Washington. They 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. Moore said in a sworn statement that he never received any money from the company, KisanKraft Machine Tools Private Ltd.