Recently, the Supreme Court ruled seven to two in favor of the constitutionality of the Mandatory Repatriation Tax (MRT) as a valid exercise of Congress’s power to tax shareholders on the undistributed income of corporations in Moore v. United States.

Potential implications stemming from this case are whether Congress can use the Moore case to enact broad wealth taxes and what the negative ramifications might be for family businesses and successful individuals from a tax on unrealized gains.

The decision leaves open the possibility for a future wealth tax, which is often proposed as a tax on assets rather than on income, but overall, our legal experts do not see the ruling having a significant immediate effect on family businesses, or on estate taxes. The opinion is very narrowly focused on the repatriation tax at issue in the case.

In the long run, however, some language in dissenting opinions may help discourage future wealth taxes and lay the foundation for legal changes to any wealth taxes that might be enacted. The ruling also may have a potential deterrence effect and/or signal that there appears to be a segment of the Court that would seriously question the constitutionality of any future tax on unrealized gains.

We will keep you updated as new information on this case becomes available.

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