Taxation & Representation Update For You. Supreme Court Tax Drama Unveiled: Will It Impact Your Finances?

Supreme Court Justices Signal Narrow Ruling in Repatriation Tax Case. On Dec. 5, the U.S. Supreme Court heard oral arguments in Moore v. United States, a case relating to the mandatory repatriation tax (MRT) from the Tax Cuts and Jobs Act (TCJA, Pub. L. 115-97 ). The MRT required U.S. citizens to pay a one-time repatriation tax on the earnings of foreign companies held by U.S. shareholders. The tax applies to earnings from controlled foreign corporations, even if they are distributed to U.S. shareholders. The provision was included in the TCJA as part of the transition from a worldwide to a quasi-territorial tax system for U.S. companies and their shareholders.

House Republicans Express Interest in Year-End Tax Deal. On Nov. 29, Rep. Rudy Yakym (R-IN) led a group of about 150 House Republicans in a letter  to House Speaker Mike Johnson (R-LA), urging the House to consider restoring several expired tax provisions from the Tax Cuts and Jobs Act (TCJA). The letter specifically identified three TCJA-era provisions: immediate research and development (R&D) expensing, bonus depreciation, and restoration of a broader limit on interest deductibility. The letter asserts that restoring these provisions would incentivize economic growth, and that “failing to act quickly will jeopardize hundreds of thousands of American jobs.” Adding to the voices of support include a group of 1,000 small businesses, who sent a letter  to the leadership of the Senate Finance and House Ways and Means committees urging Congress to renew the R&D expensing credit, stating that the expiration will “inadvertently stifle American innovation and compromise our nation’s leadership in science, technology, and innovation.”

Tax Court Rules In IRS’ Favor on Limited Partnership Taxation. On Nov. 28, the U.S. Tax Court ruled that a “limited partner” label does not automatically exempt its founders from self-employment taxes on partnership-allocated earnings. The decision was closely watched by investment funds and other firms organized as limited partnerships, and Soroban Capital Partners LP, the petitioner in the case, still has the opportunity to appeal.

IRS Issues Guidance on Cash or Deferred Arrangements Under Section 401(k). On Nov. 27, the Internal Revenue Service (IRS) released a notice of proposed rulemaking  that would amend the rules applicable to plans that include cash or deferred arrangements under section 401(k) to provide guidance with respect to long-term, part-time employees. The proposed regulation would affect participants in, beneficiaries of, employers maintaining, and administrators of plans that include cash or deferred arrangements. The notice also notes that a public hearing on the proposed regulation has been scheduled for March 15, 2024.

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