Constitutional Challenge to Trump Tax Repatriation Law to be Argued Tomorrow in Ninth Circuit

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On Friday, January 14, the U.S. Ninth Circuit Court of Appeals will hear a constitutional challenge to a provision in the 2017 federal tax reform law concerning mandatory tax repatriation. This provision “deems” the accumulated earnings of foreign corporations to be income to their U.S. shareholders, and it extends this treatment for 30 years back in time. The tax thus violates both the Constitution’s prohibition on unapportioned direct taxes and its guarantee of due process.

The Competitive Enterprise Institute and Andrew Grossman of BakerHostetler represent husband and wife taxpayers Charles and Kathleen Moore of Washington state. At issue are the shares they bought as founding investors in a small foreign company that a friend founded in 2005 to produce agricultural equipment for underserved small farmers in India. The couple has owned the shares ever since. They have never received any dividends because the company reinvested all the profits in its business. Normally, such profits are not considered income unless shareholders either receive dividends or sell the shares for a capital gain. The 2017 law, however, attempts to tax these funds as income through a legal fiction by simply declaring them to be taxable income.

Oral argument will take place in San Francisco before a three-judge panel beginning at 2pm ET. The hearing will be live-streamed at a link which will be posted Friday at

CEI attorneys are available for comment.