Charles and Kathleen Moore are preparing for a Supreme Court battle against what they claim is an unconstitutional $15,000 tax bill. The Moores, hailing from Redmond, Washington, assert that they were unfairly burdened with this tax liability due to their investment in an Indian company, from which they insist they’ve never received any distributions or dividends.
However, the narrative presented by the Moores raises questions when compared to public records. This case, with support from business and conservative interests, holds far-reaching implications for the U.S. tax code, potentially impacting the discussion of an unrealized wealth tax. The Supreme Court is set to hear arguments on this matter on December 5.
The Moores’ case is emblematic of plaintiffs whose lawsuits, on the surface, appear to defend their legal rights but are actually supported by powerful entities with significant financial resources or vested interests. In their pursuit of justice, the Moores enlisted the aid of the anti-regulatory Competitive Enterprise Institute.
During a recent event at the Heritage Foundation, lawyer Paul Clement emphasized the profound significance of the case, stating, “The constitutionality of a wealth tax may well be decided in the context of this case.”
The details of the Moores’ involvement with the Indian company, initially known as KisanKraft Machine Tools Private Limited, were initially reported by Tax Notes, a publication catering to tax professionals. These details emerged from official filings with the Indian government.
The heart of the matter lies in a provision of the 2017 tax bill passed by a Republican-controlled Congress and signed by former President Donald Trump. This provision applies to American-owned companies conducting business overseas, imposing a one-time tax on investors’ shares of unallocated profits to offset other tax benefits, with an estimated revenue generation of $340 billion.
The Moores, alongside the U.S. Chamber of Commerce and conservative think tanks, contend that this provision violates the 16th Amendment, which authorizes the federal government to levy income tax on Americans. The disputed $15,000 tax bill represents the Moores’ share of KisanKraft’s profits.
Charles Moore questioned, “If you haven’t received any income, how can you be required to pay income taxes?” in a video shared by the Competitive Enterprise Institute.
Contrary to the Moores’ portrayal as passive investors, Charles Moore, a former Microsoft employee with a career in software development, served on KisanKraft’s board of directors for five years. Tax expert Mindy Herzfeld pointed out that the Moores’ account of Charles’ involvement is at odds with the responsibilities of a board member for an Indian company, as per Tax Notes.
Additional information suggests Moore’s deeper ties to KisanKraft, including the company covering his travel expenses to India on four occasions and him making at least two additional investments beyond his initial $40,000 stake in 2006. He had also planned to invest approximately $250,000, which was eventually returned by KisanKraft along with a 12% interest. It’s also noteworthy that only Charles Moore’s name appears in company documents, despite the Moores claiming joint investments.
Surprisingly, none of this information was disclosed in the Moores’ legal filings in multiple federal courts, including the Supreme Court. International tax expert Reuven Avi-Yonah bluntly labeled the original declaration upon which the case is built as “full of lies.”
Kathleen Moore declined to discuss the case and referred inquiries to their legal representatives. Andrew Grossman, the Moore’s lead attorney, did not respond to requests for comment.
The glaring omissions and the Moores’ failure to explore alternative legal avenues to defer or eliminate their tax liability lead experts to suspect that the case might have been manufactured for a larger purpose – to challenge the proposed but unimplemented wealth tax, an issue championed by certain prominent Democrats. Unlike income tax, a wealth tax would apply to the assets of the wealthiest Americans, such as stock holdings, which currently remain untaxed until they are sold.
Steven Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center, suggested that the Supreme Court’s decision could potentially disrupt other provisions of the tax code, including those related to partnerships, limited liability companies, and other business structures. This, in turn, could affect the finances of some justices.
For instance, Chief Justice John Roberts holds an interest in an Irish partnership valued at up to $15,000, owning a cottage in County Limerick, Ireland. Justice Clarence Thomas’s wife, Ginni, possesses a limited liability company that generated between $50,000 and $100,000 in income from Nebraska real estate last year, according to the justices’ financial disclosure forms.
In recent history, other Supreme Court cases advanced by conservative interests have raised questions about the authenticity of the facts presented to bring the disputes before the court, including a wedding website designer in Colorado who refused to serve same-sex couples and a high school football coach in Washington who wanted to pray on the field.
The integrity of facts presented in the Moores’ case is under scrutiny, and experts believe that the justices might consider returning the case to a lower court without issuing a ruling. Charles Moore expressed his investment in KisanKraft as an act of trust in a friend and belief in the company’s potential to improve the lives of small and marginal farmers in India.
The case has also faced ethical questions, with Senate Democrats urging Justice Samuel Alito to recuse himself due to interactions with another lawyer, David Rivkin, who also represents the Moores. However, Alito rejected these calls, asserting that there was no valid reason for his recusal and that he could judge the case fairly.
