The Supreme Court Takes Up a Wealth Tax; You May Need to File a Protective Claim for Refund

At the end of 2017, Congress passed the Tax Cuts and Jobs Act (TCJA).  This complex measure added some deductions (such as the Deduction for Qualified Business Income), added restrictions on other deductions (such as the $10,000 limit on taxes as an itemized deduction), and added a few taxes.  One of the taxes added was the Section 965 Repatriation Tax.

Charles & Kathleen Moore invested in 2006 in an Indian company that was profitable. Under this tax, they had to pay (in 2017) tax on all the accumulated income even though they had never received any of the income.  They owed about $14,729 in tax.  They paid the tax, but then filed a Claim for refund (which was denied).  They then filed a lawsuit in federal district court in Washington to recover the tax.  The district court dismissed the case; the 9th Circuit Court of Appeals affirmed the dismissal on appeal.  You can read the Moore’s petition here; you can read the United States’s brief in opposition here; and you can read the Moore’s reply here.

If you were impacted by the Section 965 tax, you may have only until July 15, 2023 to file a “Protective Claim for Refund” for the 2019 tax year.  Two of our clients are impacted by this, and we notified both of them today.  (An option available with the tax was to pay this over an eight-year period; both of our impacted clients chose this option so they can still file a protective claim for 2019.)

I’ll have more on this case in the next few weeks, as it impacts the idea of wealth taxes (something that Senator Sanders, among others, likes the idea of).


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