As noted, in U.S. v. Hansen the Supreme Court vindicated a dissent from denial of rehearing en banc by (San Diego-based) Ninth Circuit Judge Patrick Bumatay. The Court also recently granted review in another case with a Bumatay dissent, Moore v. United States. The question presented is:
Whether the 16th Amendment authorizes Congress to tax unrealized sums without apportionment among the states.
Here's our post on Judge Bumatay's originalist dissent from denial of rehearing en banc in the case: Judge Patrick Bumatay on the Original Meaning of Income.
Counterpoint:
John R. Brooks (Fordham University School of Law) & David Gamage (Indiana University Maurer School of Law) have posted Moore v. United States and the Original Meaning of Income (19 pages) on SSRN. Here is the abstract:
In the upcoming Supreme Court case of Moore v. United States the taxpayers are challenging whether unrepatriated earnings of a foreign corporation can be “income” of a shareholder under the Sixteenth Amendment. The case therefore raises a question that the Court has rarely had to address in the last 100 years—what is the meaning of "income" under the Sixteenth Amendment? And furthermore, is "realization" required before the gain from property ownership can be treated as income?
Central to answering those question is another question: What is the original meaning of "income" at the time of the Sixteenth Amendment’s ratification? The taxpayers in Moore (and the Ninth Circuit judges who dissented from the denial of rehearing en banc) argue that some concept of realization is necessarily a part of the original meaning of income—i.e., that there must be some act of separation or conversion of property into cash or other property in order for there to be “income.”
In this essay we highlight some of the major errors and omissions of the taxpayers, amici, and Ninth Circuit dissenters related to the question of original meaning. We show that contemporary definitions of income did not–and could not have–incorporated the contemporaneous definition of "realization," and that they in fact incorporated unrealized gain. Furthermore, we show that pre-ratification and contemporaneous federal tax law explicitly included undistributed corporate earnings in shareholders' income. We also show–we believe for the first time in the literature–that the federal corporate income tax law at the time of the Sixteenth Amendment's ratification explicitly included unrealized gain from the appreciation assets as gross income for tax purposes. Given this evidence, it is clear that realization could not have been a necessary and required element of the original meaning of income.
Via Paul Caron at TaxProf Blog.
Posted at 6:02 AM