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Culture War Roundup for the week of June 17, 2024

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The tax case dealt with whether Section 965 (a deemed repatriation of certain foreign corporations) was constitutional. The big question here was on the realization requirement and this case was really a staking horse for a wealth tax. While the court upheld 965 on the grounds that income was in fact realized and then attributed to the shareholders, it took great pains to suggest no a wealth tax is a direct tax and therefore would require capitation.

The dissent argues that this tax is unlike most other taxes in that it taxes income of the foreign corporation earned in prior years; indeed in years where the owner that owned the stock on a particular date may not have owned the stock. The dissent would say there can only be a constructive recipient (allegedly different but probably in practice similar to the majority’s attribution) when there are close fsctors of control. The dissent — if they knew about tax — could analogize — between CFC taxation and PFIC taxation.

The problem with the dissent is that problem seems more like an as applied v facial challenge. In truth, I think the dissent didn’t like that congress effectively wrote a rule that imposed taxes on CFC’s income going back potentially 30 years. There is more than a hint of retroactivity though the challengers dropped this argument in their cert petition.