In Moore v. United States, the justices agreed to hear a challenge to the constitutionality of a provision of the 2017 Tax Cuts and Jobs Act known as the “mandatory repatriation tax,” which required U.S. taxpayers who owned shares in foreign corporations to pay a one-time tax on their share of the corporation’s earnings, even if those earnings were reinvested in the corporation and the taxpayers did not receive them.

Article I of the Constitution requires Congress to apportion any “direct taxes” among the states. The 16th Amendment carves out an exception to that rule, allowing Congress to tax “incomes, from whatever source derived,” without apportioning that tax among the states.

A Washington state couple, Charles and Kathleen Moore, went to federal court to challenge the tax. They own a 13% stake in an Indian corporation that supplies power tools to small Indian farms. The corporation reinvested its earnings rather than distributing dividends, and the Moores never received any income from their shares. The couple contended that the mandatory repatriation tax – which increased their tax liability by approximately $15,000 – violated the 16th Amendment. Under the Supreme Court’s cases interpreting the 16th Amendment, they argued, income must be distributed before it can be taxed, and therefore the mandatory repatriation tax is a direct tax that is not apportioned among the states.