States Fret Over Supreme Court Challenge to Foreign Income Tax

Federal policy makers are closely monitoring the US Supreme Court’s response to a constitutional challenge to the “transition tax,” but so are their state counterparts. Depending on the breadth of the court’s eventual ruling, states risk losing critical authorities to raise revenue and administer features of their tax codes.

State tax administrators, academics, and tax practitioners have taken a keen interest in Moore v. United States, which the high court will likely hear in December. The case focuses on whether the Sixteenth Amendment authorizes the federal government to tax undistributed earnings, but the resulting precedent in Moore could have ...