Transition Tax on Foreign Earnings Upheld Under Constitution (1)

A shareholder foreign earnings tax created through the 2017 tax overhaul doesn’t exceed Congress’s taxing authority, a federal appeals court ruled.

The US Court of Appeals for the Ninth Circuit issued the opinion Tuesday, affirming a lower court’s 2020 ruling that upheld what’s known as the “mandatory repatriation” or “transition” tax. The tax code Section 965 charge applied to certain US shareholders of controlled foreign corporations, treating the corporations’ post-1986 profits as 2017 taxable income for the shareholders.

Charles and Kathleen Moore argued that the tax’s “decades-long retroactivity” and application to taxpayers who ...