Supreme Court to hear challenge of Section 965 transition tax


The Supreme Court has granted certiorari in Moore v. United States (No. 20-36122) and agreed to hear a challenge to the constitutionality of the Section 965 transition tax, which was enacted in the Tax Cuts and Jobs Act of 2017 (TCJA).


Section 965 provided transition tax at a reduced rate on previously unrepatriated earnings. It deemed accumulated post-1986 deferred foreign income of certain foreign corporations, including controlled foreign corporations, to be Subpart F income for 2017 (or 2018, depending on the foreign corporation’s taxable year-end), and subjected it to a reduced rate with an election to pay liability in installments. As a result, Section 965 may impose a tax on income that had not been distributed to the U.S. shareholder prior to TCJA.


The Ninth Circuit rejected the taxpayer’s challenge to Section 965 in Moore before the Supreme Court agreed to hear it. Four justices generally must agree to hear a case in order for the Supreme Court to grant certiorari.



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