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Speaker 1: You're listening to the Bloomberg Law Podcast. Catch us weekdays

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Speaker 1: at ten pm Easter on Bloomberg dot Com, the iHeartRadio app,

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Speaker 1: and the Bloomberg Business app, or listen on demand wherever

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Speaker 1: you get your podcasts.

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Speaker 2: Welcome to the Bloomberg Law Show.

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Speaker 3: I'm Greg Storr and I'm Lydia Wheeler. We're filling in

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Speaker 3: for June Grasso, who's out this week ahead.

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Speaker 2: In this hour, we'll talk about a case that asks

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Speaker 2: the US Supreme Court to decide if Congress has the

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Speaker 2: authority to tax foreign earnings. Cases being closely watched for

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Speaker 2: its potential to stop Congress from creating a future wealth tax.

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Speaker 3: But first, a federal appeals court issued a ruling recently

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Speaker 3: that seemed to gut the Voting Rates Act, or at

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Speaker 3: least a key section of it. Joining us now to

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Speaker 3: explain it all is Carolyn Shapiro, co director of the

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Speaker 3: Chicago Kent College of Law Institute on the Supreme Court. So, Carolyn,

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Speaker 3: tell us what the a Circuit Court of Appeals did here.

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Speaker 4: Bisuka said that the Voting Rights Act of nineteen sixty

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Speaker 4: five cannot be enforced by private litigants. That the only

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Speaker 4: way it can be enforced, and in particular the most

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Speaker 4: operative part today, which is Section two can only be

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Speaker 4: enforced by the federal government. That's a really remarkable, dramatic,

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Speaker 4: and just really unwarranted holding. People have been litigating Section

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Speaker 4: two cases for decades, and it's sort of true that

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Speaker 4: there's no express Supreme Court opinion that says, in so

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Speaker 4: many words, there's a private right of action under Section two.

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Speaker 4: But that's because it's been clear for so long that

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Speaker 4: there's a right of action under Section two. In fact,

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Speaker 4: it's been so clear for so long that kind of

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Speaker 4: keeps reenacting the law on that assumption. This would be

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Speaker 4: it would be just an incredible upheaval of voting right

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Speaker 4: litigation and law if this is allowed to stand.

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Speaker 2: Can you just remind us and our listeners what the

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Speaker 2: Voting Rights Act does, and in particular what Section two does.

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Speaker 4: So, the Voting Rights Act of nineteen sixty five is

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Speaker 4: the law that basically made the Fifteenth Amendment, which allowed

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Speaker 4: African Americans to vote, made it effective. The Fifteenth Amendment,

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Speaker 4: of course, was a Reconstruction era amendment shortly after World

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Speaker 4: the Civil War, and then for many many decades it

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Speaker 4: was largely ineffective. States in the South found ways to

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Speaker 4: make it impossible or difficult for African Americans to vote,

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Speaker 4: and the courts basically allowed that to happen, including the

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Speaker 4: Supreme Court. In nineteen sixty five, Congress enacted the Voting

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Speaker 4: Rights Act, and that really changed everything. It made our

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Speaker 4: country the multi racial democracy that we support to be.

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Speaker 4: So it's an incredibly important piece of let's aslation. People

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Speaker 4: often refer to it as the crown jewel of the

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Speaker 4: civil rights business. Section two of the of the Voting

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Speaker 4: Rights That provides that where there is a practice or

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Speaker 4: a set of policies that make it difficult for a

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Speaker 4: group of minority voters to elect the representatives of their

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Speaker 4: choice it comparably to the way white voters can that

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Speaker 4: that can violate the statute. So, for example, the redistricting

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Speaker 4: is done in such a way so that African Americans

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Speaker 4: can't elect their own, their favored representatives, that can violate

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Speaker 4: Section two of the Voting Rights Act. It doesn't require

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Speaker 4: intentional discrimination. It looks to the effects of certain types

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Speaker 4: of decisions that states and local governments make about voting.

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Speaker 4: It's been very important for many years, but it's even

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Speaker 4: more important than it used to be because In twenty thirteen,

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Speaker 4: the Supreme Court made the other most significant part of

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Speaker 4: the voting Right tech inoperative, which is Section five, the

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Speaker 4: part that required certain jurisdictions to get approval before they

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Speaker 4: made changes in their voting systems.

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Speaker 3: Can you back up a little bit for us and

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Speaker 3: explain how this case came about. I know it was

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Speaker 3: a lawsuit brought by voters in Arkansas. Is that right?

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Speaker 5: Yeah?

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Speaker 4: This is an Arkansas case, and the district court in Arkansas,

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Speaker 4: I believe, said that it found that there was no

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Speaker 4: private right of action under section two of the fourteenth Amendment,

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Speaker 4: and it reached that decision, if I'm remembering correctly, even

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Speaker 4: without the state having raised the question of its own

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Speaker 4: accord claiming that there were. It was a jurisdictional question

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Speaker 4: and that therefore it was required to consider that. This

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Speaker 4: is a really remarkable overreach. I can't emphasize that enough.

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Speaker 2: Tell us about the circuit decision and the reasoning there.

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Speaker 2: Why did they say there was no avoute for.

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Speaker 4: Private They looked at the language of the statute, and

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Speaker 4: they looked at the language of the statute in extremely

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Speaker 4: isolated detail. And it is true. The language of the

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Speaker 4: statute doesn't contain the words private right of action, and

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Speaker 4: the language of the statute doesn't say in so many

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Speaker 4: words that private individuals can do under the statute. There

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Speaker 4: are many many statutes like that in the federal legislation,

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Speaker 4: and historically the Court used to be somewhat more open

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Speaker 4: to inferring of private right of action into particular statutes

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Speaker 4: than it has become in more recent years. However, it

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Speaker 4: has also said that where it's been clear that there's

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Speaker 4: a private right of action in the past, that that

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Speaker 4: had been inferred in the past, and in particular, where

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Speaker 4: Congress has reenacted the statute, the Court shouldn't go back

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Speaker 4: and reparse the language of the statute under the wonders

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Speaker 4: that did not exist when it was originally enactive. So

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Speaker 4: it looks what the atificate is to look at the

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Speaker 4: words of the statute in complete isolation of how the

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Speaker 4: statute has been applied for decades, and in complete isolation

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Speaker 4: of the legislative history. With a reenactment of the statute,

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Speaker 4: where it is extremely clear that Congress intended for people

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Speaker 4: to be able to bring lawsuits to enforced Section.

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Speaker 3: Two, what's exactly is the state arguing in this case, the.

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Speaker 4: State is arguing that they just can't be sued unless

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Speaker 4: they're being sued by the federal government, which basically means

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Speaker 4: that if the federal government doesn't have the resources or

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Speaker 4: the ability, or depending on the administration, that desire to

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Speaker 4: enforce the Voting Rights Act, the Voting Rights Act doesn't

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Speaker 4: get enforced. They're saying that a private person or a

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Speaker 4: private individual such as the NAAFP, or individual voters or

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Speaker 4: a community organization just simply can't do anything about it,

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Speaker 4: regardless of how blatant the violation of their voting rights are, you.

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Speaker 2: Know, cal And one thing that struck me about this

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Speaker 2: decision is that reading parts of it, at least there

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Speaker 2: was a congressional report from i think the House and

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Speaker 2: Senate Judiciary committees that said, we understand this law to

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Speaker 2: allow for private lawsuits. Is this one of these cases

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Speaker 2: where the legislative history what Congress intended and was talking

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Speaker 2: about says one thing, but the language of the statute

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Speaker 2: at least arguably says something else.

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Speaker 4: Well, I think that's how the Eighth took it, interpreted

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Speaker 4: the statute, or chose to interpret with the statute. But

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Speaker 4: I think that that is a real triumph of form

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Speaker 4: over substance. The statute itself doesn't expressly say one way

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Speaker 4: or the other whether there's a private right of action.

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Speaker 4: It certainly doesn't prohibit there from being one, and historically

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Speaker 4: it's been appropriate for courts to infer a private right

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Speaker 4: of action. The Court has again in recent years changed

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Speaker 4: that approach. But Congress, the Congress that enacted the law

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Speaker 4: before Congress changed that approach, of course, didn't know that

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Speaker 4: that was going to happen. They were operating on the

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Speaker 4: assumption that people have been doing to enforce the voting

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Speaker 4: right back for a long time and would continue to

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Speaker 4: do so. And we'll say that in our explanation of

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Speaker 4: our we enactment of the law. So it's I would

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Speaker 4: not say that the law says one thing, in the

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Speaker 4: legislative history says another. But that is at least in part,

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Speaker 4: how the Eighth Circuit tries to defend its position.

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Speaker 2: Well.

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Speaker 3: Coming up in the program, we'll dive deeper into the

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Speaker 3: recent voting rates ruling out of the Eighth Circuit Court

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Speaker 3: of Appeals with Carolyn Shapiro. Remember, you can always get

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Speaker 3: the latest legal news by listening to Bloomberg Law podcast

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Speaker 3: on Apple, Spotify, or wherever it is you get your podcasts.

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Speaker 2: I'm Lydia Wheeler and I'm Greg store. This is Bloomberg.

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Speaker 1: You're listening to the Bloomberg Law Podcast. Catch the program

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Speaker 1: weekdays at ten pm Eastern on Bloomberg Radio, the tune

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Speaker 2: I'm Lydia Wheeler and I'm Greg Store in for June Grosso.

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Speaker 2: We've been speaking with Carolyn Shapiro of Chicago Kent College

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Speaker 2: of Law about the recent ruling out of the Eighth

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Speaker 2: US Circuit Court of Appeals on the Voting Rights Act. So, Carolyn,

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Speaker 2: we talked a lot about this ruling coming out of

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Speaker 2: the Circuit of a very conservative appeals court.

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Speaker 5: There was a.

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Speaker 2: Supreme Court decision a couple of years ago that perhaps

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Speaker 2: laid the groundwork for this, a concurring opinion by Justice

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Speaker 2: Neil Gorsich. Can you tell us a little bit about that.

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Speaker 4: Yeah, So this is a case called Burnovitch that came

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Speaker 4: out of Arizona, and in this case, it was a

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Speaker 4: Section two lawsuit that challenged a number of practices in

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Speaker 4: Arizona having to do with the ability for people to

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Speaker 4: use mail in ballots and things like that. It was

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Speaker 4: what's called a vote denial claim as opposed to vote dilution,

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Speaker 4: So it didn't have to do with redistricting. It had

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Speaker 4: to do with other practices. And the Supreme Court read

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Speaker 4: Section two in that context fairly narrowly, but did not

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Speaker 4: address the question of whether there's a private right of action,

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Speaker 4: and in fact that wasn't presented. Scursich wrote a concurrence

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Speaker 4: in which joined by Justice Thomas. In that concurrence, he said,

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Speaker 4: you know, nobody's raised this question, but it's been a

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Speaker 4: sort of a question that other courts have asked in

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Speaker 4: the past, and he cited a district Court opinion from

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Speaker 4: the nineteen eighties as his example of why this is

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Speaker 4: remains an open question, which I have to say not

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Speaker 4: it might be very persuasive, but he put it out

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Speaker 4: there for litigants to pick up, and of course they did.

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Speaker 4: That's that's why he did it. And people who read

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Speaker 4: the court opinions are looking for those kinds of invitations.

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Speaker 4: So both courts, as in the District Court in this

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Speaker 4: Arkansas case, and the litigants in the Arkansas case and

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Speaker 4: in other cases now as well, are starting to make

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Speaker 4: that argument and to say, hey, this is an open question,

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Speaker 4: maybe there's no private right of action, and pushing the

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Speaker 4: appeals courts to make rulings on that question.

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Speaker 3: So, Carolyn, we talked about how the Eighth Circuit Court

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Speaker 3: of Appeals here ruled there's no private right of action

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Speaker 3: for litigans to come and sue to enforce Section two

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Speaker 3: of the Voting Rights Act. But the New Orleans based

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Speaker 3: Fifth Circuit Court of Appeals issued a ruling recently on

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Speaker 3: this too. What did that court say?

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Speaker 4: That court said that there is a private right of action.

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Speaker 4: It didn't do a super deep dive into the statute

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Speaker 4: of this quite the same sort that the Eighth Circuit

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Speaker 4: did in sort of parsing the language the way the

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Speaker 4: Eighth Circuit did, but it basically said, you know, there's

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Speaker 4: always been a private right of action here, and we

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Speaker 4: don't think that this is there's a basis for changing

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Speaker 4: that in this moment. That's the law of our circuit,

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Speaker 4: and that's the law we're going to apply.

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Speaker 2: You know, Carolyn, some listeners may be thinking that there

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Speaker 2: was this case out of Alabama in the Supreme Court

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Speaker 2: in its last term, and that was a lawsuit brought

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Speaker 2: by private litigants, and the Supreme Court did something pretty

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Speaker 2: significant in rejecting a republican drawn congressional map there. So,

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Speaker 2: can you explain how it can be if there is

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Speaker 2: an explanation that the Supreme Court keeps acting like there

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Speaker 2: is a private right of action and yet this issue

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Speaker 2: apparently is open enough that a federal appeals court decided

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Speaker 2: that there is no private right of action.

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Speaker 4: Well, I would dispute that really is an open question,

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Speaker 4: in part for exactly the reason that you say everybody

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Speaker 4: has assumed and has assumed is maybe the wrong word.

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Speaker 4: It is. It's an established feature of the law, and

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Speaker 4: Congress itself has assumed that there's a private right of

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Speaker 4: action in its re enactment of the law repeatedly. But

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Speaker 4: it's because it is the case that there is not

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Speaker 4: an opinion that says, in so many words, there is

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Speaker 4: a private right of action. And you have Justice cour

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Speaker 4: Such issuing this invitation, joined by Justice Thomas. Suddenly there's

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Speaker 4: an opportunity for forlitigants and courts to say, well, wait

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Speaker 4: a minute, let's see how clever we can be and

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Speaker 4: come up with an argument that what everybody's always thought

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Speaker 4: was true isn't true. Which this is sort of a

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Speaker 4: strange way, in my view, to the law to operate,

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Speaker 4: and I do think it's quite inconsistent with the case

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Speaker 4: you mentioned out of Alabama, Alan versus Milligan. In Alan

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Speaker 4: versus Milligan, the court went out of its way to say,

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Speaker 4: there's forty years of precedent here. It was not. The

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Speaker 4: question was not what whether there's a private right of action.

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Speaker 4: The question was how that private right of action operates

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Speaker 4: or what it takes to prove a violation of Section

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Speaker 4: two of the Voting Rights Act. The court went out

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Speaker 4: of its way to say, we are not up ending

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Speaker 4: forty decades of present forty years of precedent. It's this

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Speaker 4: is the way the law has been, and we don't

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Speaker 4: think it appropriate to change it. So well, it didn't

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Speaker 4: speak directly to the question that the Eighth Circuit has

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Speaker 4: now ruled on. It certainly indicated a significant fidelity to

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Speaker 4: an understanding of the statute that has been widespread, again

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Speaker 4: not just in the Court, also in Congress.

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Speaker 3: It sounds like there's a real circuit split here between

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Speaker 3: the Eighth Circuit and the Fifth Circuit. So isn't this

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Speaker 3: now present a question that the Supreme Court is going

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Speaker 3: to have to resolve?

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Speaker 4: Yes, I think it does. The only possibility that would

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Speaker 4: prevent that from happening would be if the Eighth Circuit

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Speaker 4: Court of Appeals takes the case en banc, which would

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Speaker 4: mean that the full Court would reconsider the question issued

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Speaker 4: the decision made by the three judge panel and there

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Speaker 4: was a dissent, so there were two judges who ruled

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Speaker 4: that there's no private right of action and one judge

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Speaker 4: who dissented. I don't know how likely it is that

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Speaker 4: Theates if it will do that, and on the assumption

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Speaker 4: that it doesn't, or if it does take it on blank,

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Speaker 4: that it comes out the same way, then yes, I

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Speaker 4: think the Supreme Court will certainly have to take this

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Speaker 4: case and we'll have to settle a question once and

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Speaker 4: for all. Based on the Alabama case, I think it's

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Speaker 4: quite unlikely that the Supreme Court would affirm the eighth

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Speaker 4: of it.

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Speaker 2: That sounds right to me in terms of where the

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Speaker 2: Supreme Court seems to be on this question. But in

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Speaker 2: the event we're both wrong. In the Supreme Court agrees

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Speaker 2: with the Eighth Circuit and says no private right of action.

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Speaker 2: Can you just describe the implications of that? What would

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Speaker 2: be left of the Voting Rights Act after that sort

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Speaker 2: of decision?

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Speaker 4: The Voting Rights Act would be really astonishingly ineffective. We

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Speaker 4: have already lost Section five, as I mentioned before, the

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Speaker 4: part of Voting Rights Act that required covered jurisdictions to

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Speaker 4: get permissions for making changes and they're voting and election system.

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Speaker 4: That was within hours after the Supreme Court issued that opinion,

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Speaker 4: and Shelby County versus Holder States that had been required

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Speaker 4: to get that kind of preclearance started enacting laws literally

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Speaker 4: immediately that would never have been able to be pre

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Speaker 4: cleared and that have had the effect of making it

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Speaker 4: harder for minority voters to exercise their rights. Section two

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Speaker 4: was actually one of the reasons that the Supreme Court said, well,

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Speaker 4: it's okay in that opinion. It's not the end of

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Speaker 4: the world for us to get rid of the operation

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Speaker 4: of Section five because there's still Section two lawsuits and

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Speaker 4: its specifically noted that those losses can be brought by individuals,

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Speaker 4: by private litigants. So on that point, the Court itself

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Speaker 4: has operated on that assumption in the absence of private plaintiffs,

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Speaker 4: the only way these lawsuits could be brought would be

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Speaker 4: by the Partment of Justice, and the Department of Justice

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Speaker 4: just simply doesn't have the resources to bring all of

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Speaker 4: the lawsuits that are brought by private plaintiffs, and under

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Speaker 4: some administrations really has indicated no interests at all and

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Speaker 4: enforcing the voting like that.

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Speaker 3: So, Carolyn, if you and Greg are both right here

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Speaker 3: and the Eighth Circuit Court of Appeals decision is overturned

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Speaker 3: by the Supreme Court, does that settle all future disputes

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Speaker 3: over Section two of the Voting Rights Act.

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Speaker 4: Well, certainly doesn't settle all future disputes over Section two.

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Speaker 4: Litigates are going to come up with other arguments. There

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Speaker 4: are always going to be questions about its scope and

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Speaker 4: its application in different circumstances. But it would settle that

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Speaker 4: question whether or not there's a private light of action.

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Speaker 3: Our thanks to Carolyn Shapiro, co director of the Chicago

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Speaker 3: Kent College of Law Institute on the Supreme Court. Coming

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Speaker 3: up next on Bloomberg Law Show, we'll talk about a

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Speaker 3: tax case that could have big implications for a future

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Speaker 3: wealth tax. I'm Lydia Wheeler and I'm Greg Store.

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Speaker 2: This is Bloomberg.

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Speaker 1: You're listening to the Bloomberg Lawn Podcast. Catch us weekdays

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Speaker 1: at ten pm Easter on Bloomberg dot Com, the iHeartRadio

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Speaker 1: app and the Bloomberg Business app, or listen on demand

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Speaker 1: wherever you get your podcast.

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Speaker 2: I'm Lydia Wheeler and I'm Greg Storr in for June Grosso.

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Speaker 2: Let's get now to that big tax case the Supreme

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Speaker 2: Court is hearing over foreign earnings. It's been closely watched

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Speaker 2: for its potential to upend other parts of the tax

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Speaker 2: code and potentially affect a future wealth tax. Joining us

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Speaker 2: to discuss it is Michael Rappaport. He is a Bloomberg

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Speaker 2: Industries reporter covering tax Michael, thanks so much for joining us.

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Speaker 5: Thanks for having me so tell us.

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Speaker 2: A little background about this case. Who are the people

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Speaker 2: involved in How did they get to the Supreme Court?

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Speaker 5: Sure the planeff Sir Charleston Kathleen Moore, a retired couple

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Speaker 5: from Washington State, and they are challenging a tax bill

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Speaker 5: of fourteen thousand, seven or twenty nine dollars that they

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Speaker 5: had to pay on the earnings of Kisen Kraft, which

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Speaker 5: is a machine tool company. Based in India, in which

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Speaker 5: they'd invested because Charles Moore was a friend and former

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Speaker 5: colleague of the company's CEO. They contend that the tax

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Speaker 5: that was imposed on them is unconstitutional because it was

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Speaker 5: based on corporate earnings from kisen Kraft that were not

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Speaker 5: actually distributed to them. The lower courts ruled against them,

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Speaker 5: but they took their Supreme Court and the High Court agreed.

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Speaker 1: To hear it.

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Speaker 3: What exactly is this tax? Is a new and where

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Speaker 3: did it come from?

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Speaker 5: The tax is known as the Mandatory Repatriation Tax or

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Speaker 5: the Transition Tax, which was part of the Tax Cuts

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Speaker 5: and Jobs Act, the Big Tax the Overhault back in

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Speaker 5: twenty seventeen. This is a one time tax on companies

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Speaker 5: accumulated foreign earnings. Big US companies had been stashing their

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Speaker 5: foreign earnings overseas for many years rather than bring them

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Speaker 5: back to the US and have them taxed at US

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Speaker 5: corporate tax rates, which at the time were relatively high.

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Speaker 5: What the twenty seventeen law did, besides lowering the corporate

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Speaker 5: tax rate, was to change the whole time system so

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Speaker 5: that all earnings of US companies would be tax going forward,

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Speaker 5: no matter where in the world they were located. The

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Speaker 5: mandatary repatriation tax was a one time catchup tax imposed

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Speaker 5: on those accumulated earnings to make sure that they wouldn't

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Speaker 5: be entirely free from US taxation. But it also applies

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Speaker 5: to people like the Moors who had a significant stake

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Speaker 5: in a foreign company about thirteen percent of their case,

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Speaker 5: at thirty percent stake in Kis and craft And they

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Speaker 5: were taxing kins and Crafts earnings even though they didn't

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Speaker 5: actually receive any distribution of those earnings that falls out

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Speaker 5: of the same military repatriation tax. And the Mores claim

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Speaker 5: that that's unconstitutional.

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Speaker 2: And so why do they claim it's unconstitutional? What's the

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Speaker 2: argument that the Moors are making in this case?

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Speaker 5: This hinges on what's called realization. The Moors claim that

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Speaker 5: it's improper on the sixteenth Amendment of the Constitution, which

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Speaker 5: established the USN Tax, to tax them in this fashion

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Speaker 5: because they didn't realize didn't actually receive any distribution of

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Speaker 5: those earnings. The government's response to that is that the

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Speaker 5: tax is legal in the sixtieth Amendment, that it does,

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Speaker 5: in fact Congress to tax a shareholder's share of undistributed

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Speaker 5: or unrealized corporate earnings. As income to the shareholders. In fact,

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Speaker 5: the government says Congress has done so numerous times in

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Speaker 5: the one hundred and ten years since the sixteenth Membal

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Speaker 5: was ratified. It's imposed taxes like taxes on companies, foreign income,

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Speaker 5: and partnership taxes to follow the same principle that you

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Speaker 5: don't always have to realize income in order to tax

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Speaker 5: on it, and the court has upheld those provisions in

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Speaker 5: the past.

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Speaker 3: So what's the government arguing here?

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Speaker 5: Then?

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Speaker 3: On the other side, as I.

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Speaker 5: Said, the government's argument is that the repatriot text is legal,

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Speaker 5: that in fact, there have been cases in which unrealized

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Speaker 5: income is taxable, such as tax on foreign income, tax

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Speaker 5: tax on partnerships, and courts have upheld those provisions.

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Speaker 2: What are the key precedents here? It seems pretty remarkable

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Speaker 2: that the sixteenth Amendment has been around this long and

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Speaker 2: the Court has never clearly answered what seems to be

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Speaker 2: a pretty basic question about what it covers.

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Speaker 5: Well, I wanted to keep precedents certainly from the standpoint

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Speaker 5: of what the Moors are claiming, is a case called

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Speaker 5: Eisner versus Macomber, which is from nineteen twenty. The Moors

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Speaker 5: claim that that case rules out taxes unrealized income. What

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Speaker 5: the government says and responses is that, well, that case

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Speaker 5: was in a very limited context. It was limited to

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Speaker 5: cases in which a company pays a stock dividend to

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Speaker 5: a shareholder, and that the court has repeatedly refused to

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Speaker 5: extend that principle beyond that limited sort of circumstances.

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Speaker 3: So if the court strikes down this tax, what are

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Speaker 3: the implications for the rest of the tax code.

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Speaker 5: Well, the first and most obvious implication is if you

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Speaker 5: strike down the mandatary repatriation tax, it could trigger enormous

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Speaker 5: tax refunds for some of the giant multinational companies that

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Speaker 5: had been paying billions of dollars in these taxes over

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Speaker 5: the last several years, such as Apple, Microsoft, Pfiser. The

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Speaker 5: government has projected that the tax would bring in a

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Speaker 5: total of three hundred and forty billion dollars over ten years.

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Speaker 5: So we're talking about something that could hugely benefit big companies,

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Speaker 5: that could really blow a hole and government revenue. Beyond that,

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Speaker 5: though that, there's a lot of concern among people in

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Speaker 5: tax world, and it's kind of much roomed. Ever since

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Speaker 5: the court agreed to hear the case, that if you

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Speaker 5: strike down the repatriation tax. It also calls into question

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Speaker 5: other parts of the tax code that similarly are levied

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Speaker 5: on corporate income that hasn't been distributed to the shareholder.

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Speaker 5: The same principle behind the repatriation tax also applies in

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Speaker 5: a lot of existing provisions in tax code. So, for instance,

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Speaker 5: you have taxes on foreign income what's called Subpart F,

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Speaker 5: which applies to certain taxes on certain kinds of income

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Speaker 5: from the foreign affiliates of US companies guilty, the tax

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Speaker 5: on Global Intangible Low tax Income, which is the US

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Speaker 5: mindium tax on the company's foreign income. Taxes on partnerships

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Speaker 5: because their profits are taxable to the individual partners even

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Speaker 5: when they are even when the earnings aren't distributed. Mark

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Speaker 5: to market situations, taxes leving on the current market value

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Speaker 5: of certain kinds of assets like regulative futures contracts, even

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Speaker 5: something like taxes on the zero coupon bonds, which taxpayers

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Speaker 5: have to pay taxes on each year but don't actually

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Speaker 5: receive payment until the bond's mature. All those kinds of

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Speaker 5: wa under the same kind of principle as the mandatory

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Speaker 5: repatriation tax, and there are other such situations. Paul Ryan

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Speaker 5: the former Speaker of the House has suggested that ruling

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Speaker 5: in favor of the Moors could affect a third of

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Speaker 5: the entire tax code.

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Speaker 2: So do the Moors in their allies acknowledge what you

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Speaker 2: just said, agree with what you just said.

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Speaker 5: Do they.

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Speaker 2: Accept that this will have such a big effect on

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Speaker 2: the tax code or are they arguing, Hey, this is

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Speaker 2: actually a narrow case and there's a way you can

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Speaker 2: resolve it in our favor without having all these big implications.

437
00:25:32,080 --> 00:25:35,840
Speaker 5: But the Mores, in their supporters claim is that the

438
00:25:36,080 --> 00:25:39,840
Speaker 5: mandatary repatriation tax is distinguishable from all these other provisions,

439
00:25:39,880 --> 00:25:43,800
Speaker 5: and the details are very in the weeds and legalistic,

440
00:25:43,880 --> 00:25:46,920
Speaker 5: but basically they claim that this is something separate from

441
00:25:47,200 --> 00:25:49,399
Speaker 5: things like Subpart F and some of the other provisions,

442
00:25:49,600 --> 00:25:51,800
Speaker 5: so that you can rule in the Moor's favor and

443
00:25:51,800 --> 00:25:55,040
Speaker 5: strike down the repatriation tax and not have any of

444
00:25:55,080 --> 00:25:57,520
Speaker 5: this other stuff affected. Some of the more supporters the

445
00:25:57,640 --> 00:25:59,480
Speaker 5: US Chamber of Commerce claimed in it's front of the

446
00:25:59,520 --> 00:26:02,879
Speaker 5: court brief that the people who are concerned about this

447
00:26:02,960 --> 00:26:08,240
Speaker 5: were engaging in hysteria and barely overstating the potential impact.

448
00:26:08,560 --> 00:26:11,920
Speaker 5: What the people opposed to the More say, the people

449
00:26:11,960 --> 00:26:15,080
Speaker 5: who want to see the court uphold the mandatary repatriation tax.

450
00:26:15,520 --> 00:26:19,040
Speaker 5: Is that it's not that simple. You can't really strike

451
00:26:19,119 --> 00:26:22,200
Speaker 5: down one and preserve the rest. So if you strike

452
00:26:22,240 --> 00:26:24,520
Speaker 5: down the mandatary repatriation tax, then really could have ripple

453
00:26:24,520 --> 00:26:27,320
Speaker 5: effects and call into question a lot of these other provisions.

454
00:26:27,960 --> 00:26:30,560
Speaker 3: You mentioned that there's about three hundred and forty billion

455
00:26:30,640 --> 00:26:34,199
Speaker 3: dollars at stake here and that you know, overturning this

456
00:26:34,240 --> 00:26:37,000
Speaker 3: could really blow a hole in government revenue. Has the

457
00:26:37,040 --> 00:26:39,400
Speaker 3: government talked about kind of what they use that revenue

458
00:26:39,440 --> 00:26:41,679
Speaker 3: for and what you know the implications could be.

459
00:26:42,440 --> 00:26:45,600
Speaker 5: Well, the government attended the mandatary repatriation tax its kind

460
00:26:45,600 --> 00:26:48,040
Speaker 5: of a pay for for some of the other things

461
00:26:48,800 --> 00:26:51,200
Speaker 5: that it was some of the other changes that it

462
00:26:51,320 --> 00:26:53,679
Speaker 5: made in the tax cuts and job sects, such as

463
00:26:53,720 --> 00:26:56,280
Speaker 5: lowering the corporate tax rate from what had been thirty

464
00:26:56,280 --> 00:26:59,280
Speaker 5: five percent down to twenty one percent. This was intended,

465
00:27:00,240 --> 00:27:02,040
Speaker 5: as I said, to make up for some of that

466
00:27:02,080 --> 00:27:04,320
Speaker 5: lost revenue, and also to make sure that some of

467
00:27:04,359 --> 00:27:08,440
Speaker 5: these accumulator earnings that companies had piled up overseas over

468
00:27:08,480 --> 00:27:12,040
Speaker 5: many years wouldn't go completely untaxed. When the government decided

469
00:27:12,080 --> 00:27:15,160
Speaker 5: to change its tax system and tax all of us

470
00:27:15,200 --> 00:27:16,600
Speaker 5: companies income going forward.

471
00:27:17,359 --> 00:27:21,040
Speaker 2: Michael, let's talk briefly and we can continue after the

472
00:27:21,040 --> 00:27:24,119
Speaker 2: break that you want to about implications for a wealth tax.

473
00:27:24,480 --> 00:27:28,000
Speaker 2: These our hypothetical proposals right now, But what does this

474
00:27:28,119 --> 00:27:29,720
Speaker 2: case mean for those proposals.

475
00:27:30,359 --> 00:27:33,200
Speaker 5: A ruling in the Moors favor might preclude attempts to

476
00:27:33,240 --> 00:27:35,760
Speaker 5: impose a wealth tax because it's based on the same

477
00:27:35,840 --> 00:27:38,639
Speaker 5: kind of principles. A wealth tax would be based on

478
00:27:38,720 --> 00:27:41,760
Speaker 5: the accumulated value of a wealthy person's assets. In other words,

479
00:27:42,080 --> 00:27:44,960
Speaker 5: value that hasn't actually been monetized by the taxpayer. If

480
00:27:44,960 --> 00:27:47,680
Speaker 5: you own a stake in a public company that has

481
00:27:47,680 --> 00:27:51,199
Speaker 5: accumulated tremendously in value that's pay per wealth. You have

482
00:27:51,240 --> 00:27:54,040
Speaker 5: not actually realized that income. You haven't even sold the shares.

483
00:27:54,280 --> 00:27:57,920
Speaker 5: You haven't received that as income. As long as you

484
00:27:58,240 --> 00:28:01,000
Speaker 5: don't sell that asset, that means accumulative value is an

485
00:28:01,040 --> 00:28:03,480
Speaker 5: unrealized game. And if the court strikes down the mandatary

486
00:28:03,720 --> 00:28:06,879
Speaker 5: repatriation tax because it says you can tax unrealized games,

487
00:28:07,160 --> 00:28:09,240
Speaker 5: that could mean you can oppose a well tax because

488
00:28:09,320 --> 00:28:10,639
Speaker 5: it would tax on realized gains.

489
00:28:11,400 --> 00:28:14,119
Speaker 2: Michael tell us a little bit about this kind of

490
00:28:14,200 --> 00:28:17,240
Speaker 2: side dispute, or maybe it's a central dispute about Charles

491
00:28:17,280 --> 00:28:21,439
Speaker 2: Moore's involvement with his company. Why is that a controversy

492
00:28:21,480 --> 00:28:23,320
Speaker 2: and how might it affect the case?

493
00:28:24,240 --> 00:28:27,359
Speaker 5: Charles Moore has portrayed himself and his wife as simple

494
00:28:27,359 --> 00:28:31,320
Speaker 5: passive outside shareholders and kisen Kraft, the Indian company, issue

495
00:28:31,359 --> 00:28:33,440
Speaker 5: here that they had no control of what the Kis

496
00:28:33,440 --> 00:28:36,600
Speaker 5: and Craft distributed its urnings to shareholders. Since this case

497
00:28:36,680 --> 00:28:40,000
Speaker 5: hinges on whether undistributed corporate income can be taxed, that

498
00:28:40,240 --> 00:28:42,760
Speaker 5: could be significant. But what Charles Moore didn't say in

499
00:28:42,840 --> 00:28:45,239
Speaker 5: his followings to the Supreme Court is that and this

500
00:28:45,320 --> 00:28:48,800
Speaker 5: is shown in kisen Kraft's corporate documents. In India, Charles

501
00:28:48,840 --> 00:28:50,800
Speaker 5: Moore was essentially a corporate insider there. He was a

502
00:28:50,840 --> 00:28:53,479
Speaker 5: director of the company for five years. He received thousands

503
00:28:53,520 --> 00:28:55,920
Speaker 5: of dollars in travel reingbursons for the company, even though

504
00:28:55,960 --> 00:28:58,440
Speaker 5: he claimed in his followings that he never received any

505
00:28:58,480 --> 00:29:01,560
Speaker 5: payments from the company. He advanced only twoitter fifty thousand

506
00:29:01,600 --> 00:29:03,560
Speaker 5: downlished the Kais and Craft and the form what was

507
00:29:03,560 --> 00:29:06,360
Speaker 5: called share application money that was later refunded to him.

508
00:29:06,400 --> 00:29:08,200
Speaker 5: He appears to have sold some of the shares to

509
00:29:08,360 --> 00:29:11,520
Speaker 5: the company's CEO, as I said, was a friend and

510
00:29:11,640 --> 00:29:14,680
Speaker 5: former colleague of his. All the suggests that he would

511
00:29:14,680 --> 00:29:16,600
Speaker 5: have had at least some sort of voice in what

512
00:29:16,680 --> 00:29:18,520
Speaker 5: the COIs and Craft did in fact distrie of its

513
00:29:18,520 --> 00:29:21,040
Speaker 5: turnings to the shareholders. Now the question is does all

514
00:29:21,080 --> 00:29:23,080
Speaker 5: this matter to the case, And people in the tax

515
00:29:23,080 --> 00:29:26,240
Speaker 5: world are kind of split about that. Some people think, yes,

516
00:29:26,280 --> 00:29:28,960
Speaker 5: it does matter that the Wars haven't told the full

517
00:29:29,000 --> 00:29:31,320
Speaker 5: story to the court, that it speaks to their credibility

518
00:29:31,440 --> 00:29:34,440
Speaker 5: and to their portrayal of themselves as ordinary taxpayers and

519
00:29:34,480 --> 00:29:37,800
Speaker 5: kind of a David versus Golide situation. Other people contend well,

520
00:29:38,240 --> 00:29:41,760
Speaker 5: even if Charles Wore was more deeply involved with the

521
00:29:41,800 --> 00:29:44,360
Speaker 5: company that he said, it doesn't affect the central issue

522
00:29:44,360 --> 00:29:46,560
Speaker 5: in the case. It doesn't speak to whether the mandatary

523
00:29:46,560 --> 00:29:49,600
Speaker 5: repatriation tax is unconstitutional. It doesn't speak to whether it's

524
00:29:49,640 --> 00:29:52,320
Speaker 5: legal the tax income that the taxpayer hasn't realized. So

525
00:29:52,320 --> 00:29:53,760
Speaker 5: these people think that at the end of the day,

526
00:29:53,960 --> 00:29:56,920
Speaker 5: it does not matter to the ultimate outcome of the case.

527
00:29:57,680 --> 00:29:59,480
Speaker 5: For what it's worth, the government has not shown any

528
00:29:59,520 --> 00:30:01,440
Speaker 5: sign that it intends to make an issue out of this,

529
00:30:01,520 --> 00:30:03,720
Speaker 5: so it's very possible. It might not come up during

530
00:30:03,760 --> 00:30:06,600
Speaker 5: the oral arguments on Tuesday. We don't know whether any

531
00:30:06,640 --> 00:30:09,520
Speaker 5: of the justices have taken note of this issue, so

532
00:30:09,520 --> 00:30:10,719
Speaker 5: we'll have to wait and see about that.

533
00:30:11,960 --> 00:30:15,480
Speaker 3: You mentioned earlier about the implications that this case could

534
00:30:15,520 --> 00:30:18,360
Speaker 3: have on a future wealth tax. Can you talk about

535
00:30:18,440 --> 00:30:21,120
Speaker 3: who has been calling for a wealth tax and kind

536
00:30:21,120 --> 00:30:23,040
Speaker 3: of the history there and kind of why we don't

537
00:30:23,040 --> 00:30:23,640
Speaker 3: already have that.

538
00:30:24,520 --> 00:30:27,400
Speaker 5: Well, it's actually kind of started before the Court agreed

539
00:30:27,400 --> 00:30:30,200
Speaker 5: to take the case, because some conservative groups urged the

540
00:30:30,240 --> 00:30:33,880
Speaker 5: Court to accept to hear this case exactly for that reason,

541
00:30:33,920 --> 00:30:36,480
Speaker 5: because they want the Court to use this case to

542
00:30:36,640 --> 00:30:41,600
Speaker 5: rule future wealth tax off limits. Now, Democrats continue to

543
00:30:41,600 --> 00:30:44,280
Speaker 5: press andw with proposals for a wealth tax. The latest

544
00:30:44,320 --> 00:30:46,680
Speaker 5: attempt was introducing the Senate ships a few days ago

545
00:30:47,040 --> 00:30:49,320
Speaker 5: by Senator Ron Wide and the chairman of the Center

546
00:30:49,400 --> 00:30:52,640
Speaker 5: Finance Committee. He insists that such a tax would be constitutional.

547
00:30:53,080 --> 00:30:55,640
Speaker 5: President Biden has called for a wealth tax also or

548
00:30:55,680 --> 00:30:59,000
Speaker 5: a billionaire's tax, as a court where assets above a

549
00:30:59,040 --> 00:31:02,240
Speaker 5: certain level would be taxed, whether or not would be realized.

550
00:31:02,560 --> 00:31:05,320
Speaker 5: As of right now, however, a wealth tax is still

551
00:31:05,440 --> 00:31:08,400
Speaker 5: very much in the nascent stages. There's no indication that's

552
00:31:08,440 --> 00:31:12,200
Speaker 5: going to pass anytime soon. Congress is having difficulty agreeing

553
00:31:12,200 --> 00:31:16,280
Speaker 5: on anything much these days, and even Wide admits that

554
00:31:16,880 --> 00:31:18,920
Speaker 5: proposal of this nature probably wouldn't be acting on for

555
00:31:18,960 --> 00:31:19,560
Speaker 5: some time yet.

556
00:31:20,360 --> 00:31:23,160
Speaker 2: Michael, we only have thirty seconds left or so. But

557
00:31:23,840 --> 00:31:26,920
Speaker 2: do you have any strong feelings, based on what the

558
00:31:27,000 --> 00:31:29,000
Speaker 2: quarters that are done in the past, about how this

559
00:31:29,120 --> 00:31:30,800
Speaker 2: case is likely to come out?

560
00:31:31,480 --> 00:31:33,600
Speaker 5: It's really hard to say. I mean, part of the

561
00:31:33,640 --> 00:31:37,320
Speaker 5: reason that some of the people in tax world have

562
00:31:37,400 --> 00:31:41,320
Speaker 5: been trumpeting the potential implications of this so loudly is

563
00:31:41,360 --> 00:31:44,520
Speaker 5: because they know that the justices, while they obviously are

564
00:31:44,920 --> 00:31:47,360
Speaker 5: legal experts, are not tax law experts. Tax flow is

565
00:31:47,400 --> 00:31:50,720
Speaker 5: extremely in the weeds and detailed and complex, and they

566
00:31:50,720 --> 00:31:53,400
Speaker 5: want to make sure that the justices before they rule,

567
00:31:53,440 --> 00:31:55,800
Speaker 5: or aware of the potential implications for the rest of

568
00:31:55,840 --> 00:31:58,760
Speaker 5: the tax code. And it's really hard to say but

569
00:31:58,880 --> 00:32:00,800
Speaker 5: how the court is going to come down this, But

570
00:32:01,560 --> 00:32:05,880
Speaker 5: this particular court has shown a tendency to not confine

571
00:32:05,920 --> 00:32:09,680
Speaker 5: its rulings to narrow issues, so it's certainly in the

572
00:32:09,720 --> 00:32:13,360
Speaker 5: realm of possibility that they could rule broadly in this case.

573
00:32:13,440 --> 00:32:16,920
Speaker 5: And if they do, in factor, won't favor the Moores issues,

574
00:32:16,960 --> 00:32:20,040
Speaker 5: something that could have significant implications for other provisions in

575
00:32:20,080 --> 00:32:20,920
Speaker 5: the tax code.

576
00:32:21,160 --> 00:32:24,840
Speaker 3: That's Michael Rappaport, a senior reporter at Bloomberg Tax and Accounting.

577
00:32:25,160 --> 00:32:28,640
Speaker 3: Thanks so much for joining us. Well, Greg, One thing

578
00:32:28,680 --> 00:32:31,640
Speaker 3: we didn't chat about with Michael is the controversy here

579
00:32:31,800 --> 00:32:35,719
Speaker 3: involving Justice Alito in this case. You know over one

580
00:32:35,800 --> 00:32:38,760
Speaker 3: of the attorneys that's actually arguing, I think David Rivkin,

581
00:32:39,640 --> 00:32:41,520
Speaker 3: you know he's going to be before the court. Can

582
00:32:41,560 --> 00:32:45,080
Speaker 3: you talk about the relationship with Alito there and what's

583
00:32:45,120 --> 00:32:45,520
Speaker 3: going on?

584
00:32:45,760 --> 00:32:48,920
Speaker 2: Yeah, really unusual situation. David ri Rivken, a well known

585
00:32:48,920 --> 00:32:53,960
Speaker 2: conservative lawyer, co wrote to Wall Street Journal Articles opinion

586
00:32:54,000 --> 00:32:57,040
Speaker 2: pieces with an opinion a writer at the Wall Street

587
00:32:57,080 --> 00:33:00,480
Speaker 2: Journal in which basically gave Justice Alito a four to

588
00:33:00,520 --> 00:33:03,720
Speaker 2: say some things, and he talked about he talked about

589
00:33:03,800 --> 00:33:07,000
Speaker 2: the leak of the ruling in the abortion case. People

590
00:33:07,080 --> 00:33:09,960
Speaker 2: have said that was an inappropriate thing to happen, and

591
00:33:10,440 --> 00:33:13,960
Speaker 2: Democrats have called for Justice Alito to recuse from this

592
00:33:14,040 --> 00:33:17,280
Speaker 2: case because of David Rifkins's involvement. And then Justice Alito

593
00:33:17,880 --> 00:33:21,480
Speaker 2: back in September put out a statement in which he

594
00:33:21,520 --> 00:33:23,600
Speaker 2: said I'm not going to recuse. There's nothing out of

595
00:33:23,640 --> 00:33:27,719
Speaker 2: the ordinary about these interviews, nothing to see here, and

596
00:33:27,760 --> 00:33:30,360
Speaker 2: so every indication is he is going to participate in

597
00:33:30,360 --> 00:33:30,840
Speaker 2: this case.

598
00:33:32,040 --> 00:33:35,000
Speaker 3: Wow, that's really interesting, you know, especially given all the

599
00:33:35,040 --> 00:33:37,720
Speaker 3: ethics controversies. And that does it for this edition of

600
00:33:37,720 --> 00:33:40,000
Speaker 3: the Bloomberg Law Show. I'm Lydia Wheeler and.

601
00:33:39,960 --> 00:33:42,040
Speaker 2: I'm Greg Storr. This is being pl