In 2006, according to their petition to the court, the couple invested $40,000 in the company, KisanKraft Machine Tools Private Limited, which supplied farmers with basic tools. The Moores also received shares in the company, which was started by a friend of Mr. Moore’s, Ravindra Kumar Agrawal.
In 2018, the Moores learned that they owed income tax on the company’s reinvested earnings dating back to 2006, adding about $15,000 to their tax bill. Backed by conservative and business groups, the Moores sued, claiming that the tax violated the Constitution’s apportionment requirements because it taxed their shares in the company, which they characterized as personal property, rather than on income they had gained.
Lower courts, including a panel of judges on the U.S. Court of Appeals for the Ninth Circuit, sided with the federal government. In a dissent, Judge Patrick J. Bumatay, a Trump appointee, wrote that the decision by the appeals panel conflicted with “ordinary meaning, history and precedent,” all of which recognize that “an income tax must be a tax on realized income.”
The Moores appealed to the Supreme Court, which agreed to review the case.
In their petition, the couple argued that the Ninth Circuit’s decision “sweeps away the essential restraint on Congress’s taxing power, opening the door to unapportioned taxes on property (as in this case) and anything else Congress might deem to be ‘income.’”
Lawyers for the Biden administration argued that the Ninth Circuit had “correctly rejected” the Moores’ contention that the tax was unconstitutional, contending that the Moores’ claims were “unsupported by constitutional text, congressional practice, or this court’s precedent.” The case, they added, lacked “pressing prospective importance” because it was a one-time tax that only applied to pre-2018 income.
