Shane McAllister Conley, An Unrealized Opportunity: What Moore v. United States means for the existence of a constitutional realization requirement for income taxation, 2025 Wis. L. Rev. 1187 (2025).
The United States Supreme Court disappointed tax practitioners and commentators when it declined to weigh in on whether realization—actual or constructive receipt of income as wages, salaries, interest, rent, business income, dividends, or gain from the sale of property—is a constitutional prerequisite for income taxation in Moore v. United States. The Court managed to avoid the realization question by holding that income realized by a foreign corporation could be attributed to the Moores as shareholders such that requiring them to pay a one-time Mandatory Repatriation Tax was constitutionally permissible. The shareholders could be taxed on the corporation’s realized earnings, much as owners of pass-through entities are taxed on their share of the entity’s earnings.
Despite the Court’s apparent avoidance of the question, this Note will argue that various aspects of the Moore opinion suggest that a constitutional realization requirement does exist. However, such a requirement, if it exists, would do little to limit Congress’s Sixteenth Amendment taxing power, as the Court’s attribution analysis brings many existing Internal Revenue Code (I.R.C.) provisions within the ambit of taxability, mitigating fears of realization tearing a “blast radius” through the I.R.C. Furthermore, the design of effective policies that could tax wealth in spite of a realization requirement undermines arguments that realization could pose an obstacle to the future enactment of a wealth tax.
Although the Court’s maintenance of the status quo with respect to realization as a constitutional prerequisite may be frustrating for commentators, it is unlikely to have a significant short-term impact on future tax policy, given that the recently passed One Big Beautiful Bill Act (OBBBA) maintains the status quo of 2017’s Tax Cuts and Jobs Act (TCJA) by extending and making permanent many of TCJA’s provisions. As the Court was hesitant to limit Congress’s ability to collect revenue via the taxing power by invalidating TCJA’s Mandatory Repatriation Tax on realization grounds in Moore, the Court is likely to be similarly hesitant about using realization to invalidate any OBBBA tax provisions given projected decreases in federal income tax revenue over the coming decade.
