The Supreme Court commenced oral arguments on Tuesday in the highly anticipated case of Moore v. United States, which has far-reaching implications for the U.S. tax code. The case involves a Washington couple, Charles and Kathleen Moore, who hold a controlling interest in a profitable foreign company impacted by a tax provision implemented under former President Donald Trump's 2017 tax overhaul.

At the crux of the case is a dispute over a levy on earnings and profits accumulated by the foreign company that were not distributed to the Moores. This raises questions regarding the definition of income and has the potential to reshape the U.S. tax code, according to experts. "This could have the biggest fiscal policy effects of any court decision in the modern era," noted Matt Gardner, a senior fellow at the Institute on Taxation and Economic Policy.

The tax provision in question, called "deemed repatriation," was introduced as part of the 2017 Tax Cuts and Jobs Act to facilitate the transition to a new tax system. It mandated a one-time levy on earnings of foreign entities accrued since 1986. The Moore case challenges whether individuals must "realize" or receive profits before incurring taxes, casting doubt on the interpretation of the 16th Amendment, which outlines the legal definition of income.

Former House Speaker Paul Ryan, a key figure in drafting the Tax Cuts and Jobs Act, emphasized at a recent event that the purpose of the provision was not to justify a wealth tax but rather to enable a systemic transformation. Ryan, who does not support a wealth tax, underscored that using the Moores' argument to block one would necessitate significant changes to the existing tax code.

The Supreme Court's ruling in this case could have varying degrees of impact on the tax code. Daniel Bunn, President and CEO of the Tax Foundation, who has extensively written on the subject, explains that if the court deems the levy on unrealized income unconstitutional, it may influence the future taxation of pass-through entities, such as partnerships, limited liability corporations, and S corporations.

Considering the potential consequences, businesses operating in cross-border contexts are urged to closely monitor the developments in this case. The outcome could also have significant ramifications for federal revenue and shape future tax policies. The Tax Foundation estimates that if the deemed repatriation provision were entirely invalidated for both corporate and noncorporate taxpayers, federal revenue would decline by a staggering $346 billion over the next decade.

However, a definitive ruling is not expected until 2024, leaving considerable uncertainty surrounding the scope and impact of this case. As the Supreme Court deliberates on Moore v. United States, taxpayers and policymakers alike await a decision that could reshape the taxation landscape in the United States.

In the meantime, the tax community is closely watching this precedent-setting case, eagerly anticipating the potential ramifications it could have on the U.S. tax code and future tax policies.