heard oral arguments Tuesday in a little case with potentially huge implications. The high court’s eventual decision in
could give a green light to
in Congress and in state legislatures to enact taxes on unrealized gains, what liberals call “
The Moore case doesn’t involve one of these wealth taxes itself, but the tax that Charles and Kathleen Moore are challenging operates along the same lines. That is, it taxes monetary gains that are “unrealized” and thus exist only on a balance sheet.
Years ago, the Moores
that wanted to help India’s rural farmers—and turn a profit while doing so—by importing American-made tools into India.
The couple contributed $40,000 to help Ravi Agrawal found a company called KisanKraft and, in exchange, received about 13% of the company’s common shares.
Demand for American farm tools in rural India was large, larger than KisanKraft could satisfy as a small startup. So, the company reinvested all its profits to grow bigger.
The Moores, as minority shareholders, couldn’t force KisanKraft to pay them a dividend, but neither did they want to do that. They were content to keep their money in a company that was doing a lot of good for Indian farmers.
The Moores didn’t receive any payments from KisanKraft. But because the company was growing, their initial investment increased in value. That value, however, existed only on paper.
The Moores never received a dollar. And if the company suddenly went under, their investment would have disappeared.
For 12 years, all went well. And then the Internal Revenue Service knocked on the Moores’ door. The IRS insisted that under the “Mandatory Repatriation Tax” part of the
and Jobs Act of 2017, the Moores had to pay taxes on their share of KisanKraft’s reinvested earnings going back to the company’s founding 12 years earlier.
All those reinvested earnings were “income,” as far as the IRS was concerned, and the Moores owed the IRS its cut.
But where was the money? The Moores didn’t realize any income. They didn’t receive any distributions, stock dividends, or other payments whatsoever from KisanKraft. The “income” existed only on a balance sheet in a company half a world away.
How could the IRS demand a portion of money, the Moores wondered, that they hadn’t realized or received?
Under the Mandatory Repatriation Tax, the couple had to declare an additional $132,512 as “taxable 2017 income” and pay an additional $14,729 in tax.
The Constitution and Taxes
The Constitution limits the federal government’s taxing power. Under the
, the only direct tax (that is, a tax
) that the government can take is an income tax.
And the historical definition of “income” includes the requirement that the money be “realized.” That is, the money is in the hands—or, at least,
—of the person taxed.
The IRS disagreed. It claimed that realization isn’t necessary because that word doesn’t appear in the 16th Amendment.
This is essentially the same argument made by
, such as Sen. Elizabeth Warren of Massachusetts and state legislators in
. These politicians argue that they can tax any unrealized gains, not just those from foreign investments.
Did the stock you purchased in June go up in value by Dec. 31? Then under their theory of government taxation, you must pay taxes on those unrealized gains.
The market crashed on Jan. 1 and wiped out your investments, you say? Too bad, you still owe taxes on the gains from Dec. 31. Where will you get the money from? That’s your problem. Pay up.
Charles and Kathleen Moore have a good argument. And their lawyers, expertly led by
with the support of the
, delivered it Tuesday to the nine Supreme Court justices.
They point to many historical sources from the time of the 16th Amendment’s ratification that tend to show that “income” does, indeed, require realization. They also point, chiefly, to two Supreme Court cases that say so.
In the first case,
(1920), the Supreme Court held that a stock dividend wasn’t income because the dividend didn’t put any money in the investor’s hands. The investor received only an unrealized gain because “every dollar of his investment together with whatever accretions and accumulations have resulted … still remains the property of the company, and subject to the business risks which may result in wiping out the entire investment.”
The same goes for the Moores’ investment in KisanKraft, but even more so because they haven’t received even a stock dividend. They’ve received nothing.
The second case,
(1955), held that for purposes of the Income Tax Code, “income” means “undeniable accessions to wealth, clearly realized, and over which the taxpayers have complete dominion.”
Clear as crystal, but the tax code isn’t the same as the 16th Amendment. Still, it sure would be absurd for the code that operationalizes the power granted in that constitutional amendment to use a different meaning than the one used in the amendment.
In response to all of this, the IRS argues that Macomber applies only to stock dividends or, if the Supreme Court doesn’t buy that, that Macomber is such an old case that it can be ignored. And Glenshaw Glass doesn’t apply because it’s only relevant to the tax code.
And as for the Moores’ comprehensive historical analysis, the IRS points to several Civil War-era taxes that appear to have taxed unrealized gains. To which the Moores respond: Even if those taxes did reach unrealized gains, they’re irrelevant because the 16th Amendment was ratified in 1913.
Thus, what matters is whether, in 1913, “income” required realization, and the historical sources show that it did.
At oral argument Tuesday before the Supreme Court, Grossman argued that “appreciation in the value of a home, a stock investment, or other property is not and never has been taxed as income.” He reasoned that a gain is “not income unless and until it has been realized by the taxpayer.”
Displaying an impressive recall of Supreme Court precedent, Grossman said that the court has “held that line for a century.” This is a tax on “ownership of property, and therefore must be apportioned,” he noted.
In the first of many comments about first principles, Grossman noted that “dispensing with the need for realization sweeps away what the Framers regarded as the essential check on Congress’ power to tax property.”
Grossman noted that the government could not identify “a single thing the government could not tax as income under its position that realization is unnecessary.” He did concede that KrisanKraft realized gains, but argued that the Moores, his clients, did not.
Solicitor General Elizabeth Prelogar argued the case for the United States. She defended the Mandatory Repatriation Tax, stating that it was “firmly grounded in the 16th Amendment’s text and history.”
Prelogar argued that the Supreme Court’s tax jurisprudence supported the government’s position. She warned that if the court ruled for the Moores, it would “cause a sea change in the operation of the tax code and cost several trillions of dollars in lost tax revenue.”
Prelogar suggested that the court didn’t need to resolve any “fundamental questions in this case about whether the 16th Amendment requires realization.” The Mandatory Repatriation Tax “taxes income that was actually realized by the foreign corporations,” she said, and Congress was within its rights to attribute that tax to U.S. shareholders.
The solicitor general argued that the Mandatory Repatriation Tax was no different, from a taxation standpoint, than a Subchapter S or partnership agreement.
Under questioning by justices, Prelogar conceded that if Congress passed a tax on appreciation of real estate or stock portfolios, she would argue that those taxes are constitutional under the 16th Amendment. She noted that “there is no bright line realization rule or requirement under the 16th Amendment and that Congress is permitted to tax certain forms of unrealized gains.”
Several justices indicated through their questions that they were looking for a way to decide the case in a narrow fashion. Whatever the high court eventually decides, the ruling could have much bigger implications than the Moores’ tax bill.
If the Moores win broadly, Democrats can kiss goodbye their dreams of wealth taxes on unrealized gains. But if the Moores lose, residents of blue states probably can expect a very unpleasant April 15.
And the next time Democrats control the presidency and Congress, the rest of us Americans can, too.
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Defense attorneys have coined the term “January 6 Jurisprudence” to describe the treatment received by the more than 1,200 defendants arrested so far in connection with the events of
This carve-out legal system involves the
and possibly unlawful use of a
; excessive prison sentences and indefinite periods of pretrial incarceration; and the designation of nonviolent offenses as federal crimes of terrorism.
A universal feature is the requirement that a Jan. 6 defendant, usually a supporter of Donald Trump, face trial in Washington, D.C., a city overwhelmingly populated by Democrats. Federal judges have denied every change of venue motion filed in Jan. 6 cases, arguing those who protested at the Capitol can get a fair trial in the nation’s capital.
The results so far appear to contradict the court’s collective conclusion. Court records show the jury selection process has repeatedly revealed a strong degree of bias against anyone tied to Jan. 6. At least 130 defendants have been convicted at trial—not one has been acquitted by a jury—and hundreds have been sentenced to prison time ranging from seven days to 22 years.
Defense lawyers say this track record helps explain why the vast majority of defendants have opted for a plea deal rather than go to trial.
This is the same environment that now awaits the former president as he prepares to stand trial in Washington on March 4, 2024, on charges of election interference, in addition to an array of criminal and civil cases against him elsewhere.
and Trump’s counsel spar over a number of issues, perhaps the biggest dispute will concern whether it will be possible to seat an impartial jury for the presumptive 2024 GOP nominee in a city that voted 92% for Joe Biden in 2020.
indicted Trump in August, a Jan. 6 defense attorney who is not representing the former president, J. Daniel Hull,
the New York Times that Washington “is the worst possible place for any Jan. 6 defendant, but especially Donald Trump, to have a trial.”
U.S. District Court Judge Tanya S. Chutkan recently set a jury selection schedule for Smith’s four-count indictment against Trump for the events of Jan. 6. She ordered both parties to begin developing a questionnaire, due Jan. 9, 2024, that hundreds of D.C. residents will be asked to complete so the court can begin the initial step of weeding out unqualified jurors.
Stakes are high for both sides. Trump’s lawyers must navigate constraints on how many jurors can be stricken from consideration to ensure their client gets a fair trial. The
must persuade the American people that a case brought by a Democratic administration and handled by a Democrat-appointed judge with a record of inflammatory statements about the former president will be heard by unbiased jurors.
The Sixth Amendment guarantees, among other rights, “the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed.” In extreme cases, criminal defendants can petition to move their trial out of the prosecuting jurisdiction for a number of reasons, not the least of which is sustained, negative press coverage that taints the jury pool.
Trump’s lawyers are not discussing their strategy publicly, but sources have indicated to RealClearInvestigations that the defense will file a change-of-venue motion in the next month or two. Given the partisan composition of Washington, saturation coverage of the former president’s ongoing legal woes, and the city’s relatively small population, Trump will have a strong argument in favor of moving the trial outside of the nation’s capital.
Yet a review of Jan. 6 cases to date suggests the odds are against that. Not a single judge on the D.C. District Court has granted a change of venue motion even for high-profile trials, such as those for members of the Oath Keepers and the Proud Boys, the so-called “militia” groups involved in the Capitol protest.
Despite nonstop local news coverage and nationally televised proceedings of the Democrat-run January 6 Select Committee that, in some instances, mentioned the defendants by name, Judge Timothy J. Kelly repeatedly rejected motions to move the Proud Boys’ seditious conspiracy trial out of Washington.
One month before jury selection began, Kelly acknowledged in a November 2022 order that the five defendants “have been the subject of more particularized and extensive media coverage than most January 6th defendants, in part because of the House Select Committee’s hearings this summer.” Nonetheless, Kelly, a Trump appointee, denied the defendants’ last-minute attempt to seek relief in another venue by noting, “the brighter spotlight on Defendants does not support transfer, mainly because the pretrial publicity here is national in scope, available to anyone across the country with access to a television or the internet.”
Jury selection lasted several days, an anomaly for Jan. 6 trials. Despite the lengthy process, the panel still
several D.C. residents who disclosed participation in Democratic protests, including Black Lives Matter and the Women’s March, according to one court observer’s report.
After a four-month trial and six days of deliberation, the jury convicted the defendants in May on multiple charges while returning not-guilty verdicts on a handful of other offenses, including impeding police officers. One juror told Vice News that he and his cohorts unanimously concluded in less than a day that four of the five defendants were guilty of seditious conspiracy, an exceedingly rare charge traditionally reserved for individuals tied to foreign terrorist groups.
“[The jury] hated us with a passion,” Joseph Biggs, one of the Proud Boys found guilty of seditious conspiracy and other charges, told RCI in an interview from his jail cell in September. “They wanted to see us die. One of them said he wanted to see us buried under the jail.” Despite the individual’s stated desire to see the defendants dead, he was seated on the panel.
Chutkan’s handling of her first jury trial for a Jan. 6 defendant, Russell Alford, also indicates how Trump might fare. Alford was charged in March 2021 with four misdemeanors for his 11-minute nonviolent walk through the Capitol.
In rejecting Alford’s bid to move his trial,
downplayed the partisanship of D.C. residents and surveys that indicated higher-than-average prejudice against Capitol protesters. In her April 2022 order, Chutkan insisted that “jurors’ political leaning are not, by themselves, evidence that those jurors cannot fairly and impartially consider the evidence presented and apply the law as instructed by the court.” She also claimed an “expanded examination will effectively screen for prejudice among potential jurors in this case.”
A review of court transcripts, however, raises questions as to whether Chutkan fulfilled her promise. A jury questionnaire exposed a bias so strong against Jan. 6 protesters that half the respondents were automatically eliminated from consideration. Many who remained were also problematic.
After one day of voir dire, which is the direct questioning of potential jurors, Chutkan still allowed individuals who expressed critical views about anyone involved in Jan. 6 to serve on the panel. One juror said people who were at the Capitol on Jan. 6 “were probably guilty.” Another who worked as an investigator for federal agencies, including the Department of Homeland Security and the Transportation Security Administration, admitted he had “strong feelings about the individuals who gathered at the Capitol on January 6.”
Chutkan rejected a defense attorney’s request to remove that juror from consideration. “I’m going to deny it because he said he has training; he’s by nature trained to be skeptical. He has an opinion, but it appears that he is willing to confine his verdict to the evidence presented in the case.”
Did People Lie to Get on Jan. 6 Juries?
A staffer for Sen. Ben Ray Lujan, D-N.M., also got the nod, despite telling Chutkan he knew many Capitol police officers—several of whom are routinely called as government witnesses in Jan. 6 trials—and his confession that the day was “pretty impactful” on him.
On several occasions, Chutkan reassured the skeptical defense team that the selected jurors would set aside personal feelings to objectively weigh the evidence.
The jury returned unanimous guilty verdicts on all counts in less than four hours.
Alford now wonders whether jurors were being honest. “They told us what we wanted to hear so they could get on the panel,” Alford told Real Clear Investigations by phone from a halfway house last month. He had just finished serving 176 days of a 12-month jail sentence imposed by Chutkan. “In any other jurisdiction, we would have won. We thought we could get a fair shake, but they all were connected to the government.”
Alford’s experience is not an outlier. Post-trial interviews with jurors have often revealed bias. In a
with C-SPAN’s Brian Lamb following her service on an Oath Keepers’ trial earlier this year, a woman named Ellen, a former co-worker of Lamb, described how she desperately tried to get selected as a juror. When she finally was selected, Ellen admitted she “was shocked beyond belief.”
Over the course of several days of deliberations, Ellen said she successfully persuaded reluctant jurors to render guilty verdicts against the six defendants, including a 72-year-old who didn’t enter the Capitol and an autistic young man. She worked in tandem with a juror who had worked as a lawyer for the Department of Justice, the same government agency prosecuting the defendants. “How that was allowed, I’ll never know,” Ellen told Lamb. “He couldn’t believe it.”
Ellen also expressed disdain for the people on trial. “They weren’t even from big cities. These were people from, living on farms in rural places, most of them had no concept of Washington, D.C.,” she told Lamb.
Democrat Mosby’s Change of Venue
The situation was quite different, however, for a former Democratic elected official recently on trial in neighboring Maryland. A grand jury indicted Marilyn Mosby, the former state’s attorney for the city of Baltimore, in 2022 on four counts of perjury related to COVID-19 fraud. Her lawyers asked the judge to move the trial, which was set to begin on Oct. 31, 2023, out of the Baltimore area to the southern district of Maryland based on studies that uncovered higher levels of bias among prospective jurors in the northern district, the location where the trial was set to take place.
The analysis, conducted by Trial Innovations Inc., evaluated “relevant newsprint, television, and social media coverage” and determined that “the Northern Division jury pool has been saturated with prejudicial coverage surrounding the Defendant.” Telephone interviews of eligible residents in the two districts also revealed distinct disparities. For example, 62% of respondents in the northern district had read, seen, or heard of Mosby compared to 42% in the southern district.
Nearly half of the respondents in the northern district considered Mosby “somewhat” or “very” corrupt compared with roughly one-quarter who had the same response in the southern district.
In granting Mosby’s motion in September, U.S. District Court Judge Lydia Kay Griggsby concluded that “pre-trial publicity about this case has, to a degree, negatively impacted the views held about the Defendant by potential jurors residing in the Court’s Northern Division more so than their counterparts in the Southern Division.” (Mosby was convicted on all counts on Nov. 9.)
Defense surveys in Jan. 6 cases point to the same, if not higher, level of prejudice among D.C. residents. A May 2022
compared attitudes between Washington residents and those living in areas of Florida, North Carolina, and Virginia. While 85% of D.C. residents consider Jan. 6 an “insurrection, attack, or riot,” only 41% of Florida residents agreed with the description. Seventy-two percent of D.C. respondents were more likely than not to find a Jan. 6 defendant guilty, as opposed to 48% of respondents in Virginia and North Carolina and 37% of Florida respondents.
Forty percent of D.C. residents think the events of Jan. 6 were racially motivated, while less than 20% of the respondents in the three other states thought so.
Unlike the judge overseeing the Mosby matter, D.C. judges are unmoved by such disparities.
While overall public interest in Jan. 6 has waned nearly three years later, it remains a campaign issue for Democrats and a top news story in the nation’s capital. The Washington Post
a “January 6 Insurrection” portal on its website, providing updates on Trump’s trial and other proceedings related to the Capitol protest. CBS News’ Washington affiliate has a full-time reporter
only to cover the events of Jan. 6.
Jury selection for a November trial indicated little change in prospective jurors’ intensely negative views about Jan. 6. Voir dire for the trial of Taylor Johnatakis, a man from Washington state charged with multiple offenses for his participation in the Capitol protest, showed a sustained level of prejudice against Jan. 6 defendants. Five of the first 10 individuals were excused after confessing they could not fairly assess the evidence or follow the judge’s instructions to set aside their opinion to reach a verdict.
One man, a historian for the American Historical Association, admitted he had written columns describing Jan. 6 as an “insurrection.” A public school teacher told the judge she uses Jan. 6 as a “teachable moment” for her special-needs students and that she still discusses the issue with her fellow educators. Another woman works for a provider that offered mental health services for who she described as “traumatized” police officers who were “victims” of Jan. 6. (All were struck for cause.)
Some seated jurors recalled their emotional reaction to that day. One woman, who has been on disability for 13 years, said she “burst out crying” when she watched events unfold at the Capitol. (Johnatakis, who represented himself, was
on all counts after just a few hours of deliberation.)
Court watchers say such attitudes will make it especially hard to seat a fair jury for the most controversial figure in America, Donald Trump.
It is difficult to contemplate how the government and Chutkan will get around years of hypercritical coverage of Trump—not just related to Jan. 6 but stretching back to claims Trump illegally colluded with Russia to rig the 2016 election and every investigation in between.
Still, it is highly unlikely that Chutkan will consent to Trump’s request to move the trial to another jurisdiction. She will, as she did in Alford’s case, note that court-ordered venue changes are rare, even in trials of wide public interest. (She compared Alford’s trial to that of Boston Marathon bomber Dzhokhar Tsarnaev, where the judge refused to move his trial out of the city.)
There are, however, exceptions. In 1996, a federal judge moved the trial of Oklahoma City bomber Timothy McVeigh and Terry Nichols to Denver. After considering intense news coverage of the deadly attack and its impact on the community, U.S. District Court Judge Richard Matsch
: “There is so great a prejudice against these two defendants in the state of Oklahoma that they cannot obtain a fair and impartial trial at any place fixed by law for holding court in that state.”
The change of venue request was not opposed by the lead prosecutor in that case—Merrick Garland, who now oversees the U.S. Justice Department as attorney general of the United States.
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A California mother who lost her daughter to suicide
and was removed from her custody for not supporting her gender identity filed an amicus brief urging the
to hear a case from another mother in Indiana facing the loss of custody for not supporting her daughter’s gender transition.
Abigail Martinez is a Salvadoran immigrant who raised four children in California, one of whom began questioning her sexuality amid a struggle with depression in high school.
School staff told her daughter to join the school’s LGBTQ club, where the mother claims in her amicus brief the school club “persuaded that the only way to be happy was to change her gender,” and that the school psychologist encouraged her daughter to do the same.
With a new policy at the school requiring staff to use students’ pronouns and preferred names for students without parental notification or permission, Martinez was not informed of her daughter’s new identity, and feels “the school staff should have helped me, but they became my worst enemy.”
After Martinez’ daughter was hospitalized for attempting suicide,
the school psychologist told her daughter to accuse her mother of abuse so “she would lose custody and the state would pay for gender-transition treatments without parental consent.”
As a result, the California Department of Child and Family Services took her daughter and placed her in a group home, after which a judge ordered Martinez’ daughter be allowed to receive cross-sex hormones to further her transition.
While Martinez fought against the allegations of abuse and ultimately was exonerated and removed from the child abuse registry, soon after the court found her to be a fit parent her daughter committed suicide by lying down on tracks in front of an oncoming train.
Martinez had sought that her daughter be treated for her underlying depression instead of receiving cross-sex hormones, a lack of treatment that she blames for her daughter’s suicide.
In Indiana, the case of M.C. and J.C. v. Indiana Department of Child Services follows a similar contour: A child was removed from custody of parents nonetheless found “fit” by the state for the parents’ religious beliefs about
and decision not to support the child’s transition.
In their case, the parents allege Indiana failed to follow the free exercise clause of
by preventing them from raising their child according to their faith, and that the Indiana Department of Child Services censored the parents’ First Amendment speech rights by limiting what they were allowed to speak about with their child during their limited visitations.
“When governments usurp the essential role of parents in the lives of their children, tragedy ensues,” said Kayla Toney, associate counsel for First Liberty Institute, who is representing Martinez and filed the amicus brief urging the Supreme Court to take the Indiana case.
“The Constitution ensures that states cannot target parents because of their religious beliefs, interfere with the religious upbringing of their children, or impose prior restraints on speech in their own homes. We hope the Supreme Court will act to prevent state officials from committing any more violations of parental constitutional rights with impunity.”
With Indiana courts upholding the Department of Child Services’ decisions, the writ of certiorari filed by the parents seeks review by the Supreme Court. If the Supreme Court hears the case and rules against Indiana, the result would be to overturn state laws in California, Washington, and Oregon, and court decisions in Indiana, Ohio, and Illinois that lead to parents losing custody if they do not seek or affirm gender-transition treatments for their child.
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