The Mandatory Repatriation Tax Is Unconstitutional

Yale Journal on Regulation Bulletin, Vol. 36, 2018

20 Pages Posted: 3 Oct 2018 Last revised: 12 Oct 2018

Sean P. McElroy

Stanford University, School of Law, Students

Date Written: 2018

Abstract

In late 2017, Congress passed the first major tax reform in over three decades. This Essay considers the constitutional concerns raised by Section 965 (the “Mandatory Repatriation Tax”), a central provision of the new tax law that imposes a one-time tax on U.S.-based multinationals’ accumulated foreign earnings.

First, this Essay argues that Congress lacks the power to directly tax wealth without apportionment among the states. Congress’s power to tax is expressly granted, and constrained, by the Constitution. While the passage of the Sixteenth Amendment mooted many constitutional questions by expressly allowing Congress to tax income from whatever source derived, this Essay argues the Mandatory Repatriation Tax is a wealth tax, rather than an income tax, and is therefore unconstitutional.

Second, even if the Mandatory Repatriation Tax is found to be an income tax (or, alternatively, an excise tax), the tax is nevertheless unconstitutionally retroactive. While the Supreme Court has generally upheld retroactive taxes at both the state and federal level over the past few decades, the unprecedented retroactivity of the Mandatory Repatriation Tax — and its potential for taxing earnings nearly three decades after the fact — raises unprecedented Fifth Amendment due process concerns.

Keywords: Tax, Repatriation, 965

JEL Classification: K34

Suggested Citation

McElroy, Sean, The Mandatory Repatriation Tax Is Unconstitutional (2018). Yale Journal on Regulation Bulletin, Vol. 36, 2018. Available at SSRN: https://ssrn.com/abstract=3247926

Sean McElroy (Contact Author)

Stanford University, School of Law, Students ( email )

Stanford, CA
United States

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