As tax season is upon us, a pending Supreme Court case, Moore v. United States, is drawing wide attention from taxpayers, and legal professionals. The case will address the constitutionality of the Section 965 “Transition Tax”, an imposition that arrived as part of the Tax Cuts and Jobs Act in 2017.
The petitioners in the case, Moore, are individual shareholders of an Indian company, who although hadn’t received any distributions from the said company during their period of investment, were nonetheless called to pay the Transition Tax. The outcome of this case could potentially impact a considerable number of taxpayers, not least some major businesses and clients who have previously had, or currently have dealings with the firm.
The Transition Tax was established as an toll charge on the untaxed foreign earnings of foreign corporations as if those earnings had been repatriated to the United States. It concerns the particulars of the new international tax regime introduced by the Tax Cuts and Jobs Act. However, the Moore case challenges its constitutionality and it will be pivotal in determining the future of this law.
Given the potential implications, many companies and individuals are advised to submit a protective refund claim. This procedure safeguards the taxpayer’s right to claim a refund in future, specifically for those years where the statute of limitations may run out before the final resolution in the Moore case is reached. Doing so does not obligate the taxpayer to any stipulated action, and merely serves as an insurance policy.
A protective refund claim may be submitted by following specific guidelines provided by the IRS. The claim must be submitted in written format before the statute of limitations expires and it ‘must identify and describe contingencies affecting the claim, and it must be clear and concise. The claim must state that it is a “protective claim,”‘ according to IRS guidelines .
For more detailed information on the pending case, along with its potential impact on businesses and taxpayers, the full article is available on JD Supra.