Did Moores Counsel Concede Their Refund Suit? (6/25/24)

In Moore v. United States, 602 U. S. ____ (2024), here, the Supreme Court held constitutional the Mandatory Repatriation Tax (“MRT”), a “one-time, backwardlooking, pass-through tax on some American shareholders of American-controlled foreign corporations to address the trillions of dollars of undistributed income that had been accumulated by those foreign corporations over the years.” (Quoted explanation of the MRT is from Syllabus.)  I don’t see any tax procedure issues in the case, which worked its way to the Supreme Court as a straight-forward traditional refund suit.

However, Justice Barrett concluded in her concurring in judgment opinion that (Concurring in judgment opinion, p. 17, here; emphasis supplied by JAT):

          Congress’s power to attribute the income of closely held corporations to their shareholders is a difficult question— and unfortunately, the parties barely addressed it. Without focused briefing on the attribution question, I would not resolve it. Subpart F and the MRT may or may not be constitutional, nonarbitrary attributions of closely held foreign corporations’ income to their shareholders. In this litigation, however, the Moores have conceded that subpart F is constitutional. Tr. of Oral Arg. 9. And I agree with the Court that subpart F is not meaningfully different from the MRT in how it attributes corporate income to shareholders. Ante, at 20–21. Taxpayers generally bear the burden to show they are entitled to a refund. United States v. Janis, 428 U. S. 433,  440 (1976); see also Haaland v. Brackeen, 599 U. S. 255, 277–278 (2023) (burden to show unconstitutionality). Given the Moores’ concession, they have not met that burden here. For that reason, I concur in the Court’s judgment affirming the judgment below.

That strikes me as odd. From apparently an isolated statement during oral argument, Justice Barrett (and Justice Alito who joined her opinion) rest their concurring in judgment opinion on Moores' Counsel havomg conceded the issue they expressly raised. I am not sure that Moores Counsel’s words are as crisp a concession as Justice Barrett presents it. Here is the part of the oral argument,she refers to (p. 9, here):

JUSTICE BARRETT: So you concede that Subpart F is constitutional? I just want to be sure that I understand your answer.

MR. GROSSMAN: We think that the defect with the MRT doesn't really apply to Subpart F. You know, Sub -- the Court has never considered the constitutionality of Subpart F, but, as we take it, we don't think that there's a constitutional issue there.

Moores Counsel stated only that he did not “think” there was a constitutional issue with subpart F, not that he conceded that there was no constitutional issue. Accordingly, I think (but do not concede) that Justice Barrett rested her concurring in judgment opinion on a thin reed.

Justice Kavanaugh, in the opinion for the Court, makes a similar point about the concession, although without tying the "concession" to the requirements to prevail in a refund suit. The majority this says (Slip op. 20-21, here):

Therefore, even if we were to accept the Moores’ constructive-realization nomenclature and theory, the Moores’ concession that subpart F imposes taxes on so-called constructively realized income would necessarily[*21] mean that the MRT likewise imposes taxes on constructively realized income. After all, the MRT is integrated into subpart F’s framework, and it has the same essential features as subpart F. If subpart F is not unconstitutional under the “constructive realization” theory—and the Moores explicitly concede that it is not, Tr. of Oral Arg. 9—then the MRT is likewise not unconstitutional on that theory.

I am reminded of a similar issue that arises with respect to stipulations of law in the Tax Court. I discuss that issue in my Federal Tax Procedure Book (Practitioner and Student editions). I have expanded that discussion in the working draft of the 2024 editions due in August 2024. The expanded discussion (with changes in red is):

                   12.   The Stipulation Process.

          Stipulations are the parties’ written agreement as to the facts and, sometimes, the law in the case. Rule 91(a)(1) states (emphasis supplied):

          The parties are required to stipulate, to the fullest extent to which complete or qualified agreement can or fairly should be reached, all matters not privileged which are relevant to the pending case, regardless of whether such matters involve fact or opinion or the application of law to fact.

          Stipulations are usually used for facts or opinions. The Rule allows stipulation of the application of law to fact, but “does not expressly contemplate stipulations as to pure questions of law.” n1 Nevertheless, if the parties stipulate a pure question of law, the Court will not be bound by the stipulation but the parties may be bound by the stipulation. n2
   n1 Siemer Milling Co. v. Commissioner, (T.C. Dkt. 21655-15, Unpublished Order dated 12/4/17, p. 2, n. 3). I am not sure what the court means by the “expressly” or “pure” qualifiers. Of course, there really is not much difference between stipulations of law and stipulations as to the application of law to fact.
   n2 Bokum v. Commissioner, 94 T.C. 126, 143 (1990) (“A court is not bound by the parties' stipulations of law, particularly when those stipulations are erroneous.”); Thoburn v. Commissioner, 95 T.C. 132, 144 n. 12 (1990) (rejecting the parties stipulations as to the statute of limitations, concluding “We are not bound by stipulations of law.” Nevertheless, there may be stipulations of law that bind the parties if not the Court. Mathia v. Commissioner, 2007 T.C. Memo. 4, *8 (“Although we are not bound by stipulations of law [citing Bokum], respondent's argument fails to acknowledge that stipulations of law may bind the parties to the stipulation as a matter of contract law”).