Supreme Court to consider ‘quadrillion-dollar question’ in major tax case

by Tobias Burns and Zach Schonfeld - 11/28/231/3

(Wow this case could take down the entire corrupt system of the government, the IRS and the Tax Lawyers that make billions over tax cased.)

The Supreme Court will hear oral arguments in early December on a case that has the potential to broadly reshape the U.S. tax code and cost the government hundreds of billions of dollars in revenue.At issue in Moore v. United States is the question of whether the federal government can tax certain types of “unrealized” gains, which are property like stocks or bonds that people own but from which they haven’t directly recouped the value, so they don’t have direct access to the money that the property is worth.

Large portions of the U.S. tax code require that income be “realized” before it can be taxed, but critics say it’s an inherently wishy-washy concept that courts have just been ignoring for years due to administrative impracticalities. Even if the court limits the scope of its decision to the specific tax referenced in the case, known as the mandatory repatriation tax, a ruling in favor of the plaintiffs couldcost $340 billion over the next decade, according to the Justice Department.

For comparison, that would cancel out all the extra revenue generated by the $80 billion IRS funding boost and then add $140 billion to the national deficit, which now stands between $26 and $33 trillion, according to various measurements.

But experts say the cost could be much higher than that if the court broadens out its definition of what counts as realization, pushing heaps of taxable income out of the government’s reach. The decision could have implications for everything from potential wealth taxes, like the one the Biden administration proposed for billionaires in 2022, to large swaths of the international tax regime.

TheU.S. solicitor general herself is scheduled to argue the casebefore the justices, underscoring how the Biden administration views its importance. “It’s the million-dollar question, just with a few more zeros: the quadrillion-dollar question,” Harvard University tax law professor Thomas Brennan told The Hill.

“On one extreme, if theSupreme Court decides that a realization requirement is present in the 16th Amendment… then there are a number of code sections that arguably would be invalid or have to be reworked,” he said. These sections could involve partnership tax rules, rules on the taxation of debt and commodities, taxes on futures contracts and the international tax rules that string these areas together between countries.

“On the other extreme, even if the Supreme Court finds in favor of the taxpayers, they could do so in a narrow way that’s limited to the particular situation at hand, or in a way that … forecloses the possibility of Congress enacting wealth taxes but that doesn’t disturb much of existing tax law,” Brennan said.

What is the Moore tax case?

The dispute arose from businesspeople Charles and Kathleen Moore’s investment in an Indian company that sells farm equipment. Republicans’ 2017 tax bill imposed a one-time tax on Americans who owned shares in foreign corporations, even if the corporation hadn’t distributed any earnings to the taxpayer.

The Moores filed their lawsuit after paying a roughly $15,000 tax bill, court filings show.

Practical financial workarounds to realization

Whatever the decision of the court, which is expected before June of next year, there are in practice numerous, well-established workarounds for people who own a lot of “unrealized” property to access it before technically receiving it and having to pay taxes on it.

One famous strategy, known as “Buy, Borrow, Die,” involves using large, diversified stock portfolios as collateral for relatively low-interest loans. Rather than selling the holdings and “realizing” the taxable income, wealthy taxpayers use them as collateral to take out low-interest loans. Since debt isn’t taxable, they can skip paying tax on the holdings.

As long as the portfolio appreciates faster than the rate of interest on the loan, payments can be made and the line of credit remains viable. A law allowing a “step up in basis,” which means that inheritors of assets get to claim their present-worth value as opposed to what they were worth when they were originally bought, permits this scheme to continue through generations.

That’s compared to taxes on workers’ wages and salaries, which are “realized” immediately upon being sent out and taxed before they even reach their recipients.

https://thehill.com/homenews/4323743-supreme-court-moore-tax-case/

>>19992462

2/2

Conservative groups champing at the bit while critics cry foul

Conservative financial and economic groups have been rooting for a resounding endorsement of the realization requirement for tax purposes from the current court, which brushed aside decades of precedent in overturning the seminal abortion case Roe v. Wade last year.

“Realization has been the defining event that turns something from an asset holding value to income subject to federal tax under the Sixteenth Amendment,” lawyers for the Chamber of Commerce, thebiggest business lobby in the U.S., exhorted the court in an amicus brief, filed in March.

“The framers [of the Constitution] intentionally created a system that makes it difficult to pass destructive taxes such as the [mandatory repatriation tax] or a wealth tax,” the Philanthropy Roundtable wrote in their own brief. Critics of a blanket constitutional requirement for realization say the idea is trumped up, and it’s really just about the timing of when an asset is allowed to be taxed for accounting purposes.

They point to a 1940 decision in Helvering v. Horst finding that “the rule that income is not taxable until realized has never been taken to mean that the taxpayer … can escape taxation because he has not himself received payment of it from his obligor.”

This is because the taxpayer “has fully enjoyed the benefit of the economic gain represented by his right to receive income,” the court found. As such, the requirement was considered to be “founded on administrative convenience” and “not one of exemption from taxation.”

Calls for Alito to recuse have surfaced

Democrats have demanded that Justice Samuel Alito, one of the court’s leading conservatives, be recused from the case over his ties to one of the lawyers advocating for a realization requirement. Alito participated in two interviews with the lawyer, David Rivkin Jr., that were published in The Wall Street Journal’s opinion section.

In a rare public response, Alito noted other justices who had interviewed with lawyers practicing before the court.“There is no valid reason for my recusal in this case,” Alito said.

Tax lawyers worry the rules of the game are about to change

Tax lawyers are concerned that their jobs could change significantly due to the scope of the ruling.

“If [the court makes] a specific realization requirement, then it could have an impact on many other provisions of the Internal Revenue Code, because there are provisions currently … that arguably diverge from the realization rule,” Lawrence Hill, a partner at the Steptoe & Johnson law firm, told The Hill.

He described these divergences as “very significant,” saying the rules pertaining to taxation of partnerships, S corporations, grantor trusts, controlled foreign corporations and original issue discounts could be affected, in addition to entire accounting norms pertaining to tax accrual and adjusting valuations to a going market rate.

“That is the concern of the tax bar,” he said.

Kyle Pomerleau, a senior fellow at the American Enterprise Institute who filed an amicus brief supporting the government, said a broad ruling in favor of the Moorescould lead others to file a deluge of lawsuits challenging those other portions of the tax code.

“A cloud is going to be cast over the U.S. economy, as there’s all this uncertainty about what the tax code is going to look like in five, 10, 15 years from now.” Pomerleau instead suggested a narrower way for the Supreme Court to resolve the case that wouldn’t reopen the question of whether income must be realized for the federal government to tax it.

“Because this is a tax on business profits and a tax on the use of a certain type of foreign business entity, and because it’s a tax on foreign activity, not domestic activity, it falls under the umbrella of an indirect tax,” said Pomerleau.

“And indirect taxes don’t have the same limitation that direct taxes have under the Constitution, you don’t have to apportion them,” he continued. “Therefore, all of the Moores’ arguments kind of fall away.”

https://thehill.com/homenews/4323743-supreme-court-moore-tax-case/

Judge recuses himself from Elon Musk’s case against Media Matters

by Dominick Mastrangelo - 11/28/23 3:17 PM ET

The judge presiding over tech billionaire Elon Musk’s lawsuit against Media Matters for America has recused himself from the case, according to court documents.

In a notice filed with the court on Tuesday, Judge Mark Pittman of the U.S. District Court in Northern Texas wrote that he was recusing himself from the case and requested the clerk of the court assign it to another judge.

Pittman, who was appointed to his position by former President Trump,did not give a reason for stepping away, and it was not immediately clear why the request was made. (Call to dig on why he recused himself+

Federal judges are mandated to recuse themselves when their “impartiality might reasonably be questioned,” including when they have a financial interest or personal bias.

Musk sued Media Matters, a progressive watchdog, last week for what his attorneys argued was the company’s misrepresentation of how content appears on X, the platform formerly known as Twitter, “as if they were what typical X users experience on the platform.”

Media Matters had days earlier published a report on X, revealing it was placing advertising next to hateful content. The report came around the same time Musk had embraced an antisemitic conspiracy theory on the platform, which he owns.

The Media Matters report and Musk’s post triggered a wave of major companies pulling advertising from X.

“This is a frivolous lawsuit meant to bully X’s critics into silence,”Media Matters President Angelo Carusonesaid in a recent statement to The Hill on Musk’s suit. “Media Matters stands behind its reporting and looks forward to winning in court.”

https://thehill.com/homenews/media/4331598-elon-musk-media-matters-judge-recuses-from-case/

>>19992484

Anons I don't think he is comped, I think he's being targeted by the 5th Circuit Court and Texas Bar Association. Judge's don't have to say why they recused, I think. He's made some very good decisions including on Bidan's student loan bullshit, Laurance Tribe lost his shit on that decision, when lefties are outraged, the Judge is doing the right thing:

Judge who sanctioned 'lazy lawyers in glass towers' was too harsh, 5th Circuit rules for third time

By Debra Cassens Weiss November 9, 2023

(I’m pretty sure Judge Pittman is being targeted by the 5th Circuit Court, because he has been sanctioned 3 times thus far, probably because President Trump appointed him. See the 5th Court sanctions below:Any law fags want to weigh in on them?)

For at least a third time, a federal appeals court has ruled that a federal judge in Fort Worth, Texas, was too quick to sanction lawyers or parties. The 5th U.S. Circuit Court of Appeals at New Orleans saidU.S. District Judge Mark Pittmanof the Northern District of Texas abused his discretion whenhe sanctioned two lawyers $250 each for submitting declarations instead of notarized affidavits.

Pittman, an appointee of former President Donald Trump, is a judge for the U.S. District Court for the Northern District of Texas. He acknowledged that a federal law allows declarations to be used in place of affidavits in a June 9 opinion. (There’s the bias in Texas Bar, why even include who he was appointed by!)

But Pittman said the law’s intended audience was not “lazy lawyers in glass towers who wish to skirt an explicit court order.” Pittman had sanctioned lawyers for both sides for failing to follow his order to the letter following discovery disputes in a sex harassment case involving Weatherford College. He did not make a finding of bad faith when imposing the sanctions. Pittman’s order required the lawyers to submit notarized affidavits certifying that they had read, understood and would follow Texas ethics rules, the Texas Lawyer’s Creed and a case involving overly aggressive lawyer conduct. The lawyers said they submitted declarations, rather than affidavits, because of inclement weather, the 5th Circuit said. Only one of the lawyers appealed the sanctions.

The appeals court noted the law allowing declarations, rather than affidavits. “Defense counsel’s alleged error was not even an error much less bad faith conduct justifying sanctions since he complied with the court’s order under federal law,” the appeals court said. “On this set of facts, the district court’s imposition of sanctions was a clear abuse of discretion.”

Law.com reports that the 5th Circuit has ruled twice before that Pittman’s sanctionswent too far. Last year, the 5th Circuit said Pittman abused his discretion when he dismissed a lawsuit against Spirit Airlines because of a missed deadline to file a certificate of interested persons. The dismissal was an “excessively harsh sanction,” the appeals court said.

In 2021, the appeals court said Pittman’s dismissal of a suit for the plaintiff’s failure to retain local counsel was “demonstrably unwarranted.”

https://www.abajournal.com/news/article/judge-who-sanctioned-lazy-lawyers-in-glass-towers-was-too-harsh-5th-circuit-rules-a-third-time

Judge's Dismissal of Lawsuit Over Missed Filing Deadline Was 'Overkill,' Court Says

The Fifth Circuit panel said U.S. District Judge Mark Pittman abused his discretion in dismissing a personal injury lawsuit against Spirit Airlines and the Dallas Fort Worth International Airport.

September 16, 2022 at 02:19 PM

U.S. District Judge Mark Pittman’s dismissal of a lawsuit over a missed filing deadline was “overkill” and an abuse of discretion, a federal appeals court said in reviving the case.

Pittman, who sits in the Northern District of Texas, dismissed a personal injury complaint brought by Meher Razvi against Spirit Airlines because Razvi failed to file a certificate of interested persons on time.

https://www.law.com/texaslawyer/2022/09/16/judges-dismissal-of-lawsuit-over-missed-filing-deadline-was-overkill-court-says/

>>19992506

you are right!

>>19992490

Yes he's a good guy, and also Shut down Bidan's student loan program, along with other things and overruling the states ban of gun rights for those under 21.

• In December 2022, Pittman ruled thatTexas' law banning people from 18 to 20 years of age from carrying concealed handguns was unconstitutional in light of Bruen.[15]

>>19992489

All judges are supposed to recuse if there is a conflict, and he knows that lefties do it all the time, but those same lefties will raise hell if there is a conflict. It's better to recuse now. Chutcan and Engoren should have recused before it even started.

Trump Organization no longer prepares financial statements at heart of trial, executive testifies

by Miranda Nazzaro - 11/27/23 2:47 PM ET

Former President Trump’s company no longer prepares the sweeping financial statements now under scrutiny in his civil fraud trial in New York, an executive testified Monday.

Mark Hawthorn, the chief operating officer of the Trump Organization’s hotel arm, told the court that the firm bearing the name of the former president prepares audits and some other specific financial reports, but “there is no roll-up financial statement of the company,” The Associated Press reported.

When asked why there are no longer comprehensive reports, Hawthorn told lawyers they are “not required by any lender, currently, or any constituency,” per AP.

These “statements of financial statements” from 2014-21 are at the center of New York Attorney General Letitia James’s (D) $250 million lawsuit against the former president, his two adult sons and the Trump Organization.

The suit alleges the company sought lower taxes and better insurance coverage and misled lenders by falsely inflating and deflating the value of its assets, which Trump and his sons have repeatedly denied.

Trump claims his wealth was understated rather than overblown on his financial statements. He has emphasized the numbers were accompanied by disclaimers stating they weren’t audited and that others could reach a different judgment.

The defense has argued the various companies under the Trump Organization’s umbrella have produced scores of financial documents “that no one had a problem with,” according to lawyer Clifford Robert.

Andrew Amer, a lawyer for James’s office, has pushed back on this argument, claiming the suit is about Trump’s statements of financial condition, and that the other documents are irrelevant.

Judge Arthur Engoron has already ruled Trump and his co-defendants engaged in fraud. The trial, which began nearly two months ago, is to decide on claims of conspiracy, insurance fraud and falsifying business records.

Trump’s defense began presenting its case earlier this month and recently called ex-Trump executive Jeffrey McConney to the stand.

McConney, who served as the corporate controller of the Trump Organization, laid out to the court last week how he and other executives determined asset values, which he argued were legitimate.In emotional testimony, he told the court he never meant to mislead anyone or to be inaccurate, adding that he “felt comfortable” with the company’s valuations.

https://thehill.com/regulation/court-battles/4329288-trump-organization-trial-financial-statements/

Upcoming Supreme Court case could bring down the Deep State and The Atlantic is seething…

The Case That Could Destroy the Government

What was once a fringe legal theory now stands a real chance of being adopted by the Supreme Court.

By Noah Rosenblum Nov. 27, 2023 Writer for “The Atlantic”1/3

This Wednesday, theSupreme Court will hear a case that poses the most direct challenge yet to the legitimacy of the modern federal government. The right-wing legal movement’s target is the “administrative state”—the agencies and institutions that set standards for safety in the workplace, limit environmental hazards and damage, and impose rules on financial markets to ensure their stability and basic fairness, among many other important things.The case, Securities and Exchange Commission v. Jarkesy, threatens all of that. Terrifyingly, this gambit might succeed.

The case involves garden-variety securities fraud. George R. Jarkesy Jr., a right-wing activist and conservative-radio talk-show host, ran a pair of investment funds with $24 million in assets. But he misrepresented how the funds were run, paid himself and his partner exorbitant fees, and inflated the assets’ value. As punishment, the SEC fined him several hundred thousand dollars and prohibited him from working in some parts of the securities industry—very standard stuff.

Jarkesy responded with what can be described only as chutzpah. He didn’t just contest the SEC’s ruling; he alleged that the SEC’s entire process against him was unconstitutional. Among other things, he asserted thatCongress never had the authority to empower the SECand that the SEC adjudicator who punished him was too independent from presidential control.

In May of last year, Jarkesy’s arguments were accepted by two judges on the conservative Fifth Circuit Court of Appeals. In a 2–1 decision,the court agreed with Jarkesy, all but ruling the SEC’s entire existence unconstitutional. The opinion was so extreme that Judge W. Eugene Davis, twice appointed by Republican presidents—and elevated to the appeals court by Ronald Reagan—dissented vigorously.

Jarkesy’s most far-reachingconstitutional argument is built on the “nondelegation doctrine,”which holds that there may be some limits on the kinds of powers that Congress can give to agencies. Jarkesy argues that, when Congress gave the SEC the power to decide whether to bring enforcement actions in court or in front of an independent agency adjudicator, it gave away a core legislative function. It thus violated the doctrine and engaged in an unconstitutional delegation.

This is wild stuff. Not long ago, a lawyer would have been laughed out of court for making such nondelegation claims. Today, they’d have a good chance of destroying the federal government’s administrative capacity—taking down its ability to protect Americans’ health and safety while unleashing fraud in the financial markets.

Whether Congress’s grant of authority to the SEC was constitutional should not be a close question. Congress has delegated expansive authority to government agencies since the dawn of the republic. Only twice in American history has the Supreme Court concluded that a delegation to an agency ran afoul of the Constitution—and both of those times, nearly 90 years ago, involved unusual statutes nothing like this one.

The SEC was created as an independent agency in 1934, after the financial crash of 1929, to thwart the sort of market manipulation that preceded the Great Depression; Congress has granted it additional powers over the years to continue protecting financial markets. Responding to catastrophes and guarding against market manipulation is exactly the kind of work that Congress should empower the executive branch to do. Requiring Congress to legislate in response to every new fraud some crook might dream up would not be a good use of its time. And there’s no reason to think that delegating authority to police markets runs afoul of the Constitution….

https://1ft.io/proxy?q=https%3A%2F%2Fwww.theatlantic.com%2Fideas%2Farchive%2F2023%2F11%2Fsecurities-and-exchange-commission-v-jarkesy-supreme-court%2F676059%2F

>>19993078

2/3

This was, of course, irrelevant to the conservative judges who heard Jarkesy’s appeal. The Fifth Circuit majority concluded that Congress acted “unconstitutionally” without “an intelligible principle” by letting the SEC choose where to bring its enforcement actions. But of course, statutes routinely leave prosecutors and other enforcement agencies the discretion over how to proceed in their cases, without raising delegation concerns. And for more than 75 years, the Supreme Court has recognized that other agencies can decide how to proceed in their policy-making activities—whether via case-by-case adjudications or general rule makings, for example—without even hinting at any delegation problems.

Jarkesy’s second claim—that the internal adjudicator who first heard his case held too much independence—is especially galling. These adjudicators should be independent; the alternative would be to put their regulatory powers at the political whim of whichever administration might be in charge. They have long enjoyed some protection from removal, in order to insulate them from threats of reprisal. The Supreme Court has always recognized the need to maintain the independence of internal agency adjudicators: Even the conservative Chief Justice William Howard Taft, who wrote an opinion nearly 100 years ago extolling the benefits of presidential control of all government officers, was careful to carve out exceptions for adjudicator independence. But, apparently, Taft is no longer conservative enough….

Underlying the Fifth Circuit’s ruling is a deep misunderstanding of American history. Of the three judges who decided the case, the two in the majority seem to believe that government regulation of any kind is somehow un-American. Their opinion invokes the opening language of the Constitution, “We the People,” and then cherry-picks quotes from the Framers to support a stifling vision of federal power. For instance, they cite James Madison for the proposition that unless we keep the government’s powers strictly separated among three different branches, we will inevitably fall into tyranny. But Madison goes on, in “Federalist No. 51,” to recognize that “some deviations … from the principle [of the separation of powers] must be admitted.” And Alexander Hamilton, in “Federalist No. 66,” goes further still, championing “partial intermixture.” Besides, both Madison and Hamilton were interested first and foremost in establishing a powerful national government. That is, after all, why they had participated in what the legal historian Michael Klarman has called the “Framers’ coup” to get rid of the Articles of Confederation….

The Fifth Circuit’s claim that regulation and the separation of powers are incompatible is not simply bad history; like much of the rest of originalist jurisprudence, it is selective history served up to justify a preferred political outcome. In fact, as voluminous scholarship has decisively established, regulation was pervasive in the early republic. Congress has always depended on expansive delegations to govern the country. Separation of powers was not understood to be a bar to effective government. Indeed, for the drafters and ratifiers of the Constitution, such separation was a pragmatic principle to ensure free and efficacious government. That is why, far from impeding delegations, Congress made creative use of the separation of powers—such as in the establishment of the Sinking Fund Commission, enacted by the very first Congress, which mixed representation from the three branches to ensure the stability of the federal debt.

The Fifth Circuit’s misuse of history is symptomatic of much of the originalism practiced by judges affiliated with the conservative Federalist Society, who now hold immense power across the federal judiciary. Originalism’s ideology was born in sin; recent scholarship has argued that originalism first emerged to defend segregation following the Supreme Court’s decision in Brown v. Board of Education. And, in any case, many conservative judges don’t even bother to make substantial originalist arguments anymore. A lazy hand-waving suffices instead. They sprinkle in a few historical quotations, refuse to engage seriously with historians’ findings, and then declare that their right-wing policy preferences are dictated by the authority of history.

Thus, Jarkesy’s challenge might succeed. Arguments like his have been rejected by federal courts many times already. But the federal judiciary has drastically changed in recent years, and the Supreme Court with it—opening the possibility of a new, friendly reception to these absurd legal claims. (The Court could also set aside these substantive questions and decide the case on other, more technical grounds.)

https://1ft.io/proxy?q=https%3A%2F%2Fwww.theatlantic.com%2Fideas%2Farchive%2F2023%2F11%2Fsecurities-and-exchange-commission-v-jarkesy-supreme-court%2F676059%2F

>>19993123

Anons what you are viewing here is SHEER PANIC FROM THE DS. This is exactly what Trump is going to do to all agencies

3/3

Were Jarkesy to win, he wouldhelp achieve what the conservative legal movement’s members have long dreamed of: the destruction of the New Deal. The SEC, Jarkesy’s target, is not just the most important regulator of the financial markets, it is also one of the crown jewels of the New Deal agencies. Republicans have had it in their crosshairs for nearly a century.

Theconsequences of Jarkesy’s success would be disastrous, especially for the American economy. The SEC enforces the basic rules that make stock markets work. Without it, stock issuers and dealers would lie—with disastrous results. One needs only to examine the rampant fraud, contagion, and meltdown in crypto markets last year to see what an unregulated securities market looks like.

More generally,if Congress cannot delegate to agencies, it cannot govern(WTF?). Congress could never and has never written rules specific enough to anticipate all eventualities. This is why Congress delegated power to the SEC in the first place.

Finally, and most dangerous,ending independence for internal agency adjudicatorswould undermine the rule of law. Without independence, adjudicators would be beholden to the politicians who oversee agencies. Unscrupulous presidents would use agencies to punish their opponents and reward their allies. This would do more than turn regulators into political handmaidens; it would destabilize markets, stifle growth, and inevitably lead to financial crises.

Of course, if Republicans want to pursue this terrifying course, they can try. The country is still a democracy. The right way to abolish the SEC and undo the New Deal is to win a majority and pass a statute. But Americans like having functional financial markets and bringing fraudulent hedge-fund managers to justice—just as they like eating unspoiled food and using effective and safe medication. The “administrative state”—that is, government regulation to protect the public—is rightly popular, as Republican presidential candidates, to their chagrin, keep discovering.

But Jarkesy, a fringe figure using fringe arguments, is trying to do an end run around the democratic process and win in the Courtwhat right-wing activists have failed to achieve at the ballot box.The Supreme Court should reject this antidemocratic ploy rather than accept the Fifth Circuit’s fake history.

https://1ft.io/proxy?q=https%3A%2F%2Fwww.theatlantic.com%2Fideas%2Farchive%2F2023%2F11%2Fsecurities-and-exchange-commission-v-jarkesy-supreme-court%2F676059%2F

Fifth Circuit already ruled on an SEC Case a year or more ago, and they determined that Congress cannot grant their powers to internal agency, and the won his case. We reviewed it here. But damn the DS is really worried.

>>19993142

notableanon repost if too late for this bread,