No. 20-36122 _CHARLES G. MOORE; KATHLEEN F. MOORE, D.C. No. Plaintiffs-Appellants, 2:19-cv-01539-JCC v. ORDER

UNITED STATES OF AMERICA,

Defendant-Appellee.

Before: Ronald M. Gould, Jacqueline H. Nguyen, and Mark J. Bennett, Circuit Judges.

Order; Dissent by Judge Bumatay SUMMARY *

Tax

The panel denied a petition for panel rehearing and denied on behalf of the court a petition for rehearing en banc, in a case in which the panel affirmed the district court’s dismissal of an action seeking to invalidate the Mandatory Repatriation Tax.

Judge Bumatay, joined by Judges Ikuta, Callahan, and VanDyke, dissented from the denial of rehearing en banc. Judge Bumatay stated that the panel erred in disregarding the realization requirement of the Sixteenth Amendment, by allowing an unapportioned direct tax on unrealized income—undistributed earnings of a foreign corporation owned by a U.S. taxpayer—without offering any other limiting principle; and that the opinion opens the door to new federal taxes on other types of wealth and property being categorized as an “income tax” without the constitutional requirement of apportionment.

* This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader. MOORE V. UNITED STATES 1

ORDER

Appellants’ Petition for Panel Rehearing is DENIED.

The full court was advised of the Petition for Rehearing En Banc. A judge requested a vote on whether to rehear the matter en banc, and the matter failed to receive a majority of the votes of the nonrecused active judges in favor of en banc consideration. Fed. R. App. P. 35. Appellants’ Petition for Rehearing En Banc is also DENIED.

BUMATAY, Circuit Judge, joined by IKUTA, CALLAHAN, and VANDYKE, Circuit Judges, dissenting from the denial of rehearing en banc:

“[T]he ratification of the Constitution was the ultimate act of popular sovereignty.” Ariz. State Legislature v. Ariz. Indep. Redistricting Comm’n, 576 U.S. 787, 837 (2015) (Roberts, C.J., dissenting). Its provisions “reflect[] a compromise—a pragmatic recognition that the grand project of forging a Union required everyone to accept some things they did not like.” Id. And courts have “no power to upset such a compromise simply because we now think that it should have been struck differently.” Id. But our court’s decision does just that.

Under the original constitutional design, Congress could only levy “direct taxes” if such taxes were “apportioned among the several States.” U.S. Const. art. I, § 2, cl. 3. The apportionment of direct taxes was to be set “in proportion to the census or enumeration” of the States’ populations. U.S. Const. art. I, § 9, cl. 4. Thus, at the Founding, for a direct tax to be constitutional, the federal government had to collect the proceeds proportionally—meaning if one State had twice 2 MOORE V. UNITED STATES the population of another, it also had to contribute twice as much. Given this requirement’s heavy burden on federal taxing power, the Supreme Court narrowed the definition of “direct taxes” to encompass only certain taxes, such as capitations (head taxes), taxes on real property, taxes on personal property, and taxes on income from personal property. Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519, 571 (2012) (simplified).

But the people changed that system. In 1913, the people created a limited exception to the apportionment requirement. By ratifying the Sixteenth Amendment, the people gave Congress the authority to “lay and collect taxes on incomes, from whatever source derived, without apportion