The Supreme Court issued a narrow 7-2 ruling on June 20 rejecting a sweeping constitutional argument that a wealthy Washington state couple brought before them that was viewed as a stalking horse aimed at preemptively striking down a future tax on wealth.

The couple, Charles and Kathy Moore, had challenged the constitutionality of the Mandatory Repatriation Tax, which was enacted as part of Republicans 2017 Tax Cuts and Jobs Act. The MRT imposed a one-time retroactive tax on Americans who received undistributed income meaning income not distributed to them by a company from foreign corporations in which they held more than a 10% stake. The Moores argued that the tax was unconstitutional because the 16th Amendment only authorizes taxes on income, and that the unrealized gains they received from undistributed income in foreign corporations is not income.

The courts decision , written by Justice Brett Kavanaugh, upheld the MRT, but did so without reaching the constitutional question of whether unrealized gains counted as income for the purposes of the 16th Amendment. Instead, the justices ruled that the gains taxed by the MRT were income for the foreign corporation because they were just income that remained undistributed to shareholders.

So the precise and narrow question that the Court addresses today is whether Congress may attribute an entitys realized and undistributed income to the entitys shareholders or partners, and then tax the shareholders or partners on their portions of that income. This Courts longstanding precedents, reflected in and reinforced by Congresss longstanding practice, establish that the answer is yes, the decision read.

Justices Ketanji Brown Jackson and Amy Coney Barrett each wrote their own concurring opinion, with Justice Samuel Alito joining Barretts concurrence.

Justices Clarence Thomas and Neil Gorsuch dissented. In an opinion written by Thomas, the justices said that unrealized investment gains should not count as income.

Because the Moores never actually received any of their investment gains, those unrealized gains could not be taxed as income under the Sixteenth Amendment, Thomas wrote.