By the government’s estimates, that strategy allowed Americans who owned significant chunks of foreign companies to evade taxes on nearly $2.3 trillion in offshore earnings between 1986 and 2015. The TCJA’s overhaul eliminated the tax on dividends from foreign owned companies as part of a broader shift in how the U.S. taxes overseas earnings. To avoid rewarding those who had kept their earnings offshore, it also imposed a one-time tax known as the Mandatory Repatriation Tax, or MRT, on the foreign corporate holdings.
The vast majority of Americans will never have to care about this because the vast majority of Americans don’t own enough shares in foreign corporations to fall under these obscure tax laws. These new taxes only kicked in for people who own more than 10 percent of a foreign company; anyone whose 401(k)s have a few shares of Toyota or Samsung in them needn’t be personally precoccupied ny these prestidigitations. Moreover, none of these changes apply going forward: If you didn’t pay the MRT five years ago, you won’t have to pay it ever.
The same thing can’t be said for Charles and Kathleen Moore, a married couple from Washington. The Moores invested $40,000 in a family friend’s tool-making company in India in 2005 and saw their share grow to roughly $500,000 in value by 2017. When they filed their 2018 taxes, they discovered that they owed roughly about $15,000 under the MRT alone. They paid the requisite amount to the Internal Revenue Service and then sued to recoup it, arguing that the MRT violated the Sixteenth Amendment.