Supreme Court to examine congressional tax authority

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(The Center Square) - The U.S. Supreme Court will rule on a case to determine Congress’ tax authority inside a home, with a particular focus on home distilling.

Justices on the high court agreed on Monday to hear arguments in McNutt v. Department of Justice, a case challenging the federal prohibition on home distilling. In 1868, Congress passed a prohibition on distilling spirits inside residential properties.

At the time, lawmakers cited rampant fraud and avoidance of federal taxes in public locations where distilled spirits were regulated. Individuals found to participate in home distilling are subject to as much as $10,000 in fines and up to five years in prison.

The high court will examine whether it is within Congress’ authority to levy taxes against individuals for such offenses. Lawyers for Scott McNutt, a Texas man seeking to distill alcholic beverages in his home, argued the federal government could go after numerous types of activity under the current law.

“There is no limit to the government’s claim of power to criminalize local conduct that might theoretically conceal taxable activity,” lawyers for McNutt wrote in a brief to the Supreme Court.

However, lawyers for the federal government argued that Congress enacted the law due to specific tax evasion concerns with home distilleries. They asserted activities other than home distilling would not be subject to federal taxes.

“Because the location restrictions were enacted only after lengthy experience with tax evasion, upholding those restrictions would not open the door to hypothetical laws restricting other conduct lacking that history,” lawyers for the federal government wrote.

McNutt, the primary plaintiff in the case, is joined by several individuals who are interested in obtaining a permit to distill alcohol in their homes. The hobby distillers argued that the prohibition does not fall under the necessary and proper means for Congress to impose its tax on distilled spirits.

“Rather than ‘help Congress raise revenue’ by preventing evasion of the distilled spirits tax, the prohibition ‘reduce[s] revenue by preventing individuals from making distilled spirits,’” lawyers for the distillers wrote.

The Necessary and Proper Clause, found in Article I of the U.S. The Constitution, gives Congress broad authority to enact laws in a manner it sees fit.

The government argued prohibition on home distilling helped to raise revenue through Congress’ taxation powers, making it necessary and proper. Lawyers said the prohibition prevents conduct from occurring in areas where distilling is more difficult to regulate, like a residence.

“Congress adopted the location restrictions as a means of safeguarding tax revenue,” lawyers for the government wrote. The law "prohibits distilling in a range of locations that are unified by one feature: Each is a place that particularly facilitated tax evasion.”

The federal government collected $11.1 billion in alcohol taxes in fiscal year 2023, according to the Congressional Research Services. About $6.8 billion of that revenue was from distilled spirits.

As well as homes, the prohibition restricts distilling on boats or commercial vessels and in businesses where wine or beer is produced.

“This case is important not only for would-be home distillers, but for everyone concerned about the legitimate constitutional limits on the federal government’s authority,” Andrew Grossman, senior legal fellow at the Buckeye Institute, said in a statement to The Center Square.

Justices on the high court are expected to hear arguments in the case in February 2027. A decision in the case will be released by June 2027.