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Investor Files Declaration Regarding Mandatory Repatriation Tax

MAR. 27, 2020

Charles G. Moore et al. v. United States

DATED MAR. 27, 2020

Charles G. Moore et al. v. United States





Pursuant to 28 U.S.C. § 1746, I, Charles G. Moore, declare and state as follows:

1. I am over the age of 18 years and am competent to make this declaration. I have personal knowledge of the facts stated herein, and if called as a witness, I could and would competently testify thereto.

2. I am married to Kathleen F. Moore, and we reside in King County, Washington.

3. I spent much of my career working at Microsoft Corporation ("Microsoft") in Washington State as a software engineer.

4. In 1991, I worked in Microsoft's applications development division where I met Ravindra Kumar Agrawal ("Ravi"). Ravi and I worked together on the Microsoft Word conversions team and then went on to work together on the Microsoft Office team. While working together, we became friends.

5. After one of Ravi's regular trips to India in the early 2000s, Ravi told me that he noticed that many small and marginal farmers in India used very simple and basic hand tools, ones that were far less efficient and effective than the tools available at Home Depot in the United States. In addition, Ravi noticed that people from the rural parts of India were increasingly leaving those areas and moving to cities, meaning there were fewer and fewer people available to perform farming and agricultural work, which drove up wages and farmers' operating costs.

6. Ravi shared with me his idea of starting a business to provide small and marginal farmers with more efficient and cost-effective tools and machines that would increase their productivity, help them better perform their jobs, and reduce their operating costs. Ravi's business plan was motivated by his desire to help and serve small farmers and to establish a sustainable, profitable business.

7. Ravi assembled a business plan and formed an Indian Public Limited in 2005 called KisanKraft Machine Tools Private Limited ("KisanKraft"). Later, the company's name was changed to KisanKraft Limited.

8. Ravi approached a number of friends, including me, about investing in KisanKraft in 2005 and 2006. When Ravi first approached me, I gave his business plan and investment proposal significant thought. We discussed the short-term, mid-term, and long-term goals of KisanKraft and agreed that the best way for the business to succeed in its social and business missions would be for it to reinvest any earnings, expand geographically, and, perhaps one day, experience a public offering or sale. I thought the probability of that happening was low, but Ravi had a good business plan and was someone whom I trusted. Moreover, I thought KisanKraft was formed for a noble purpose and had the potential to improve the lives of small and marginal farmers in India.

9. Kathleen and I invested in KisanKraft at its inception in 2006. At first, there were only a handful of shareholders, and Ravi, Sarika Agrawal (Ravi's wife), and Kathleen and I contributed 99.5 percent of the start-up capital. Kathleen and I invested $40,000, which was approximately 11 percent of KisanKraft's start-up capital. That was a lot of money for us, but we believed in Ravi's idea and wanted to support him and see it to fruition.

10. Since KisanKraft's inception, Ravi has lived in India, where he manages KisanKraft's day-to-day operations. From 2006 to 2010, we spoke regularly, and he would give me updates on KisanKraft, including any new opportunities or developments such as a new tool or machine that he wanted to distribute. At the end of each year, Ravi would send me an annual financial statement for KisanKraft.

11. Ravi asked Kathleen and me several times to come visit India. He wanted to show us around the country, and we wanted to see for ourselves how KisanKraft was doing.

12. My first visit to India was in the fall of 2011. This visit was both a vacation and to see how KisanKraft was doing. While in India, Ravi took me to KisanKraft's main office, where I met a number of KisanKraft employees.

13. During subsequent visits to India, I met other employees of KisanKraft and toured some of its branch offices and warehouses. I also met several dealers to which KisanKraft supplies its tools, as well as a few farmers who use its tools.

14. I remember that one dealer in particular was very proud of the income he earned from selling KisanKraft's products, which permitted him to send his daughter to college to study electrical engineering.

15. In total, I have visited India five times. My last trip was in 2016.

16. To this day, Ravi regularly shares information with me about KisanKraft and its business. While Ravi shares information with me, he has served as the decision maker and CEO of KisanKraft since its inception.

17. Since its inception, KisanKraft has not made any distributions of earnings to its shareholders. Instead, it has retained its earnings to grow its business and serve more customers.

18. Accordingly, I have never received a distribution, dividend, or other payment from KisanKraft.

19. Because KisanKraft reinvested its earnings, it does not have sufficient cash on hand to distribute its retained earnings from over the years to shareholders.

20. As a minority shareholder, I do not have the power to compel KisanKraft to make distributions to shareholders.

21. Ravi remains to this day committed to KisanKraft's success. He spends a significant amount of time managing KisanKraft and remains focused on growing its business and serving small and marginal farmers.

22. KisanKraft also has a corporate social responsibility policy. A true and correct copy of that policy is attached as Exhibit A. Carrying out that policy, KisanKraft seeks to improve the quality of life in communities in which it operates.

23. Throughout 2017, Kathleen and I owned about 12.9 percent of KisanKraft's outstanding common shares.

24. I first became aware of the Mandatory Repatriation Tax in the summer of 2018. Ravi mentioned the tax to me and put me in touch with a CPA who prepared his returns.

25. The CPA told me about the Mandatory Repatriation Tax and how we were responsible for paying tax on KisanKraft's deferred foreign earnings going back to 2006. I was completely surprised. Having never received any income from KisanKraft, I certainly did not expect to have to pay income tax just because we owned shares in it.

26. The CPA said that, based on statements prepared by KisanKraft, the Mandatory Repatriation Tax meant that we would be subject to taxation on our pro rata share of KisanKraft's retained earnings, which amounted to approximately $508,000.

27. After receiving a deduction associated with the Mandatory Repatriation Tax, the CPA told me that our taxable income increase from the Mandatory Repatriation Tax was $132,512.

28. From the beginning, I had strong reservations about the Mandatory Repatriation Tax and thought that a new tax on earnings so far in the past that we hadn't even received couldn't possibly be constitutional. Nevertheless, I recognized the necessity of complying with my federal income tax obligations.

29. Kathleen and I retained the CPA in the Summer of 2018 to help us become compliant with our filing obligations. The CPA prepared an amended U.S. federal income tax return for us, and we promptly filed it and paid our additional liability, which amounted to $14,729.

30. We filed a second amended return in March 2019 claiming a refund of the additional amount we paid as a result of the Mandatory Repatriation Tax on the ground that it violated the Constitution's apportionment requirement and Due Process Clause.

31. On August 30, 2019, the Internal Revenue Service mailed us a letter stating that our second amended return was referred to a second office. Other than that mailing, I did not receive any correspondence from the Internal Revenue Service regarding our second amended return.

I declare under penalty of perjury that the foregoing is true and correct.

Executed this 26th day of March, 2020 at King County, Washington.

Charles G. Moore

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