Tax protester statutory arguments

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Tax protesters

History Arguments Constitutional Statutory Conspiracy Notable tax protesters Robert Clarkson - Vivien Kellems Mitch Modeleski - Irwin Schiff Richard Michael Simkanin William J. Benson Wayne C. Bentson Related topics The Law That Never Was Cheek v. United States Titles of Nobility Amendment Tax avoidance and tax evasion Tax resistance Christian Patriot Posse Comitatus

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Tax protesters in the United States make a number of statutory arguments that the assessment of the income tax in the United States violates the statutes enacted by the United States Congress and signed into law by the President. Such arguments generally claim that the statutes fail to create a duty to pay taxes, that such statutes do not impose the income tax on wages or other types of income claimed by the tax protesters, or that provisions within the statutes exempt the tax protesters from a duty to pay. Other arguments contend that the Internal Revenue Service is not authorized by statute to assess income taxes, to seize assets to satisfy tax claims, or to penalize persons who fail to file a return or pay the tax assessed.

These kinds of arguments are distinguished from related constitutional arguments and general conspiracy arguments. Statutory arguments presuppose that Congress has the constitutional power to assess a tax on incomes, but argue that the Congress has simply failed to do so by statute. However, supporters of such arguments may also be inclined to contend that constitutional and conspiracy arguments apply as well.

The courts that have been presented with such arguments have ruled them to be spurious, unpersuasive, or frivolous, or all three.

Contents 1 Definition of "state" 2 Arguments about the legal obligation to pay tax 2.1 The Internal Revenue Code as a statute enacted by Congress 2.2 The "IRS refuses to say what law makes U.S. citizens liable for income tax" argument 2.3 The "income taxes are voluntary" argument 2.4 Demanding an explanation of tax obligations 3 Arguments about tax administration and process 3.1 Arguments about lack of regulations 3.2 Arguments about authority of IRS employees to collect penalties 3.3 Arguments about authority of IRS employees to seize assets 3.4 The OMB control number argument 4 Arguments that the IRS is not a government agency 5 The 861 argument 6 See also 7 Notes 8 External links

[edit] Definition of "state"

Some tax protesters have argued that in most subparts and the general definition, the Internal Revenue Code's definitions of "state" and "United States," are what other amending code sections^[1][2] refer to as "a special definition of "state"," where the statutory definitions include the District of Columbia, Puerto Rico, and some other territories, without mentioning the 50 states. Under this argument, the definition of "state" within the Code in general, or within those certain subparts of the Code, refers only to territories, or the possessions of the federal government, or the District of Columbia. Alaska and Hawaii were formerly included in the "special" definition of a "state" until each was removed from the that general definition by the Alaska Omnibus Act ^[3] and the Hawaii Omnibus Act^[4] when they were respectively admitted to the Union.

Under the following argument that is supported by some tax protesters and some others,^{[citation needed]} the term "state" is used in an international meaning of "nation" or "sovereign." The argument is that this meaning refers to the foreign status of each state to every other state including the federal state, under private international law. Under this argument, all court opinions on the subject of states being foreign to each other (and also to the federal state and possessions) have upheld this concept,^{[citation needed]} and have distinguished between meanings of foreignness by using the terms private international law and public international law. Under this argument, the latter term deals with the authority the 50 States delegated to the United States government to represent American interests outside of America, grouping all those that are bound by the United States Constitution as one body, relative to those that are not bound, such as France or Britain. Under this argument, the term "private international law" signifies the foreignness of the sovereign states, or nations, of the United States system to each other, within the system.

Tax protesters and others^{[citation needed]} argue that the importance of the definition applies where the term "state" is the reference to the federal state as defined within a subpart or generally, then when "state" is referenced in other definitions (such as "employee") within relevant places, it has the same meaning. There are two Code sections that define "employee" within the whole of the Internal Revenue Code and both are found in parts of the Title where "state" is governed by this "special" definition. Tax protesters argue that each section defines the term "employee" as being limited to someone who works within or in the employ of a state, or who is an officer of a corporation, while the courts have ruled that the term "employee" is not limited to those persons.^{[citation needed]} The definition of "wages" is that remuneration which is earned by an "employee."^{[citation needed]} Tax protesters argue that normal income taxes are taxes on wages and some laws that require things like filing a return are only required of employees.

Tax protesters and others who are not tax protesters^{[citation needed]} argue that there are also no conflicting definitions of "state" or "United States" to this interpretation in Title 26 of the United States Code (the Internal Revenue Code) -- that both of the two times either of these terms are defined as "the 50 states," the terms are localized to the subpart. Under this argument, in those two subparts that define "state" as the 50 states, there is no mention of the District of Columbia or any territories in that definition.

Some tax protesters and others argue that the Supreme Court has ruled that except in unusual circumstances, "includes" has the meaning of exclusivity of whatever is being listed if the list is made in a certain way.^{[citation needed]} In such situations, of which the definition of "State" is an example, the argument goes that no things not in the list are included with what is included Montello Salt Co. v. Utah, 221 U.S. 452 (1911).

The Internal Revenue Code general definition of the term "state" is as follows:

The term “State” shall be construed to include the District of Columbia, where such construction is necessary to carry out provisions of this title.^[5]

Other subparts of the Internal Revenue Code list the District of Columbia and territories of the United States in response to the definition of "State," or geographically, the "United States" (26 C.F.R § 31.3132 (e)-1)^[6]

The Internal Revenue Code general definition of the terms "includes" and including" is as follows:

The terms “includes” and “including” when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined.^[7]

This may be in line, however, with the Montello Salt Co. case. Generally, the federal courts have interpreted the terms "includes" and "including" as used in 26 U.S.C. § 7701, the Internal Revenue Code's general definition section, to be terms of expansion, not terms of limitation. For example, in the case of United States v. Condo, the United States Court of Appeals for the Ninth Circuit stated:

[the taxpayer's] other tax theories are equally frivolous. His assertion that 26 U.S.C. § 7343 only applies to business entities and their employees ignores the word "includes" in the statute delineating the class of persons liable. The word "includes" expands, not limits, the definition of "person" to these entities.^[8]

In the case of Montello Salt Co., the Supreme Court stated that the term "including" is generally interchangeable with "also" but not necessarily, and can sometimes have a meaning of exclusivity. The Montello Salt case was not a Federal tax case, and no issues involving the meaning of the terms "state" or "includes" or "including" as used in the Internal Revenue Code were presented to or decided by the Court. The word "tax" is not found in the text of the decision.

No federal court has upheld the argument that the term "state" as used in the Internal Revenue Code excludes the fifty states or that the term "state" means only the "District of Columbia."

[edit] Arguments about the legal obligation to pay tax

Some tax protesters argue that there is no law imposing a Federal income tax or requiring the filing of a return, or that the government is obligated to show the tax protesters the law or tell the protesters why they are subject to tax, or that the government has refused to disclose the law.

[edit] The Internal Revenue Code as a statute enacted by Congress

A New York Times article on July 31, 2006 states that when filmmaker Aaron Russo asked an IRS spokesman for the law requiring payment of income taxes on wages and was provided a link to various documents including title 26 of the United States Code (the Internal Revenue Code), Russo denied that title 26 was the law, contending that it consisted only of IRS "regulations" and had not been enacted by Congress.

According to the United States Statutes at Large (published by the United States Government Printing Office) the Internal Revenue Code of 1954, the predecessor to the current 1986 code, was enacted by the Eighty-Third Congress of the United States with the phrase "Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled" and was "approved" (signed into law) at 9:45 A.M., Eastern Daylight Time, on August 16, 1954, and published as volume 68A of the United States Statutes at Large. Section 1(a)(1) of the enactment states: "The provisions of this Act set forth under the heading 'Internal Revenue Title' may be cited as the 'Internal Revenue Code of 1954'. Section 1(d) of the enactment is entitled "Enactment of Internal Revenue Title Into Law", and the text of the Code follows, beginning with the statutory Table of Contents. The enactment ends with the approval (enactment) notation on page 929. Section 2(a) of the Tax Reform Act of 1986 changed the name of the Code from the "1954" Code to the "1986" Code. The Internal Revenue Code is published as title 26 of the United States Code.[2]

Regarding the legal status of the United States Statutes at Large, 1 U.S.C. § 112 provides (in part, with italics added):

The Archivist of the United States shall cause to be compiled, edited, indexed, and published, the United States Statutes at Large, which shall contain all the laws and concurrent resolutions enacted during each regular session of Congress; all proclamations by the President in the numbered series issued since the date of the adjournment of the regular session of Congress next preceding; and also any amendments to the Constitution of the United States proposed or ratified pursuant to article V thereof since that date, together with the certificate of the Archivist of the United States issued in compliance with the provision contained in section 106b of this title. [ . . . ] The United States Statutes at Large shall be legal evidence of laws, concurrent resolutions, treaties, international agreements other than treaties, proclamations by the President, and proposed or ratified amendments to the Constitution of the United States therein contained, in all the courts of the United States, the several States, and the Territories and insular possessions of the United States.

Although the specific statutes imposing an income tax may be generally unknown to persons other than tax lawyers, certified public accountants, enrolled agents and other tax specialists, such statutes exist. Internal Revenue Code sections 1 (26 U.S.C. § 1) (relating to individuals, estates and trusts) and 11 (26 U.S.C. § 11) (relating to corporations) are examples of statutes that expressly impose an income tax on "taxable income" (with section 1(a), for example, expressly using the phrase "[t]here is hereby imposed on the taxable income of [ . . . ]" and section 11 stating: "A tax is hereby imposed for each taxable year on the taxable income of every corporation."). The term "taxable income" is in turn defined in section 63 (26 U.S.C. § 63) with reference to "gross income" which in turn is defined in 26 U.S.C. § 61.

In Holywell Corp. v. Smith, the United States Supreme Court (in a unanimous case) stated the legal significance of 26 U.S.C. § 6151:

The Internal Revenue Code ties the duty to pay federal income taxes to the duty to make an income tax return. See 26 U.S.C. 6151(a) ('when a return of a tax is required . . . the person required to make such return shall . . . pay such tax').^[9]

Regarding civil monetary penalties for failure to timely pay taxes, 26 U.S.C. § 6651(a)(2) states (in part):

In case of failure—

[ . . . ]

(2) to pay the amount shown on tax on any return specified in paragraph (1) on or before the date prescribed for payment of such tax (determined with regard to any extension of time for payment), unless it is shown that such failure is due to reasonable cause and not due to willful neglect, there shall be added to the amount shown as tax on such return 0.5 percent of the amount of such tax if the failure is for not more than 1 month, with an additional 0.5 percent for each additional month or fraction thereof during which such failure continues, not exceeding 25 percent in the aggregate [ . . . ]

Regarding Federal income tax returns for single (unmarried) individuals, 26 U.S.C. § 6012 provides (in part):

Returns with respect to income taxes under subtitle A shall be made by the following: [ . . . ]

(A) Every individual having for the taxable year gross income which equals or exceeds the exemption amount, except that a return shall not be required of an individual—

(i) who is not married (determined by applying section 7703), is not a surviving spouse (as defined in section 2 (a)), is not a head of a household (as defined in section 2 (b)), and for the taxable year has gross income of less than the sum of the exemption amount plus the basic standard deduction applicable to such an individual [ . . . ]

Further provisions of section 6012 refer to tax return filings for other individual taxpayers (e.g., married persons filing joint returns, surviving spouses, heads of household, married persons filing separate returns) as well as for other entities such as corporations, estates, and trusts. See also 26 U.S.C. § 6011.

Civil monetary penalties for failure to timely file tax returns (denominated as "additions" to tax) are mentioned at 26 U.S.C. § 6651(a)(1). Under 26 U.S.C. § 6061, with specified, limited exceptions, "any return [ . . .] required to be made under any provision of the internal revenue laws or regulations shall be signed in accordance with forms or regulations prescribed by the Secretary" (emphasis added). The Treasury Regulations indicate that the individual's Federal income tax return must be filed on "Form 1040," "Form 1040A," etc.^[10]

Criminal penalties for willful failure to timely file tax returns or pay taxes are mentioned at 26 U.S.C. § 7203:

Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution [ . . . ]

Under 26 U.S.C. § 7206:

Any person who—

(1) Declaration under penalties of perjury

Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; or

(2) Aid or assistance

Willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document; or [ . . . ]

(A) Concealment of property

Conceals from any officer or employee of the United States any property belonging to the estate of a taxpayer or other person liable in respect of the tax, or

(B) Withholding, falsifying, and destroying rec­ords

Receives, withholds, destroys, mutilates, or falsifies any book, document, or record, or makes any false statement, relating to the estate or financial condition of the taxpayer or other person liable in respect of the tax;

shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 3 years, or both, together with the costs of prosecution.

See also 26 U.S.C. § 7207 and 18 U.S.C. § 1001.

The Federal tax evasion tracks the language of statutory provisions such as Code section 1 (the imposition statute for the individual income tax), with both statutes using the word "imposed."^[11]:

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.^[12]

[edit] The "IRS refuses to say what law makes U.S. citizens liable for income tax" argument

Some tax protesters argue that the Internal Revenue Service refuses to disclose the laws that impose the legal obligation to file Federal income tax returns or pay Federal income taxes -- and conclude that there must be no law imposing Federal income taxes.

The official Internal Revenue Service web site contains references to selected specific code sections and case law,[3] including 26 U.S.C. § 6011 (duty to file returns in general); 26 U.S.C. § 6012 (duty to file income tax returns in particular); and 26 U.S.C. § 6151 (duty to pay tax at time return is required to be filed)^[13] and 26 U.S.C. § 61 (definition of gross income) and 26 U.S.C. § 6072 (timing of duty to file).^[13]

The year 2006 instruction book for Form 1040, U.S. Individual Income Tax Return, on page 80, contains references to 26 U.S.C. § 6001 (relating to record keeping); 26 U.S.C. § 6011 (general filing requirement); 26 U.S.C. § 6012(a) (specific income tax return filing requirement); and 26 U.S.C. § 6109 (duty to supply identification numbers). The IRS web site also includes a page with a link to the entire Internal Revenue Code as published by the Legal Information Institute at Cornell University Law School.^[14]

[edit] The "income taxes are voluntary" argument

Some tax protesters argue that filing of Federal income tax returns or payment of taxes is "voluntary" (in the sense of "not a legal obligation") based on language in the text of numerous court cases, such as the following: "Our system of taxation is based upon voluntary assessment and payment, not upon distraint" (from the U.S. Supreme Court case of Flora v. United States.^[15])

In Flora, the Supreme Court ruled that a Federal District Court does not have subject matter jurisdiction to hear a lawsuit by a taxpayer for a Federal income tax refund where the taxpayer has not paid the entire amount assessed (the rule, known as the Flora full payment rule, does not apply to U.S. Tax Court cases or bankruptcy cases). Tax protesters sometimes cite the language in cases like Flora for the contention that filing of tax returns and paying taxes is not legally required, i.e., that the filing of returns and paying of taxes is, in that sense, "voluntary".

In the Flora case the taxpayer did not contend, and the court did not rule, that there was no legal obligation to file Federal income tax returns or pay the related taxes. The Court's ruling in Flora was almost the opposite: the taxpayer was required to pay the full amount of tax claimed by the IRS to be owed by the taxpayer before the court would even hear a lawsuit by the taxpayer against the government to determine the correct amount of tax.

The quoted language from Flora refers to the Federal income tax: "Our system of taxation is based upon voluntary assessment and payment, not upon distraint." The key words are "voluntary" and "distraint." Like many legal terms, "voluntary" has more than one legal meaning. In the context of the quoted sentence, the income tax is voluntary in that the person bearing the economic burden of the tax is the one required to compute (assess) the amount of tax and file the related tax return. In this sense, a state sales tax is not a voluntary tax - i.e., the purchaser of the product does not compute the tax or file the related tax return. The store at which he or she bought the product computes the sales tax, charges the customer, collects the tax from him at the time of sale, prepares and files a monthly or quarterly sales tax return and remits the money to the taxing authority.

In Flora, the Court used the word "voluntary" in opposition to the word "distraint." Distraint is a legal term used in various contexts. For example, distraint is used to refer to the act of a landlord who withholds property of the tenant already in the landlord’s possession to secure payment of past due rent. The property "held for ransom," in a sense, is said to be "distrained," or "distressed." The key connotation of the word "distraint" is that there is often a taking of possession or withholding of property to induce a debtor to pay an obligation. Once the debt is paid, the property is released.

By contrast, the Internal Revenue Service does not seize the property of taxpayers each January to induce taxpayers to file a tax return and pay the tax by April 15th. The IRS relies on "voluntary" compliance as the term is used in this sense.

In the separate sense of the word "voluntary" in which some tax protesters use the term, the obligation to pay the tax and file the return is not voluntary -- for either income tax or sales tax. For example, the Internal Revenue Code is full of statutes specifically imposing the obligation to file returns and pay taxes, and imposing civil and criminal penalties for willful failure to do so on a timely basis (see above). The difference is that in the case of the income tax, the taxpayer files the return, whereas in the case of the sales tax, the seller (not the customer) files the return.

Likewise, the word "assessment" has more than one tax law meaning. In the quote from Flora the term "assessment" does not refer to a statutory assessment by the Internal Revenue Service under 26 U.S.C. § 6201 and 26 U.S.C. § 6322 and other statutes (i.e., a formal recordation of the tax on the books and records of the United States Department of the Treasury^[16]). The term is instead used in the sense in which the taxpayer himself or herself "assesses" or computes his or her own tax in the process of preparing a tax return, prior to filing the return.

Similarly, the word "deficiency" has more than one technical meaning under the Internal Revenue Code: one kind of "deficiency" for purposes of 26 U.S.C. § 6211 relating to statutory notices of deficiency, U.S. Tax Court cases, etc. (meaning, usually, the excess of the amount that the IRS claims is the correct tax over the amount the taxpayer claims is the correct tax -- both computed without regard to how much of that tax has been paid) as opposed to another kind of "deficiency" for purposes of the case law under the tax evasion and other criminal statutes (meaning, essentially, the amount of unpaid tax actually owed). Tax law, like other areas of law, is replete with words like "voluntary," "assessment," and "deficiency" that have varying meanings depending on the varying legal contexts in which those terms are used.

With respect to the use of the term "voluntary," no court has ever ruled (as of early 2007) that there is no legal obligation under the Internal Revenue Code of 1986 to timely file Federal income tax returns or to timely pay Federal income taxes.

[edit] Demanding an explanation of tax obligations

A variation on the "there is no law requiring an income tax" argument and the "IRS refuses to say what law makes U.S. citizens liable for income tax" argument is the contention that the IRS has an affirmative duty to respond to taxpayer demands for an answer as to why taxpayers must pay income taxes. Some tax protesters claim the following language from a court decision in Schulz v. Internal Revenue Service^[17] means that a taxpayer has a due process right to demand a response from the IRS as to why he or she is subject to taxation:

". . .absent an effort to seek enforcement through a federal court, IRS summonses apply no force to taxpayers, and no consequence whatever can befall a taxpayer who refuses, ignores, or otherwise does not comply with an IRS summons until that summons is backed by a federal court order. . . . any individual subject to [such a court order] must be given a reasonable opportunity to comply and cannot be held in contempt, arrested, detained, or otherwise punished for refusing to comply with the original IRS summons, no matter the taxpayer's reasons, or lack of reasons for so refusing."^[18]

The taxpayer Robert L. Schulz filed motions in a federal court to quash administrative summonses^[19] issued by the IRS seeking testimony and documents in connection with an IRS investigation. The court in Schulz did not rule that a taxpayer has a right to have the IRS explain why he or she is subject to taxation, and that issue was not presented to the court. The Court of Appeals for the Second Circuit affirmed the dismissal of the taxpayer's motions for a lack of subject matter jurisdiction because there was no actual case or controversy as required by Article III of the Constitution. The court reasoned that the summonses posed no threat of injury to the taxpayer, as the IRS had not yet initiated enforcement proceedings against him. In other words, the taxpayer was not entitled to a court order to quash the summonses until the IRS went to court to demand that he comply with the summons or otherwise face sanctions -- something the IRS had not yet done. Once the IRS took that action, the taxpayer would then have ample opportunity to challenge the validity of the summonses.

The court was emphasizing that the law requires the IRS to use the judicial process to punish lack of compliance with an administrative summons; the summons is not self-enforcing. This is true of any government request where the citizen is free to ignore the request until the government brings enforcement action. Courts adjudicate only actual controversies. In the Schulz case the court left open the possibility that the IRS might decide to drop the investigation and never enforce the summonses, or that the plaintiff might voluntarily comply with the request. Until the IRS took the taxpayer to court, the injury was merely "hypothetical."

While there is disagreement over exactly how "imminent" an injury has to be before a taxpayer can obtain relief from a court, this is separate from the obligation to timely file a tax return (which is imposed by statute). The Schulz court did not rule that the IRS was required to "explain" to the taxpayer why he had to pay taxes, but rather that the taxpayer could not obtain a court order to quash the summonses until the IRS first went to court against him. Additionally, the taxpayer was challenging requests for documents and testimony for an investigation (similar to challenging a subpoena or warrant), not demanding that the IRS explain to him why he was subject to taxation. The court did not rule that a taxpayer has no obligation to respond to a summons until the IRS undertakes proceedings against the taxpayer. The court essentially ruled that the taxpayer cannot be punished for failing to comply until the taxpayer has violated a court order mandating compliance.

A subsequent attempt by taxpayer Robert L. Schulz to obtain a court order quashing an IRS "third party" summons issued to the internet payment service known as PayPal was rejected by a Federal court in June of 2006.^[20]

[edit] Arguments about tax administration and process

Some arguments relate to the regulatory process, the authority of IRS employees to assert penalties, the IRS authority to seize assets, or the validity of IRS tax forms.

[edit] Arguments about lack of regulations

Some tax protesters have tried to argue that because the Department of the Treasury has promulgated official regulations for some but not all Internal Revenue Code provisions, there can be no obligation to file income tax returns or pay taxes. The courts have uniformly rejected this argument, ruling that duties imposed by statute cannot be avoided merely because the IRS or some other agency has not promulgated a regulation under that statute, and that the mere fact that a statute specifies that an agency is authorized to promulgate a regulation does not necessarily mean that the agency is required to do so.

For court decisions on the "lack of regulations" arguments, see Carpa v. Smith;^[21] United States v. Langert;^[22] Russell v. United States;^[23] United States v. Washington;^[24] United States v. Hicks.^[25]

[edit] Arguments about authority of IRS employees to collect penalties

Some tax protesters argue that even if the Internal Revenue Code provides for penalties, IRS employees do not have the authority to assert penalties -- basing the argument on Internal Revenue Code section 6020(b)(1) which states:

Authority of Secretary to execute return.

If any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefor, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise.

Some protesters contend that this provision shows that IRS agents have no authority to impose penalties unless they have a delegation from the Secretary of the Treasury, although the logic of the argument is unclear given that the function of imposing penalties is a separate function from that of preparing section 6020(b) returns.

Tax protesters sometimes assert that court decisions that IRS agents have delegated powers from the Secretary of the Treasury constitute a blatant disregard for the law, which tax protesters cite as proof that the finding of the court is somehow opposite of what the law says. At any rate, under 26 U.S.C. § 6020, 26 U.S.C. § 7701(a)(11)(B), and 26 U.S.C. § 7701(a)(12)(A)(i) and the Treasury regulation at 26 C.F.R. section 301.6020-1(a)(1), IRS agents do indeed have the delegated power to prepare section 6020(b) returns (see Craig v. Lowe^[26]). See also Delegation Order 182 (Rev. 7),^[27] which specifically delegates this authority to Internal Revenue Agents, Tax Auditors, and Revenue Officers of grade GS-9 and above, and to various other IRS personnel. In Craig, the taxpayer argued that only the Secretary of the Treasury himself or herself was authorized under section 6020 to prepare returns for taxpayers despite the plain language of section 6020 which uses the word "Secretary" (without the phrase "of the Treasury"). Under section 7701(a)(11)(B), where used in the Internal Revenue Code without the phrase "of the Treasury," the term "Secretary" means the "Secretary of the Treasury or his delegate" (Italics added). The phrase "or his delegate" is defined in part as "any officer, employee, or agency of the Treasury Department duly authorized [ . . . ] to perform the function mentioned or described [ . . . ]".^[28] The Court rejected the taxpayer's argument, and ruled that an IRS Revenue Agent "plainly falls" within the cited Treasury regulation.

Another group of protesters claims the existing law demands income tax only from federal employees and residents of US territories. Their argument does not rely on nonpassage of the 16th Amendment, but does suggest it.^[29] They have asked the IRS and other authorities to cite the laws requiring others to pay income tax. This group claims never to have received an answer.

[edit] Arguments about authority of IRS employees to seize assets

Some tax protesters argue that the Internal Revenue Service has no authority to seize assets to satisfy tax claims. For example, tax protester Irwin Schiff's web site, in reference to the 2005 Federal trial resulting in his most recent conviction and imprisonment on tax charges, includes the statement: "[ . . . ] the Government’s prosecutors and Judge Dawson interceded in order to prevent me from proving that all IRS seizures are illegal, and not provided for by law.[4]

The statute authorizing the Internal Revenue Service to seize assets without going to court is 26 U.S.C. § 6331. In the case of Brian v. Gugin, a group of taxpayers (including a Mr. Ralph Brian) sued a group of IRS and other government employees, (including Ms. Phylis Gugin), for what the taxpayers claimed was a violation of their rights. The following is an excerpt from the court’s decision in the case:

The plaintiffs' premise for their complaint is that the IRS agents were required to have a court order in order to be able to legally seize property for delinquent taxes. Unfortunately, this is a faulty premise. Title 26 U.S.C. §6331 authorizes the IRS to seize property of any person liable for any tax upon ten days notice. The plaintiffs are incorrect in stating that §§6331 and 6321 only apply to the Bureau of Alcohol, Tobacco and Firearms. The statute specifically states that any person may have their property levied upon. 26 U.S.C. §§6331(a) and 6321. The plaintiffs also cite 26 U.S.C. §7402 which grants jurisdiction to the district courts to issue orders, processes and judgments as well as enforce IRS summons. This section does not require a court order in order to levy on property under §6331.

A "levy" by definition is a summary non-judicial process which provides the IRS with prompt and convenient method for satisfying delinquent tax claims. [ . . . ] [T]he IRS has the option under §6502 to collect its assessment by either a levy or a court proceeding [ . . . . ]

Accordingly, the IRS agents were acting within the authority granted under §6331 and no court order was required for the attempted levy on Ralph Brian's property. Concerning the constitutional violations alleged by the plaintiffs, this court cannot find that any constitutional rights were allegedly violated if the attempted seizure was lawful under §6331.

It is important to note that the plaintiff Ralph Brian is not without a course of action under the Internal Revenue Code. If the delinquent taxes claimed are not delinquent, the taxpayer may bring an action with the IRS for a refund.^[30]

[edit] The OMB control number argument

One contention of tax protesters is that they are not liable to file returns or pay taxes because, they argue, Form 1040 or some other Federal tax form, or the related instructions, or a Treasury Regulation, does not contain an "OMB control number" (a number issued by the U.S. Office of Management and Budget under the Paperwork Reduction Act.)

With respect to Form 1040 itself, the logic of this argument is unclear, as Form 1040, U.S. Individual Income Tax Return, does contain the OMB control number, and has included the number for every tax year since 1981. (The number is in the upper right corner of page 1 of the form. The short forms, Form 1040A and Form 1040EZ, also bear OMB control numbers.)

The tax protester argument may be based in part on the fact that the instruction booklet for Form 1040 states (on page 78 of the year 2005 version): "You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless the form displays a valid OMB control number." The key language is "a form that is subject to the Paperwork Reduction Act". The regulations for the OMB control number under the Paperwork Reduction Act specifically mention statutory tax obligations, providing (in part):

§ 1320.6 Public protection.

(a) Notwithstanding any other provision of law, no person shall be subject to any penalty for failing to comply with a collection of information that is subject to the requirements of this part if:

(1) The collection of information does not display, in accordance with §1320.3(f) and §1320.5(b)(1), a currently valid OMB control number assigned by the Director in accordance with the Act [ . . . ]

(e) The protection provided by paragraph (a) of this section does not preclude the imposition of a penalty on a person for failing to comply with a collection of information that is imposed on the person by statute—e.g., 26 U.S.C. §6011(a) (statutory requirement for person to file a tax return) [ . . . . ]^[31]

Additionally the Paperwork Reduction Act itself states (in part): "[ . . . ] this subchapter shall not apply to the collection of information [ . . . ] during the conduct of [ . . . ] a civil action to which the United States or any official or agency thereof is a party [ . . . ] or [ . . . ] an administrative action or investigation involving an agency against specific individuals or entities."^[32]

The courts have ruled that there is no legal requirement that an IRS tax form bear an OMB control number in order for a taxpayer to be legally obligated to file Federal income tax returns and pay the related taxes, and there is no requirement of an OMB number in order for the taxpayer to be properly convicted of tax crimes -- as these are tax obligations imposed by statute and therefore cannot be obviated by presence or lack of an OMB control number on a tax form.

Despite the presence of the OMB control number on Form 1040 and despite the language of regulation 1320.6(e) above, tax protesters have repeatedly attempted to litigate several variations of the "OMB control number argument," but without success. See McDougall v. Commissioner (taxpayer's argument -- that the 1987 Form 1040 fails to display an OMB control number -- was rejected by the Court, with the Court stating that the 1987 Form 1040 does contain the OMB control number, in upper right corner of form; taxpayer's argument -- that Form 1040 lacks the Privacy Act and Paperwork Reduction Act notice -- was rejected by the Court, with the Court noting that the statement appears in the instructions for the form and further noting that a failure to comply with the Paperwork Reduction Act would not invalidate an IRS form, as the "mandate for collecting Federal income tax information comes from Congress");^[33] United States v. Barker (taxpayer's argument -- that IRS forms must carry valid control numbers from the Office of Management and Budget to be valid -- was rejected);^[34] Salberg v. United States (taxpayer's argument -- that although the 1981 Form 1040 contains an OMB control number, the form is invalid because it does not contain an expiration date -- was rejected; Court rules that even if the law required an expiration date, the "1981" date on the form would so qualify as an expiration date);^[35] United States v. Dawes (taxpayer's argument -- that the tax regulations and IRS instruction books must contain an OMB control number -- was rejected);^[36] Lonsdale v. United States (taxpayer's argument -- that relevant IRS forms in connection with summonses, liens or levies must contain OMB control numbers for the summonses, liens or levies to be valid -- was rejected).^[37]

In the case of United States v. Wunder, the United States Court of Appeals for the Sixth Circuit stated:

Although the defendant constructs an elaborate argument as to why section 3512 [of title 44 of the United States Code, relating to the Paperwork Reduction Act (PRA)] should apply to this case, [ . . . ] we are unable to see how section 3512 is relevant. This section, by its terms, applies only to information requests made after December 31, 1981. The tax years in question here were 1979, 1980, and 1981. Clearly, tax returns for 1979 and 1980 would not be affected by the PRA. As for the 1981 return, it did display the appropriate control number, and the regulations do not need a number because the requirement to file a tax return is mandated by statute, not by regulation. Defendant was not convicted of violating a regulation but of violating a statute which required him to file an income tax return. [ . . . ] The Paperwork Reduction Act, therefore, does not apply to the statutory requirement, but only to the forms themselves, which contained the appropriate numbers.^[38]

[edit] Arguments that the IRS is not a government agency

Many tax protesters claim that because the Internal Revenue Service itself was not created by statute and because the IRS has no legal capacity to sue or be sued, the IRS is not a federal government agency. Some claim it is a Puerto Rican trust.^[39] Others claim that the IRS does not lawfully exist.[5] The courts have uniformly rejected such arguments. As explained below, the "Internal Revenue Service" is referred to in statutes and regulations as both an "agency" and a "bureau."

Although the IRS, as a bureau within the Treasury Department, was not created by statute (and no law requires that the IRS, as a bureau within an executive department, be "created" by statute), the United States Supreme Court, in Chrysler Corp. v. Brown,^[40] specifically referred to the Revenue Act of 1862, the "Act of July 1, 1862, ch. 119, 12 Stat. 432, the statute to which the present Internal Revenue Service can be traced". (The 1862 Act created the office of Commissioner of Internal Revenue.)

Due to the doctrine of sovereign immunity, the IRS itself (along with many other Federal agencies) does not, as a general rule, have the capacity to "sue and be sued" -- a concept separate from that of whether the IRS is a U.S. "government agency." See, for example, Thompson v. Department of Treasury, Internal Revenue Service and United States of America,^[41] where the court stated that the "Department of the Treasury" and "Internal Revenue Service" are "federal agencies within the United States Government. Federal agencies may not be sued in their own name except to the extent Congress may specifically allow such suits". Also, "Congress has made no provisions for suits against either the IRS or the Treasury Department, so these agencies are not proper entities for suit. Where taxpayers are authorized to sue on matters arising out of IRS actions, the United States is the proper party defendant" (from Devries v. Internal Revenue Service.^[42])

Some tax protesters claim that the Internal Revenue Service is not mentioned in the statutes. The Internal Revenue Code contains at least 179 specific references to "Internal Revenue Service" (including references in headings of sections, subsections, etc.). Many Internal Revenue Code sections contain multiple references to "Internal Revenue Service" (for example, thirteen mentions in 26 U.S.C. § 6103, ten mentions in 26 U.S.C. § 6110, eighteen mentions in 26 U.S.C. § 7430, and thirty-three separate mentions in 26 U.S.C. § 7803). At least nineteen references to "Internal Revenue Service" are found in titles 2, 5, 12, 23, 31, and 42 of the United States Code. For example, 5 U.S.C. § 500(c) refers to the "Internal Revenue Service" as an "agency" of the Treasury Department. According to the official web site of the U.S. Department of the Treasury, the Internal Revenue Service is a bureau located within the Department.^[43]

The official U.S. Treasury regulations provide (in part):

The Internal Revenue Service is a bureau of the Department of the Treasury under the immediate direction of the Commissioner of Internal Revenue. The Commissioner has general superintendence of the assessment and collection of all taxes imposed by any law providing internal revenue. The Internal Revenue Service is the agency by which these functions are performed.^[44]

The "Internal Revenue Service" is also listed as a "component" and "agency" of the U.S. Department of the Treasury in the official government regulations for "Supplemental Standards of Ethical Conduct for Employees of the Department of the Treasury".^[45] The House Committee Report accompanying the Internal Revenue Service Restructuring and Reform Act of 1998,^[46] specifically refers to the IRS as being one of the "agencies within the Treasury."^[47]

[edit] The 861 argument

Internal Revenue Code section 861, titled "Income from sources within the United States", is a provision of the Internal Revenue Code which delineates what kinds of income shall be treated as income from sources within the United States. The language of Section 861 is occasionally cited by tax protesters who claim that the statute excludes some portion of the income of U.S. citizens and resident aliens from taxation under the provisions of the Code.^[48]

Under the tax protesters' section 861 argument, only income derived from "taxable activities" becomes "taxable income" (taxable "gross income" minus allowable deductions - 26 U.S.C. § 63). The list of taxable activities is located in Subchapter N and in Section 861 regulations. Proponents of this argument state that individuals with domestic income must go to the Section 861 regulations to determine if the activities that generate their income are taxable or not. Protesters state that regulation section 1.861-8T(d)(2)(iii) defines the taxable activities. The argument is that since the domestic activities of residents of the United States (Americans and resident aliens) are not shown to be taxable, the domestic income derived from such activities does not become taxable "gross income."^[29]

The income taxes imposed on U.S. citizens and resident aliens are generally imposed under Subchapter A (not Subchapter N) of Chapter 1 of the Code. The income tax is imposed on the "taxable income" of individuals.^[49] Larken Rose, a large advocate of the 861 argument, used the argument to challenge the IRS, and lost:

On November 22, 2005, in Philadelphia, PA, Larken Rose was sentenced to 15 months in prison, followed by one year supervised release and fined $10,000. Rose was convicted by jury in August 2005 to five counts of willful failure to file federal income tax returns. According to the evidence introduced at trial, Rose willfully failed to file personal federal income tax returns for calendar years 1998 through 2002, despite earning $500,000 during those years. On those amended returns, he reported no tax due and requested a refund for all income taxes paid in those years. At trial, Rose claimed that he failed to file returns and sought refund claims based on his determination that his income received inside the United States was not taxable under Internal Revenue Code Section 861 and regulations. The judge instructed the jury that this Section 861 argument is incorrect as a matter of law.^[50]

In August of 2006, Charles Thomas (Tom) Clayton, M.D., was found guilty by a jury in Federal court in Texas of two counts of willfully making false statements on tax returns and six counts of willfully failing to file tax returns. According to The Courier of Montgomery County, "Clayton's defense at the trial centered on the '861 argument' -- a defense used numerous times in previous years, but never successfully [ . . . . ]"[6] According to a Justice Department news release, Clayton failed to file income tax returns for years 1999 through 2004 while receiving over $1.5 million in gross income. The government also charged that for years 1997 and 1998 Clayton filed false amended returns, claiming refunds of over $160,000.[7] Criminal investigators of the Internal Revenue Service had gathered information on Clayton during the IRS investigation of Larken Rose (see above). According to the prosecutor's office, Clayton "disregarded multiple written notices from the Internal Revenue Service informing him that his 861 argument was without merit," and Clayton "had also been told the same thing by two Certified Public Accountants."^[51] On December 15, 2006, Clayton was sentenced to five years in prison and a fine of $50,000, plus a requirement that he pay over $7,400 in prosecution costs.^[52]

On October 12, 2006, actor Wesley Snipes was charged in a superseding indictment^[53] with one count of conspiracy to defraud the United States under 18 U.S.C. § 371,^[54] one count of making or aiding and abetting the making of a false and fraudulent claim for payment against the United States, under 18 U.S.C. § 287 and 18 U.S.C. § 2, and six counts of willfully failing to timely file Federal income tax returns under 26 U.S.C. § 7203. The indictment alleged that Snipes had refused to pay taxes under a section 861 argument. If found guilty, Snipes could face up to sixteen years in prison on the charges. The trial has been postponed to October 2007.

The courts have consistently ruled that the argument that Section 861 excludes income of U.S. citizens and resident aliens from taxation is without legal merit. See Aiello v. Commissioner;^[55] Williams v. Commissioner;^[56] and United States v. Bell.^[57]

[edit] See also

• America: Freedom to Fascism
• Aaron Russo
• Taxation in the United States

[edit] Notes

[edit] External links

Sites presenting tax protester arguments:

• "31 Questions & Answers about the IRS revision 3.3" — Presents the arguments of Paul Andrew Mitchell, regarding the IRS, the income tax, the 14th and 16th Amendments, and other topics, in the form of 31 questions presented and answered by Mitchell.
• "Theft by Deception" — A page selling a 83-minute DVD, "Theft by Deception". The web page claims that the video "deciphers" the Internal Revenue Code to prove that Congress has "imposed a very limited income tax, applicable only to those engaged in foreign and international commerce".
• "Streaming 'Theft by Deception' and 'The 861 Evidence,' by Larken Rose" — The arguments of tax protester Larken Rose, presented in the form of streaming videos.
• "BATF/IRS -- Criminal Fraud" — Text document by Milton William Cooper describing various alleged conspiracies concerning the Internal Revenue Service and Bureau of Alcohol, Tobacco, Firearms and Explosives. One claim is that the reference in 31 U.S.C. § 1321(a)(62) to the "Puerto Rico special fund (Internal Revenue)" proves the IRS is a Puerto Rican "pure trust".
• "The Federal Zone: Cracking the Code of Internal Revenue"
• "WhatisTaxed.com - Data-mining the tax code"