Tax protester

In United States tax law enforcement, a tax protester (or tax protestor) is an individual who resists or refuses payment of a tax for which the government has determined that person is liable. Although the term would logically seem to encompass persons who refuse to pay taxes because of a disagreement with how tax dollars are being spent, it has been used by the Internal Revenue Service and by courts to describe those who believe that tax laws do not apply to them, or to their income.

The term "tax resister" is commonly used to refer to people who do not tend to dispute the legality of the income tax or its legal applicability to them, but who intend to defy tax collection for conscientious reasons (for instance, pacifists who do not want to pay for war). Of course a person could be both a tax protester and a tax resister if they believe that tax laws do not apply to them and also believe that taxes should not be paid based on the use to which they are put.

History

People have protested taxation at various times in the history of the United States, sometimes violently. The American Revolution originated with protests against the Stamp Act and Townshend Acts by which Britain sought to tax the American colonies. In 1794, settlers in western Pennsylvania responded to a federal tax on liquor with the Whiskey Rebellion. The adverse effect of the Tariff of 1828 on southern commerce led South Carolina to reject the tariff and threaten secession. In each of these cases, some opponents of the tax in question contended that it was not merely bad, but exceeded the authority of the body that enacted it.

The assertion of federal authority in the American Civil War put an end to the organized tax protests that had marked the republic's early years. The war saw the enaction of the first federal income tax, future versions of which would become the federal government's primary source of revenue. Nonetheless, tax delinquency was widespread during the presidency of Franklin D. Roosevelt, when income taxes increased dramatically to pay for New Deal programs and U.S. involvement in World War II.

The modern tax protester movement originated later in the 20th century, as some came to assert that the federal tax on individual income is nonexistent, unconstitutional, or inapplicable to various forms of income such as wages.

The earliest official use of this term appears to have occurred in the mid-1970s. The first federal case to use the term in this manner was U.S. v. Scott, 521 F.2d 1188 (9th Cir. 1975), wherein the court noted that an undercover government agent had sworn out an affidavit regarding the agent's infiltration into a 'tax protester' organization. The case itself upheld the conviction of the leader of that organization, who had failed to file tax returns from 1969-1972, based on Constitutional arguments against the validity of the income tax.

Denial of tax liability in the United States

Arguments made by tax protesters generally fall into several categories: that the Sixteenth Amendment was never properly ratified; that the Sixteenth Amendment does not permit the taxation of individual income, or particular forms of individual income; that the statutes enacted by Congress pursuant to their constitutional taxing power are defective or invalid; and that the government and the courts engage in various conspiracies to conceal the above deficiencies.

Arguments that the Sixteenth Amendment was never ratified:

• One argument that has been raised several times suggests that the Sixteenth Amendment was not properly ratified because the legislatures of various states passed bills of ratification with different capitalization, spelling of words, or punctuation marks (e.g. semi-colons instead of commas). The best-known proponent of the non-ratification claim is Bill Benson, co-author of the book The Law That Never Was (1985). This contention was comprehensively addressed by the Seventh Circuit Court of Appeals in U.S. v. Thomas, 788 F.2d 1250 (7th Cir. 1986), cert. den. 107 S.Ct. 187 (1986):

"Thomas is a tax protester, and one of his arguments is that he did not need to file tax returns because the sixteenth amendment is not part of the constitution. It was not properly ratified, Thomas insists, repeating the argument of W. Benson & M. Beckman, The Law That Never Was (1985). Benson and Beckman review the documents concerning the states' ratification of the sixteenth amendment and conclude that only four states ratified the sixteenth amendment; they insist that the official promulgation of that amendment by Secretary of State Knox in 1913 is therefore void.

"Benson and Beckman did not discover anything; they rediscovered something that Secretary Knox considered in 1913. Thirty-eight states ratified the sixteenth amendment, and thirty-seven sent formal instruments of ratification to the Secretary of State. (Minnesota notified the Secretary orally, and additional states ratified later; we consider only those Secretary Knox considered.) Only four instruments repeat the language of the sixteenth amendment exactly as Congress approved it. The others contain errors of diction, capitalization, punctuation, and spelling. The text Congress transmitted to the states was: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration." Many of the instruments neglected to capitalize "States," and some capitalized other words instead. The instrument from Illinois had "remuneration" in place of "enumeration"; the instrument from Missouri substituted "levy" for "lay"; the instrument from Washington had "income" not "incomes"; others made similar blunders.

"Thomas insists that because the states did not approve exactly the same text, the amendment did not go into effect. Secretary Knox considered this argument. The Solicitor of the Department of State drew up a list of the errors in the instruments and--taking into account both the triviality of the deviations and the treatment of earlier amendments that had experienced more substantial problems--advised the Secretary that he was authorized to declare the amendment adopted. The Secretary did so.

"Although Thomas urges us to take the view of several state courts that only agreement on the literal text may make a legal document effective, the Supreme Court follows the "enrolled bill rule." If a legislative document is authenticated in regular form by the appropriate officials, the court treats that document as properly adopted. Field v. Clark, 143 U.S. 649, 36 L.Ed. 294, 12 S.Ct. 495 (1892). The principle is equally applicable to constitutional amendments. See Leser v. Garnett, 258 U.S. 130, 66 L.Ed. 505, 42 S.Ct. 217 (1922), which treats as conclusive the declaration of the Secretary of State that the nineteenth amendment had been adopted. In United States v. Foster, 789 F.2d. 457, 462-463, n.6 (7th Cir. 1986), we relied on Leser, as well as the inconsequential nature of the objections in the face of the 73-year acceptance of the effectiveness of the sixteenth amendment, to reject a claim similar to Thomas's. See also Coleman v. Miller, 307 U.S. 433, 83 L. Ed. 1385, 59 S. Ct. 972 (1939) (questions about ratification of amendments may be nonjusticiable). Secretary Knox declared that enough states had ratified the sixteenth amendment. The Secretary's decision is not transparently defective. We need not decide when, if ever, such a decision may be reviewed in order to know that Secretary Knox's decision is now beyond review."

This decision did not satisfy tax protestors, who contended that the Courts deliberately chose to hear cases in which the litigants presented no evidence in order to set a precedent supporting ratification. However, appeals courts (including the Supreme Court) decide questions of law; whether there is "evidence" is irrelevant.

• Another argument that has been made, but has yet to be put before a court is that the Sixteenth Amendment was not properly ratified because Ohio was technically not a state until 1953, because Congress did not pass an official proclamation recognizing Ohio's statehood until then.

Arguments that the Sixteenth Amendment does not permit taxation of income:

• All Americans are citizens of individual states as opposed to citizens of the 'United States,' and the United States therefore has no power to tax citizens outside of Washington D.C.

• The word "income" as used in the Sixteenth Amendment can not be interpreted as applying to wages.

• The Sixteenth Amendment does not expressly repeal any provision of the Constitution, and therefore is ineffective to change the law forming the basis of cases decided prior to the ratification of the amendment.

Arguments that the tax laws are ineffective:

• None of the 50 U.S. states are "states" under the tax code.

• Federal reserve notes (better known as dollar bills) are not actually money, because the Constitution only permits the government to "coin" money, and requires that such money be exchangeable for gold or silver; therefore, printed bills are instead symbols for use in bartering, and being paid in dollars is not the receipt of taxable income. This argument was recently brought before a court in Wilson v. U.S., 1998 WL 937356 (D.Col. 1998). The court responded:

"The contention that paper money is illegal has been consistently rejected. ... Congress has exercised this power by delegation to the federal reserve system. 12 U.S.C. section 411. Federal reserve notes are legal tender for all debts, including taxes. 31 U.S.C. section 392; Milam v. U.S. 524 F.2d 629 (9th Cir. 1974). The United States Constitution, art. 1, section 10, 'prohibits the states from declaring legal tender anything other than gold or silver, but does not limit Congress' power to declare what shall be legal tender for all debts.' U.S. v. Rifen, 577 F.2d 1111, 1112 (8th Cir. 1978). Since Congress has done so, there can be no valid challenge to the legality of federal reserve notes. United States v. Anderson, 584 F.2d 369, 374 (10th Cir. 1978)."

• The Fifth Amendment right against self-incrimination allows an individual to refuse to provide information on a tax form that would make that individual liable for either criminal acts from which the income was derived, or the crime of not paying the taxes themselves. This argument has been raised several times, and courts faced with it generally refer to the case of United States v. Sullivan, 274 U.S. 259, 263-64 (1927), where Justice Oliver Wendell Holmes wrote:

If the form of return provided called for answers that the defendant was privileged from making he could have raised the objection in the return, but could not on that account refuse to make any return at all.... It would be an extreme if not an extravagant application of the Fifth Amendment to say that it authorized a man to refuse to state the amount of his income because it had been made in crime. But if the defendant desired to test that or any other point he should have tested it in the return so that it could be passed upon. He could not draw a conjurer's circle around the whole matter by his own declaration that to write any word upon the government blank would bring him into danger of the law.

• Some tax protestors claim the following ruling from a recent court case, Schulz v. IRS, means that taxpayers have a due process right to demand a response from the IRS as to why they are 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. [1]

However, the claim that taxpayers have a right to have the IRS explain why they are subject to taxation is a misinterpretation of the court's holding. Schulz, the taxpayer making the appeal in the case, had filed motions in a federal court to quash administrative summonses seeking testimony and documents in connection with an IRS investigation. The Court of Appeals for the Second Circuit affirmed the dismissal of Schulz'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 summonses posed no threat of injury to Schulz until the IRS initiated enforcement proceedings against him. In other words, Schulz could not ask a court to quash the summonses until the IRS went to court to demand that he comply with them or otherwise face sanctions. At that point, Schulz would have ample opportunity to challenge the validity of the summonses.

The confusion results when the above quotation is taken out of context. The court was merely emphasizing that Congress intended for the IRS to use the judicial process to punish lack of compliance with a summons; a summons is not self-enforcing. However, this is true of any government request; you are free to ignore it until the government brings you to court, where you will be punished unless you have some legally justifiable reason for ignoring it. Courts must only adjudicate actual controversies in order to leave room for the possibility that the IRS may decide to drop the investigation and never enforce the summonses or that the plaintiff may decide to voluntarily comply with the request. Until the IRS took Schulz to court, the injury was merely "hypothetical."

While there is disagreement over exactly how "imminent" the injury has to be before you can go to court, this has absolutely nothing to do with your obligation to submit a tax return. The court was not saying that the IRS was required to "explain" to Schulz why he had to pay taxes, but rather that Schulz could not quash the summonses until the IRS went to court against him first. Additionally, Schulz was challenging requests for documents and testimony for an investigation (kind of like challenging a subpoena or warrant), not demanding that the IRS explain to him why he was subject to taxation. A tax return is not a "summons" in the sense that the court is using it. Even if it were, all the court is saying is that due process requires the IRS take you to court to punish you for failing to respond and gives you the chance to present any valid defenses for not responding, not that you have the right to an explanation before you have to comply. In other words, the court is not saying you have no obligation to respond to a summons until the IRS undertakes proceedings against you, but that you cannot be punished for failing to respond until the IRS undertakes proceedings against you.

Conspiracy arguments, in general

• The government only prosecutes people who are not well-enough informed to make the above arguments, and secretly settles with those who are.

• The Supreme Court only grants certiorari to cases wherein the tax protester has a poorly defended argument.

• The courts only rely on cases where tax protesters lost, and ignore those where tax protesters prevail.

• A 'missing' Thirteenth Amendment to the Constitution precedes the current Thirteenth Amendment; the missing amendment purportedly placed additional prohibitions on granting titles of nobility. Therefore, actions taken by lawyers and judges, who use the title 'esquire' (which is claimed to be a title of nobility), are monarchial, and therefore unconstitutional.

• The gold fringe around the American flag, as displayed in many federal courts, designates them as Admiralty courts, which can not hear other kinds of cases.

Responses to tax protesters

Federal courts have consistently rejected such arguments as frivolous without citing the where in the Internal Revenue Code book or the Constitution that makes it valid. The U.S. Internal Revenue Service assesses tax penalties against taxpayers who file "frivolous" returns, and including any of the standard tax protester arguments, or refusing or defacing the jurat including the oath verifying the truthfulness of the statements made on the return, are almost certain to incur this penalty, yet these taxpayers do not have to pay these fines and the IRS has been shown to not have jurisdiction to even assess these fines. Almost every United States Court of Appeals has made a blanket statement repudiating tax protester arguments. For example, see United States v. Buckner, 830 F.2d 102 (7th Cir. 1987):

"For the record, we note that the following beliefs, which are stock arguments of the tax protester movement, have not been, nor ever will be, considered 'objectively reasonable' in this circuit:

"(1) the belief that the sixteenth amendment to the constitution was improperly ratified and therefore never came into being;

"(2) the belief that the sixteenth amendment is unconstitutional generally;

"(3) the belief that the income tax violates the takings clause of the fifth amendment;

"(4) the belief that the tax laws are unconstitutional;

"(5) the belief that wages are not income and therefore are not subject to federal income tax laws;

"(6) the belief that filing a tax return violates the privilege against self-incrimination; and

"(7) the belief that Federal Reserve Notes do not constitute cash or income.

Despite this and other similar rulings, people continue to read and believe these facts. Even within the tax protester movement, there has been discord as to which arguments are appropriate to bring since differrent courts will respond differently to certain arguments. Attorney Larry Becraft, who has spent much of his career defending tax protesters, has recently decried "innocents who today believe certain legal arguments popular years ago, but which were litigated by ill prepared, desperate people and lost. To continue going down such dead end roads and to follow these dead arguments will only result in disaster." [2]

Furthermore, con artists have been known to take advantage of the belief of tax protesters by engaging in "tax scams." Such scams have included "the marketing of bogus trusts, 'untax' kits or other devices that would ostensibly allow people to avoid paying income taxes[3]."

And some people have been known to disseminate true and correct knowledge on the Constitution, Supreme Court Rulings and Internal Revenue Code applying to why the income taxes are being sought after illegally. Some people who do not pay such an illegal tax have been able to do so for many years and continue to battle the IRS successfully.

External links

• Daniel Evans' Tax Protester FAQ
• "Destroyed Arguments" conceded by tax opponent Larry Becraft
• Criminal Tax Manual, § 40.00: "Tax Protesters" – From the Tax Division of the U.S. Department of Justice
• The Dead Ends of Technicalitarianism by Anthony Gregory, LewRockwell.com 27 October 2005
  • "Deceptive IRS Code Words" from supremelaw.org
  • "31 Questions and Answers about the IRS" by Paul Andrew Mitchell from supremelaw.org
  • List of State and Federal Court Cases in with the 31 Q&A were put into evidence
  • "Administrative Law" from supremelaw.org
  • house_senate.pdf from paynoincometax.com