Definitions

act call

Tax protester statutory arguments

Tax protesters in the United States make a number of statutory arguments that the assessment of the federal 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 that the Congress has simply failed to impose the tax by statute. Supporters of such arguments may or may not 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, frivolous, or all three.

Definition of the terms "state" and "includes"

In connection with various arguments that the Federal income tax should not apply to citizens or residents within the fifty states, some tax protesters have argued about the meanings of the terms "state" and "includes."

Tax protester arguments

One argument is 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 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 and the Hawaii Omnibus Act when they were respectively admitted to the Union.

Under the following tax protester argument, 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, 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 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. The definition of "wages" is that remuneration which is earned by an "employee." 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 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.

The Internal Revenue Code general definition of the term "state" in section 7701 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.

Some tax protesters argue that, in connection with the phrase "to include the District of Columbia," the term "include" generally should have the meaning of exclusivity of whatever is being listed if the list is made in a certain way. 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.

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)

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.

Some tax protesters argue that in the 1911 case of Montello Salt Co. v. Utah, 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 Montello Salt decision.

Court rulings on the Internal Revenue Code definitions of "state" and "includes"

In a 1959 tax case, the United States Supreme Court indicated that the term "includes" in the Internal Revenue Code is a term of expansion, not a term of exclusivity.

Similarly, 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 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.

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." The argument that the term "state" as used in Federal income tax law means only the District of Columbia and the territories was specifically rejected by the United States Court of Appeals for the Eleventh Circuit in United States v. Ward. Similarly, in the case of Nieman v. Commissioner, the taxpayer argued that "Congress excludes the 50 States from the definition of "United States", for the purposes of 26 U.S.C., Subtitle A." The United States Tax Court rejected that argument, stating:

Petitioner attempts to argue an absurd proposition, essentially that the State of Illinois is not part of the United States. His hope is that he will find some semantic technicality which will render him exempt from Federal income tax, which applies generally to all U.S. citizens and residents. Suffice it to say, we find no support in any of the authorities petitioner cites for his position that he is not subject to Federal income tax on income he earned in Illinois.

See also United States v. Bell (taxpayer's argument -- that the term "United States" encompasses "only territories and possessions such as the 'Commonwealth of Puerto Rico, the Virgin Islands, Guam, and American Samoa' [. . . ] but not the contiguous 48 states, Hawaii and Alaska" by contending that the term "include" was a term of "limitation" -- was rejected). See also Friesen v. Commissioner (taxpayer's argument -- that Nebraska was "without" the United States and that as a Nebraska resident the taxpayer was "alien to the foreign Federal jurisdiction" and therefore not subject to income tax -- was rejected).

The argument that the United States does not include all or a part of the physical territory of the fifty states, and variations of this argument, have been officially identified as legally frivolous Federal tax return positions for purposes of the $5,000 frivolous tax return penalty imposed under Internal Revenue Code section 6702(a).

The private sector employee argument

An argument linked to the meaning of the words "includes" and "including" is the argument that for Federal income tax purposes, the term "employee" under Internal Revenue Code section 3401(c) does not include a regular, private-sector employee. The courts have uniformly rejected this argument. The text of section 3401(c), which deals only with the employer's withholding requirements and not with the employee's requirement to report Internal Revenue Code section 61 compensation for personal services (whether called wages, salaries, or any other term), is as follows:

For purposes of this chapter, the term “employee” includes an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term “employee” also includes an officer of a corporation.

In Sullivan v. United States, taxpayer Grant W. Sullivan argued that he had not received “wages” and was not an “employee” under Internal Revenue Code section 3401(c). The United States Court of Appeals for the First Circuit ruled against Sullivan, stating:

To the extent Sullivan argues that he received no “wages” in 1983 because he was not an “employee” within the meaning of 26 U.S.C. §3401(c), that contention is meritless. Section 3401(c), which relates to income tax withholding, indicates that the definition of “employee” includes government officers and employees, elected officials, and corporate officers. The statute does not purport to limit withholding to the persons listed therein.

In United States v. Ferguson, taxpayer Joy Ferguson argued that she was not an “employee” under section 3401(c), and that she therefore could not have “wages.” The court ruled against her, stating:

The core of the dispute before the court is Ferguson's assertion that she was not an “employee” as defined by §3401(c) of the Internal Revenue Code, and therefore did not earn any "wages." [footnote omitted] As such, she argues that her Form 1040 and Form 4862 accurately reported her wages as zero. As noted by the government, Ferguson's interpretation of §3401(c) has been considered and rejected numerous times by many courts. This Court would agree with the overwhelming precedent on this issue, Ferguson's argument that she is not an employee as defined by §3401(c) is frivolous.

In Luesse v. United States, taxpayer Chell C. Luesse of St. Louis Park, Minnesota, argued that he received no “wages” because he was not an “employee” under section 3401(c). The court ruled against Mr. Luesse.

In Richey v. Stewart, the court stated:

Another familiar argument from Mr. Richey [the taxpayer] is that he is not an employee under the terms of the Internal Revenue Code, citing Section 3401(c), which states that the term “employee” includes government employees. What Mr. Richey misapprises in his reading of the statute is the inclusionary nature of the language. The Code does not exclude all other persons from taxation who are not government employees.

In United States v. Charboneau, the court stated:

[. . . ] Ms. Charboneau contends that the Code's definitions of "wage income" and "self employment income" only include income derived from individuals who work for the federal government, or whose work involves that of "the performance of the functions of a public office." Because Ms. Charboneau never worked for any federal or state government during the tax years in question, she claims that the IRS cannot make any tax assessments against her.

This nonsensical argument is belied by the plain language of the Internal Revenue Code itself. For example, 26 U.S.C. §3401 defines wages as "all remuneration (other than fees paid to a public official) for services performed by an employee for his employer...." 26 U.S.C. §3401(a) (emphasis added). The statute then goes on to define various exceptions to this broad definition of wages in certain categories of private employment, such as in the agricultural and domestic service fields, newspaper delivery, the clergy, and for wages incurred by individuals working for employers "other than the United States or an agency therof" within Puerto Rico or a possession of the United States. There is nothing in the statute limiting "wages" to solely publicly-derived income. [footnotes omitted]

Ms. Charboneau, however, focuses on §3401(c), which states that:

the term “employee” includes an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing. The term “employee” also includes an officer of a corporation.

26 U.S.C. §3401(c). Setting aside the last sentence of this provision, which clearly states that officers of private corporations are considered employees for purposes of determining wages, it is obvious that within the context of this statute that the word "includes" is a term of enlargement, not of limitation, and the reference to certain public officers and employees was not intended to exclude all others. See also Sims v. United States, 359 U.S. 108, 112-13 (1959) (finding that similar provision in 26 U.S.C. §6331 dealing with levies on salaries and wages does not exclude wages of private citizens); Sullivan v. United States, 788 F.2d 813,815 ("[Section 3401(c)] does not purport to limit withholding to persons listed therein"); United States v. Latham, 754 F.2d 747, 750 (7th Cir, 1985) (the Internal Revenue Code definition of “employee” in 26 U.S.C. §3401 does not exclude privately employed wage earners);. In addition, 26 U.S.C. §7701, which provides the definitions of terms used throughout the Internal Revenue Code, states that 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." 26 U.S.C. §7701(c).

In McCoy v. United States, the court stated:

McCoy argues she should not have to pay taxes for 1996-98 because under Code Section 3401 she was not an “employee” which she contends is defined as an elected or appointed employee or official of the federal government. McCoy clearly misconstrues Section 3401(c). The definition of “employee” includes private-sector employees, employees of the federal government, as well as elected and appointed officials. The very language of the Code is inclusive, not limited to the examples of included persons.

The argument that only certain types of taxpayers (such as only Federal government employees, corporations, nonresident aliens, residents of the District of Columbia, or residents of Federal territories) are subject to income tax and employment tax, and variations of this argument, have been officially identified as legally frivolous Federal tax return positions for purposes of the $5,000 frivolous tax return penalty imposed under Internal Revenue Code section 6702(a).

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.

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.

The version of the Internal Revenue Code published as "title 26" of the United States Code is what the Office of Law Revision Counsel of the U.S. House of Representatives refers to as "non-positive law." Indeed, titles 2, 6, 7, 8, 12, 15, 16, 19, 20, 21, 22, 24, 25, 26, 27, 29, 30, 33, 34, 40, 41, 42, 43, 45, 47, 48, and 50 are "non-positive law. However, 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 also separately published as title 26 of the United States Code.

Regarding the legal status of the United States Statutes at Large, 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.

In the case of Ryan v. Bilby, the taxpayer, Dennis Ryan, had been convicted of failure to file tax returns. He therefore sued the district court judge, the prosecutor, his own attorney, two magistrates, and the IRS agents in the case. Ryan's lawsuit was thrown out. He then appealed to the United States Court of Appeals for the Ninth Circuit, which ruled against Ryan and stated:

Ryan's primary contention on appeal is that, as Congress has never enacted Title 26 of the United States Code into positive law, the defendants violated his constitutional rights by attempting to enforce it. [footnote omitted] Thus, he concludes, the district court erred by dismissing his suit. This contention is frivolous.

Congress's failure to enact a title [of the United States Code] into positive law has only evidentiary significance and does not render the underlying enactment invalid or unenforceable. See 1 U. S. C. §204(a) (1982) (the text of titles not enacted into positive law is only prima facie evidence of the law itself). Like it or not, the Internal Revenue Code is the law, and the defendants did not violate Ryan's rights by enforcing it.

The Court of Appeals imposed penalties on Mr. Ryan under 28 U.S.C. section 1912, in the form of ordering him to pay double costs, for filing a frivolous appeal.

Similarly, in Young v. Internal Revenue Service, the U.S. District Court for the Northern District of Indiana stated:

Plaintiff [the taxpayer, Jerry L. Young] asserts that the Internal Revenue Code does not apply to him. The basis for this claim is not easily found in the complaint. According to "plaintiff's answer to the court in re of defendant's pleadings," "It is a Fact that the Internal Revenue Code is NOT Postive [sic] Law. That U. S. C. Title 26 has NEVER been passed by Congress." (Emphasis in original).

The only support that the court can find for this argument amongst plaintiff's numerous filings is a letter dated May 7, 1981 from the American Law Division of the Congressional Research Service (plaintiff's Exhibit 7). That letter does say that the Internal Revenue Code of 1954 "was not enacted by Congress as a title of the U. S. Code." But this does not in any way support plaintiff's argument that the Internal Revenue Code is not positive law. First, that very same letter, in the very same sentence, states that "the Internal Revenue Code of 1954 is positive law . . .." Second, although Congress did not pass the Code as a title, it did enact the Internal Revenue Code as a separate Code, see Act of August 16, 1954, 68A Stat. 1, which was then denominated as Title 26 by the House Judiciary Committee pursuant to 1 U. S. C. §202(a). Finally, even if Title 26 was not itself enacted into positive law, that does not mean that the laws under that title are null and void. A law listed in the current edition of the United States Code is prima facie evidence of the law of the United States. See 1 U. S. C. §204(a). As the letter offered by the plaintiff points out, "The courts could require proof of the underlying statutes when a law is in a title of the code which has not been enacted into positive law." In short, this court has the discretion to recognize the Internal Revenue Code as the applicable law, or require proof of the underlying statute.

Consistent with that discretion, this court recognizes that the Internal Revenue Code is positive law applicable to disputes concerning whether taxes are owned by someone like the plaintiff. This court refuses to embrace the plaintiff's position that the tax laws of the United States are some kind of hoax designed by he IRS to violate the constitutional rights of United States citizens. Quite simply, the court finds plaintiff's position preposterous.

The argument that the Internal Revenue Code is not "law," the argument that the Internal Revenue Code is not "positive law", the argument that nothing in the Internal Revenue Code imposes a requirement to file a return or pay tax, and similar arguments, have been identified as frivolous arguments for purposes of the $5,000 penalty for taking a frivolous position on a tax return.

Specific Code provisions

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 (relating to individuals, estates and trusts) and 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 with reference to "gross income" which in turn is defined in .

In Holywell Corp. v. Smith, the United States Supreme Court (in a unanimous case) stated the legal significance of :

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').

Regarding civil monetary penalties for failure to timely pay taxes, 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, 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 .

Civil monetary penalties for failure to timely file tax returns (denominated as "additions" to tax) are mentioned at . Under , 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.

Criminal penalties for willful failure to timely file tax returns or pay taxes are mentioned at :

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 :

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 and .

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":

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.

The "show me the law" argument

Some tax protesters such as Edward Brown and tax protester organizations such as the We the People Foundation have used the phrase "show me the law" to 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 to argue that there must be no law imposing Federal income taxes.

The official Internal Revenue Service web site contains references to specific code sections and case law, including (duty to file returns in general); (duty to file income tax returns in particular); and (duty to pay tax at time return is required to be filed) and (definition of gross income) and (timing of duty to file).

The year 2007 instruction book for Form 1040, U.S. Individual Income Tax Return, on page 83, contains references to (relating to record keeping); (general filing requirement); (specific income tax return filing requirement); and (duty to supply identification numbers). The IRS web site includes a section on tax protester arguments with citations to statutes (including the duty to pay the tax) and court decisions and a 70-page downloadable PDF version of the data, entitled The Truth About Frivolous Tax Arguments and a page with a link to the entire Internal Revenue Code as published by the Legal Information Institute at Cornell University Law School.

A related argument that has been raised is that the taxpayer may not be penalized for tax evasion unless the taxpayer knows that section 7201 is the specific section of the Internal Revenue Code that criminalizes the conduct. The United States Court of Appeals for the Seventh Circuit has rejected this argument as "frivolous," and has stated:

[. . . ] a person may be convicted of tax offenses only if he knows that the [Internal Revenue] Code requires him to pay. The jury was so instructed, and its verdict shows that it found, beyond a reasonable doubt, that Patridge [the taxpayer] knew that he had to pay taxes on what he made from his business. It is scarcely possible to imagine otherwise: the system of offshore trusts, and the fictive "loans," show that Patridge was trying to hide income that he knew to be taxable. Why else all this folderol? Yet Patridge, in common with many other people who know what the law requires, could not say just which provisions of the Code make income taxable and prevent evasion. For that matter, many tax lawyers (and most judges) could not rattle off the citations without glancing at a book. This shortcoming of memory (perhaps, for Patridge, a deliberate avoidance of knowledge) prevents criminal punishment, [the lawyer for Patridge] insists.

But why would this be so? No statute says it; no opinion holds it. [. . . Section] 7201 makes only "willful" tax evasion criminal. An act is willful for the purpose of tax law [. . . ] when the taxpayer knows what the Code requires[,] yet sets out to foil the system. Knowledge of the law's demands does not depend on knowing the citation[,] any more than ability to watch a program on TV depends on knowing the frequency on which the signal is broadcast.

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.)

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 and and other statutes (i.e., a formal recordation of the tax on the books and records of the United States Department of the Treasury). 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 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 2008) 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.

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. This argument is based on tax protester theories about both constitutional law and statutory law, but the constitutional and statutory arguments will be described together here for purposes of presentation.

Some tax protesters claim the following language from a court decision in Schulz v. Internal Revenue Service 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.

The taxpayer Robert L. Schulz filed motions in a federal court to quash administrative summonses 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.

In a separate case, Schulz and his We the People Foundation organization argued unsuccessfully that, based on the First Amendment right of the people to petition the government for a redress of grievances, the government should have a duty to respond to a taxpayer's demand for an explanation as to why taxpayers are subject to income tax. On May 8, 2007, the Schulz argument was rejected by the United States Court of Appeals for the District of Columbia Circuit in We the People Foundation, Inc. v. United States.

On August 9, 2007, the United States District Court for the Northern District of New York issued an order including an injunction permanently barring Schulz and his We the People Foundation from (1) advising or instructing persons or entities that they are not required to file federal tax returns or pay federal taxes; (2) selling or furnishing any materials purporting to enable individuals to discontinue or stop withholding or paying federal taxes; (3) instructing, advising or assisting anyone to stop withholding or stop paying federal employment or income taxes; and (4) obstructing or advising anyone to obstruct IRS examinations, collections, or other IRS proceedings.

Formal assessment of tax

Some tax protesters have argued that the tax must be formally assessed (officially recorded, under section 6203 of the Internal Revenue Code, on the books of the office of the U.S. Secretary of the Treasury) by the Internal Revenue Service before a federal tax liability can exist. No court has upheld this argument. Internal Revenue Code section 6151(a) provides that:

when a return of tax is required under this title or regulations, the person required to make such return shall, without assessment or notice and demand from the Secretary [of the Treasury or his delegate], pay such tax to the internal revenue officer with whom the return is filed, and shall pay such tax at the time and place fixed for filing the return [. . . ]

The argument that no tax is owed unless the tax is first officially assessed by the IRS was specifically rejected by the United States Court of Appeals for the Second Circuit, which cited section 6151(a), in United States v. Ellett, citing United States v. Daniel, United States v. Hogan, and United States v. Dack.

Similarly, under the U.S. Bankruptcy Code, there is no requirement that an otherwise valid federal or other tax be officially assessed to be considered valid in bankruptcy. Indeed, until the enactment of the Bankruptcy Reform Act of 1994, the section 362(a)(6) prohibition on assessment without prior court approval applied to valid pre-petition taxes. With the 1994 Act, that restriction was eliminated by an amendment to section 362(b)(9), which now provides that although the taxing authority may assess a valid pre-petition tax without first obtaining court approval, a tax lien that would otherwise arise after the assessment will have no effect until certain specified events occur. By contrast, there is no requirement that the IRS assess the tax in order for the tax to be considered a valid legal claim in the bankruptcy (i.e., in the absence of a tax lien securing the tax, an unassessed tax can be classified as a valid priority unsecured claim under or a valid general unsecured claim, as applicable).

The argument that a person is not required to file a tax return or pay tax unless the Internal Revenue Service responds to the person's questions, etc., and variations of this argument, have been officially identified as legally frivolous Federal tax return positions for purposes of the $5,000 frivolous tax return penalty imposed under Internal Revenue Code section 6702(a).

Argument that acquittal in a criminal tax case proves there is no law imposing tax liability

One tax protester argument is that the acquittal of a defendant in a Federal criminal tax case proves that there is no law imposing the Federal income tax liability, or that the acquittal relieves the defendant of liability for the Federal income tax. No court has accepted this argument.

One well-known example of the continuing tax problems for acquitted defendants is the case of Vernice Kuglin, who was acquitted in her year 2003 criminal trial on charges of Federal income tax evasion. Kuglin's tax problems were not negated by her acquittal, and in 2004 she entered a settlement with the government in which she agreed to pay over $500,000 in taxes and penalties. On April 30, 2007, the Memphis Daily News reported that Kuglin's tax problems continued with the filing of a Notice of Federal Tax Lien against her assets in the amount of $188,025. The Memphis newspaper also stated that Kuglin had "given up her fight against paying taxes, according to a Sept. 10, 2004, Commercial Appeal story.

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.

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; United States v. Langert; Russell v. United States; United States v. Washington; United States v. Hicks.

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.

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 , , and 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). See also Delegation Order 182 (Rev. 7), 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 [. . . ]". 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. 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.

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.

The statute authorizing the Internal Revenue Service to seize assets without going to court is . 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.

Since at least 1867, the Federal tax collector has also held the power to sell property of a delinquent taxpayer to satisfy a Federal income tax liability, even before physically ejecting the taxpayer from the property. See the United States Supreme Court decision in the case of Springer v. United States.

The Paperwork Reduction Act (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.) The courts have rejected the OMB control number arguments, primarily on two grounds: (1) With respect to Form 1040 itself, 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; and (2) according to the court rulings (listed below), the absence of an OMB control number on a tax form (or instructions), or in tax regulations, would not eliminate the statutory legal obligation to file tax returns or pay taxes.

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) [. . . . ]

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.

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.

OMB control numbers and the Lawrence case

Some tax protesters have argued that criminal defendant Robert Lawrence was successful with an OMB control number argument when his case was dismissed by a federal court in 2006. According to the court record, the IRS agents who had calculated Mr. Lawrence's tax liability discovered errors they themselves had made -- based on information obtained from Lawrence's own tax returns, regarding the taxpayer's tax basis in certain property Lawrence had sold. With respect to certain properties the taxpayer had sold, the IRS agents discovered that he had more tax basis than they had originally calculated -- therefore, lower gains or even losses, and thus lower taxes. The IRS agents brought their errors to the attention of the government lawyers, who then asked that the charges be dropped.

Lawrence then asked the trial court to order the government to reimburse him for his legal fees. The court ruled against him on that.

He then appealed to the United States Court of Appeals for the Seventh Circuit -- to try to obtain a reversal of the trial court's refusal to order the government to compensate him for the legal fees he had incurred. At the Court of Appeals, Lawrence contended that he should be reimbursed because the government's conduct against him had been "vexatious, frivolous, or in bad faith." He raised his PRA/OMB control number argument -- an argument he had also raised at the trial court level.

In March 2007 the United States Court of Appeals for the Seventh Circuit rejected the OMB argument. The Court also rejected his request for reimbursement for the legal fees he incurred. The following is an excerpt from the Court's decision:

According to Lawrence, the Paperwork Reduction Act of 1995 (PRA) required the Internal Revenue Service to display valid Office of Management and Budget (OMB) numbers on its Form 1040 [. . . ]. Lawrence argues that the PRA by its terms prohibits the government from imposing a criminal penalty upon a citizen for the failure to complete a form where the information request at issue does not comply with the PRA. Lawrence never explains how this argument is even relevant to the three counts involving tax evasion, but even as to the other three counts, it must fail [. . . ] Lawrence's brief represents an attempt to prove that the PRA could present a valid defense to the criminal charges. Yet Lawrence conceded at oral argument that no case from this circuit establishes such a proposition, and in fact Lawrence cites no caselaw from any jurisdiction that so holds. In contrast, the government referenced numerous cases supporting its position that the PRA does not present a defense to a criminal action for failure to file income taxes [. . . ] Lawrence provides no explanation of how government conduct can be vexatious, frivolous, or in bad faith when there is no law contrary to it.

The Wunder case

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.

The Patridge case

In the case of United States v. Patridge, the United States Court of Appeals for the Seventh Circuit affirmed a tax evasion conviction, and rejected the convicted taxpayer's OMB control number argument, with these words:

Finally, we have no doubt that the IRS has complied with the Paperwork Reduction Act. Form 1040 bears a control number from OMB, as do the other forms the IRS commonly distributes to taxpayers. That this number has been constant since 1981 does not imply that OMB has shirked its duty. Section 3507 [of the Paperwork Reduction Act] requires periodic review, not a periodic change in control numbers. Patridge [the taxpayer] offers us no reason to think that the necessary review has not been conducted. The control number on Form 1040 appears on OMB's web site as a current, valid number; if this is wrong, it takes more than a lawyer's say-so to establish the proposition. That OMB didn't re-review Form 1040 between the 1995 and 1996 tax year is irrelevant; nothing in the 1995 amendments [to the Paperwork Reduction Act] says that all existing approvals become invalid or that all forms must be resubmitted.

In the same case, the Court of Appeals rejected the taxpayer's argument that the Paperwork Reduction Act could block a tax evasion conviction:

How any of this could block a conviction for tax evasion is a mystery. Patridge evaded taxes by shuffling his income among trusts in an attempt to conceal it from the IRS. That crime does not depend on the contents of any form. Evading one's taxes is illegal independent of the information one does or does not supply. Consider another example: the Clean Air Act requires businesses to curtail certain emissions using the best available technology, and to report on those emissions to the EPA. An error in the EPA's forms might spare the business any penalties for bad information but would not license it to emit pollution without limit. The Paperwork Reduction Act does not change any substantive obligation.

Other cases involving OMB control numbers

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 litigated several variations of the "OMB control number argument" 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"); 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); 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); United States v. Cavins (taxpayer convicted of tax evasion argued that his indictment should have been thrown out because Form 1040 did not comply with the Paperwork Reduction Act; argument was rejected by the United States Court of Appeals for the Eighth Circuit. The Court stated: "An OMB control number is clearly displayed at the top of each form. If the Form 1040 displays the control number required by § 3512, 'nothing more is required.'"); United States v. Dawes (taxpayer's argument -- that the tax regulations and IRS instruction books must contain an OMB control number -- was rejected); 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); Karkabe v. Commissioner (taxpayer's arguments -- that Form 1040 did not display a valid OMB control number, and that the Form 1040 was "bootleg" and "illegal" -- were rejected by the court). Pate v. Commissioner (taxpayer's OMB control number argument -- that the Paperwork Reduction Act "may in some manner negate statutory penalties for failure to file tax returns and pay taxes" -- was ruled to be without merit, with the U.S. Tax Court stating that the "requirement to file tax returns and the imposition of penalties for failing to do so represents a 'legislative command, not an administrative request'", and that the Paperwork Reduction Act "provides no 'escape hatch' from penalties for failing to file tax returns"; taxpayer's argument -- that under Pond v. Commissioner, the 1995 amendments to the Paperwork Reduction Act "call into question" certain well-established judicial precedents -- was rejected).

The OMB control number argument and variations of this argument have been officially identified as legally frivolous Federal tax return positions for purposes of the $5,000 frivolous tax return penalty imposed under Internal Revenue Code section 6702(a). In Cargill v. Commissioner, an $8,000 penalty was imposed on taxpayer Judy Cargill under in connection with her appeal in which she persisted in making the OMB control number argument after having been notified that the argument was frivolous.

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. Others claim that the IRS does not lawfully exist. 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, 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, 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.)

Similarly in Collins v. Internal Revenue Serv., the court stated:

The United States argues that the two named defendants, the Internal Revenue Service ("IRS") and Revenue Officer P. Blackard are not proper parties to this action. The United States contends and has provided authority to show that the IRS, as a division of the Treasury Department, is an agency of the United States. Although plaintiff denies that the IRS is an agency of the United States, applicable authority does not support his argument. The IRS is therefore protected by sovereign immunity and cannot be sued absent Congressional authorization, which has not occurred. Accordingly, the IRS is not a proper party to this suit. Similarly, defendant Blackard is protected by sovereign immunity and is not a proper party to this suit. The Court therefore dismisses without prejudice plaintiff's claims against the IRS and P. Blackard. Moreover, the United States is the only proper party to this action. Therefore, the United States is substituted as the defendant.

Some tax protesters claim that the Internal Revenue Service is not mentioned in the statutes. Imprisoned tax protester Irwin Schiff has contended that the Internal Revenue Service is not mentioned in Subtitle A (the subtitle dealing specifically with income tax) of the Internal Revenue Code. The "Internal Revenue Service" is, however, mentioned in Subtitle A (see, e.g., ; ; 26 U.S.C. sec. 170(f)(11)(E)(iii)(II); 26 U.S.C. sec. 355(b)(3)(C)(ii); and ). Overall, the Internal Revenue Code contains at least 200 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 , ten mentions in , eighteen mentions in , and thirty-three separate mentions in ). 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, 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.

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.

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". The House Committee Report accompanying the Internal Revenue Service Restructuring and Reform Act of 1998, specifically refers to the IRS as being one of the "agencies within the Treasury.

The argument that the Internal Revenue Service is not an agency of the United States government, the argument that the IRS is a private-sector corporation, the argument that the IRS is an agency of some state or territory without authority to administer the internal revenue laws, and variations of these arguments, have been officially identified as legally frivolous Federal tax return positions for purposes of the $5,000 frivolous tax return penalty imposed under Internal Revenue Code section 6702(a).

The 861 argument

The 861 argument refers to Internal Revenue Code section 861, entitled "Income from sources within the United States". This provision delineates what kinds of income shall be treated as income from sources within the United States when taxes are assessed of resident aliens, nonresident aliens, and foreign corporations. The provision does not apply to U.S. citizens, but 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.

Courts have uniformly held this interpretation to be incorrect, and proponents of the argument who have used it as a basis for not paying taxes have been penalized and even jailed. For example, actor Wesley Snipes was found guilty on three misdemeanor counts of failing to file Federal income tax returns despite Snipes' assertion of the 861 argument, and was sentenced to three years in prison.

Arguing the law in court

One contention by some tax protesters is that a taxpayer should be allowed to introduce, as evidence in court, copies of statutes, cases or other materials to persuade the jury about what the law is. Courts do not allow this procedure as, under the U.S. legal system, the general rule is that neither side in a civil or criminal case is allowed to try to prove to the jury what the law is. For example, in a murder case the defendant is not allowed to persuade the jury that there is no law against murder, or to try to interpret the law for the jury. Likewise, the prosecution is not allowed to do this. Instead, disagreements about what the law is are argued by both sides before the judge, who then makes a ruling. Prior to jury deliberations, the judge instructs the jury on the law. Examples of applications of this rule in tax controversies are United States v. Ambort, United States v. Bonneau, and United States v. Willie.

In a criminal tax case, a taxpayer is allowed to present evidence about what the taxpayer believes the law to be -- but only in an attempt to demonstrate, as a defense, an actual good faith belief based on a misunderstanding caused by the complexity of the tax law, not to try to persuade the jury that the taxpayer's belief is correct. An actual good faith belief based on a misunderstanding caused by the complexity of the tax law negates the "willfulness" requirement for a conviction (see Cheek v. United States).

See also

Notes

External links

Sites presenting tax protester arguments:

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