Q: Is the IRS collecting taxes without legal authority?
Yes: There is no amendment or law that requires most Americans to file or pay
Most people file taxes because they have been led to believe that they must do so or are afraid of the IRS.
Individual income tax is a direct tax -- forbidden by Article I, Section 9, Clause 4 of the U.S. Constitution. Even if Congress had the constitutional authority to lay a direct tax on the people, it has yet to do so -- i.e., there is no statute requiring most Americans to file a tax return or to pay the income tax.
The Constitution prohibits Congress from laying a direct (income) tax on the people unless it is in proportion to the states (the most recent census). The Constitution reads: "No capitation, or other direct, tax shall be laid, unless in proportion to the census or enumeration herein before directed to be taken."
The U.S. Supreme Court has declared the income tax to be a direct tax: "A proper regard for [the 16th Amendment's] genesis, as well as its very clear language, requires also that this amendment shall not be extended by loose construction, so as to repeal or modify, except as applied to income, those provisions of the Constitution that require an apportionment according to population for direct taxes upon property, real and personal" [Eisner v. Macomber, (1920), 252 U.S. 189, 206; 40 S.Ct. 189]. Note that the courts have held that wages and salaries are property [see Sims v. U.S., (1959), 359 U.S. 108].
Federal appeals courts also declared that the income tax is a direct tax. For example, the 5th, 7th, 8th and 10th U.S. Circuit Courts of Appeals have declared: "The 16th Amendment merely eliminates the requirement that the direct income tax be apportioned among the states. ... The 16th Amendment was enacted for the express purpose of providing for a direct income tax" [Parker v. Commissioner, 724 F.2d 469, 471 (5th Cir. 1984)].
The 7th Circuit held that an argument that the income tax was an excise (indirect) tax was frivolous on its face. The court declared: "The power thus long predates the 16th Amendment, which did no more than remove the apportionment requirement" [Coleman v. Commissioner, 791 F.2d 68, 70 (7th Cir. 1986)].
"The cases cited by Francisco clearly establish that the income tax is a direct tax" [United States v. Francisco, 614 F.2d 617, 619 (8th Cir. 1980)].
"The 16th Amendment removed any need to apportion income taxes among the states that otherwise would have been required by Article I, Section 9, Clause 4." [United States v. Lawson, 670 F.2d 923, 927 (10th Cir. 1982)]
Is the individual income tax imposed "in proportion to the census"? No! The tax is not tied to the population, state-by-state. Notwithstanding the constitutional prohibition found in Article I, Section 9, Clause 4, the income tax is not apportioned among the states. Congress does not require each state to tax its citizens to collect the money it says it needs over and above what it collects under the taxing authority granted to it under Article I, Section 8, Clause 1 of the Constitution (indirect taxes: excise, tariffs, duties and imposts).
How can there be a direct, unapportioned individual income tax in the United States if the original Constitution prohibits it? The government relies upon the validity of the 16th Amendment as its authority to impose the current, direct, unapportioned, individual income tax. The 16th Amendment reads: "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."
The IRS says the 16th Amendment gives it the authority to impose the income tax directly on the working people of America. The IRS is on record as saying: "The 16th Amendment to the Constitution states that citizens are required to file tax returns and pay taxes." [See IRS Publication No. 1918 (July, 96), Cat. No. 22524B.]
No less an authority than the New York Times says the 16th Amendment is the government's authority to impose the income tax directly: "Congress's right to levy taxes on the income of individuals and corporations was contested throughout the 19th century, but that authority was written into the Constitution with the passage of the 16th Amendment in 1913."
However, a research report by William Benson documents that the 16th Amendment was not ratified by the states and is a fraud. Benson's findings, published in The Law That Never Was, make a compelling case that the 16th Amendment (the "income-tax amendment") was not legally ratified and that Secretary of State Philander Knox was not merely in error, but committed fraud when he declared it ratified in February 1913. The fact is many state legislatures violated their state constitutions in ratifying the amendment, and many other states ratified differently worded versions of the amendment, thereby voiding their amendment votes. In Kentucky, for example, the state legislature voted 22 to 9 against the amendment, yet Knox counted Kentucky as having passed it. In Oklahoma, the legislature approved an amendment with significantly different wording.
For a detailed state-by-state account, see Benson's Website at www.16thamenctment.com. For a discussion of Knox and his motives for fraudulently declaring the 16th Amendment ratified, see: "Who Was Philander Knox? Is It Credible That He Would Have Committed Fraud?" which can be found on the We the People Foundation (WTPF) Website (www.givemeliberty.org).
Congress and the courts have played "governmental Ping-Pong" with Benson's constitutional challenge to the 16th Amendment. In 1985, Benson asked a federal court to declare the 16th Amendment null and void because it was fraudulently ratified. The court, instead, ruled it a political question for Congress to decide. It said, "[Defendant] Stahl's claim that ratification of the 16th Amendment was fraudulently certified constitutes a political question because we could not undertake independent resolution of this issue without expressing lack of respect due coordinate branches of government" [U.S. v. Stahl (1986), 792 F2nd 1438].
Benson then personally delivered a copy of his voluminous research report to each member of Congress. In response, the Congressional Research Service (CRS) immediately issued a report which declared that it was not going to address the factual allegations of Benson's report and that the question of the fraudulent adoption of the 16th Amendment was a question for the courts. A copy of the CRS report, written by a CRS attorney, is available on the WTPF Website.
Benson has concluded that the 16th Amendment can be ignored and that Congress' power to lay a direct (income) tax on the people is, therefore, limited by the original Constitution. He also has concluded that because the income tax is not laid in proportion to the states, the IRS has no legal authority to collect an income tax from him -- i.e., it is well-settled in American jurisprudence that a law, such as the Internal Revenue Code (IRC), that is violative of the prohibitions of the Constitution is abrogated (null and void) and can be ignored. He has not filed an income-tax return or paid income tax on his earnings since 1986.
Regardless of the constitutional infirmities of the current income-tax law, the tax law as written does not apply to most Americans living and working in the United States. What follows is some evidence of this. A more detailed discussion is available on the WTPF Website in the article "Gross Income and Section 861: Tax Researchers' Perspective and Explanation in the Context of Other Statutes and Regulations."
Sections 1461 and 7701 of the IRC establish that the only person made liable to withhold and pay the income tax is a withholding agent. This is any person required to withhold under Sections 1441 to 1443, which pertain only to nonresident aliens and foreign entities. The Office of Management and Budget (OMB) never has authorized Form 1040 to be used under Section 1 of the IRC. The only form ever approved for use under Section 1 is Form 2555, titled "Foreign Earned Income."
The Internal Revenue Manual instructs IRS employees that the Criminal Investigation Division is under the direction of the international branch of the IRS. It is only authorized to enforce criminal statutes applicable to taxes for U.S. citizens residing in foreign countries and nonresident aliens required to file federal income tax.
IRC Section 3402 imposes withholding only upon "wages" as defined exclusively at Sections 3401(a) and 3401 (a)(8)(A), which reveals that remuneration paid to U.S. citizens living and working in the United States is excepted from the definition of "wages" subject to withholding under Section 3402. The only way it can be wages is under IRC Section 911 -- remuneration in U.S. possessions.
Sen. Daniel Inouye, D-Hawaii, in a letter responding to an inquiry to a constituent who was a tax consultant, stated, "Based on research performed by the Congressional Research Service, there is no provision which specifically and unequivocally requires an individual to pay income taxes." One can see a copy of this letter and comments on the WTPF Website.
CFR [Code of Federal Regulations] 1.61-1(a) defines gross income as "all income from whatever source derived, unless excluded by law." IRC Section 61 defines gross income as "all income from whatever source derived, including (but not limited to) the following items: (1) Compensation for services, including fees, commissions, fringe benefits, and similar items; (2) Gross income derived from business; (3) Gains derived from dealings in property; (4) Interest; (5) Rents; (6) Royalties; (7) Dividends; (8) Alimony ... (15) Income from an interest in an estate or trust."
Tax researchers have discovered that "items" of income in IRC Section 61 are not the same as sources of income. That is, items may be taxable, but only if they are received from taxable sources. CFR 1.861-1 says: "Section 861 et seq. ... and the regulations thereunder, determine the sources of income for purposes of the income tax."
The specific sources are listed in CFR 1.861-8(f)(1). They are: (1) overall limitation to foreign tax credit, (2) international and foreign sales corporations, (3) nonresident-alien individuals and foreign corporations engaged in trade or business within the United States, (4) foreign-base company income and (5) a list of 15 other operative sections -- all foreign.
All this leads to the conclusion that the term "gross income" does not apply to the income of most citizens but to the incomes of nonresident aliens and U.S. citizens earning money abroad -- a conclusion no longer very surprising after considering all the other evidence.
BY BOB SCHULZ
Schulz is chairman of We the People Foundation for Constitutional Education and has opposed unconstitutional behavior by government officials for 22 years in court.
No: IRS authority comes from the Constitution, the Congress and the U.S. court system.
Regardless of one's political or otherwise mistaken belief, the IRS is not collecting taxes without legal authority.
Unfortunately, the time-worn plethora of tax-protester rhetoric -- that the IRS is collecting taxes illegally -- has caused serious consequences for the gullible individuals who subscribe to such specious fantasy. Since ratifying the 16th Amendment in 1913, Congress has had the power to collect taxes "from whatever source derived."
Thus, Congress has constitutional authority to levy and collect taxes. It is Congress -- not the IRS -- that subjects individuals to the requirement of paying taxes to support the government. The IRS only serves as the agent in collecting the taxes Congress has prescribed. Congress set out the requirement that U.S. citizens and resident aliens must file returns and must pay taxes on their taxable income in Section 6012 of the Internal Revenue Code (IRC). (Congress also requires nonresident aliens to file returns and pay taxes on income from U.S. sources.)
Failure to file and failure to pay taxes will subject an individual to penalties under Sections 6651, 6654 and 6662 of the IRC. A tax protester can be further subjected to penalty taxes up to $25,000 under Section 6673 of the IRC if he takes a position in court that federal income-tax laws are invalid. In addition, a tax protester may be criminally prosecuted for tax evasion under Sections 7201, 7202 and 7203 of the code.
Compliance with the IRC and its regulations is an obligation borne by all citizens who earn more than the minimum amount set out in the code. The kind of dissension that is part of the tax-protester movement has no legal significance whatever.
Unfortunately, there are unprincipled, professional tax protesters who attempt to mislead naive members of the public into believing they are not required to pay federal taxes. These persons promote their views in literature and at meetings to individuals, some of whom then honestly come to believe that the federal income-tax laws are invalid. The very real tragedy is the "unconscionable waste" of the time, resources and emotions of those who do sincerely pursue the wholly defective and unsuccessful arguments of the tax-protester movement.
The movement is neither new nor timely. Tax protesters have claimed that the IRC is unconstitutional for almost 90 years. Yet no court to date has affirmed any of the many "strange" positions of the tax protesters. Rather, every court that has addressed their claims has dismissed them summarily and labeled them as "meritless" and "fatuous," as "so frivolous as not to require discussion," as "diatribe" and as "wildly espoused positions" that "do not even warrant a scholarly discussion of the issues." Courts have stated that the "meritless" and "stale" tax-protester claims (long settled against them) have been "burdensome on the federal court system" and that the "continued advancing of these long-defunct arguments invites sanctions."
Persons who rely on the contentions of tax protesters that our federal income-tax system is unconstitutional do so at their own peril. One court commented that "the government may not prohibit the holding of these beliefs, but it may penalize people who act on them" [Coleman v. Commissioner, 791 F.2d 68 (7th Cir. 1986)].
One individual (who, as a result of relying on tax-protester claims, was charged, tried and convicted by a jury of three counts of tax evasion) was admonished by the court that "like moths to a flame some people find themselves irresistibly drawn to the tax-protester movement's illusory claim that there is no legal requirement to pay federal income tax" and "like the moths, these people sometimes get burned." In commenting that by acting on such claims the taxpayer faced four months in a federal prison, it concluded that "there can be little doubt that he has been burned" [U.S. v. Sloan, 939 F.2d 499 (7th Cir. 1991)].
As one court stated, "a political belief that the law is wrong or a mistaken belief that a statute is unconstitutional and that one has the right to violate it is not a defense to a criminal prosecution for filing a false or fraudulent W-4 form" or for failing to file a correct return [Rowlee v. Commissioner, 80 T.C. 1111 (1983)].
The claims of tax protesters and my comments on those claims are as follows:
(1) The IRC was not lawfully enacted. Congress enacted the provisions of the IRC pursuant to the 16th Amendment to the U.S. Constitution, which was ratified in 1913. The 16th Amendment reads: "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."
Tax protesters have forwarded the spurious argument that the 16th Amendment was not legally ratified in 1913. The constitutionality of the income-tax laws pursuant to the amendment was clearly established by the Supreme Court in 1916 in the cases of Tyee Realty Company v. Anderson, 240 U.S. 115 (191.6) and Brushaber v. Union Pac. R.R., 240 US 1(1916). Courts will not address an argument that the 16th Amendment was not legally ratified.
(2) The revenue laws of the United States do not impose a tax on income. All federal courts have squarely rejected this argument; all have held that the IRC imposes a tax on all income. Section 61 of the IRC defines gross income for income-tax purposes as "income from whatever source derived."
(3) Wages are not income. A tax on wages is a direct tax subject to the provision of Article 1, Section 2, Clause 3 of the Constitution that requires that direct taxes be apportioned by population.
This argument is specious and has been rejected repeatedly by the courts. The 16th Amendment specifically states that income may be taxed without apportionment. One court remarked that the argument that wages are not income "has been rejected so frequently that the very raising of it justifies the imposition of sanctions" [Coleman v. Commissioner, 791 F.2d68 (7th Cir. 1986)]. Protesters also contend that wages are not taxable because the value of labor equals or exceeds the value of the wages and, thus, there is no gain. The courts have rejected this argument on "myriad" occasions.
(4) The 16th Amendment violates the 13th Amendment by imposing compulsory labor akin to slavery. As the courts have stated, to work or not work is the choice of the individual. The federal government does not compel one or the other.
(5) Individuals who are citizens of individual states are not citizens of the United States. Federal courts have labeled this argument as "strange" and "utterly meritless." The courts have affirmed that all individuals must pay federal income taxes regardless of whether they requested, obtained or exercised any privilege from the federal government. This argument is the basis for serious sanctions imposed on civil litigants who raise them.
(6) The federal income tax is unconstitutional because it acts as a "societal leveling device" by transferring resources from the nonpoor to the poor. The progressive rate structure of the federal income tax was held constitutional in 1916 by the Supreme Court decisions in Tyee Realty Co. v. Anderson and Brushaber v. Union Pac. R.R., noted above. Federal courts will not review the wisdom of congressional appropriations for welfare purposes. They have stated that this "is an area exclusively within the jurisdiction of the legislative and executive branches" [Autenrieth v. Cullen, 418 F.2d 586 (9th Cir. 1969)(one case of many)].
(7) The income tax is a "taking," which abridges an individual's right to earn income. As courts have stated, taxes "take" income, but it is not in the sense in which the Constitution defines "takings." Courts have ruled that the tax levied by the IRC does not offend the Fifth Amendment.
(8) The IRS must prove the amount of an individual's income. Individuals must make an honest report of their income to the government. If they fail to do so, Section 6020(b) of the IRC permits the IRS to reconstruct their income.
(9) The Seventh Amendment requires a jury trial in the Tax Court. The Seventh Amendment does not require a jury trial when there are no facts in dispute.
The unwarranted actions of tax protesters who refuse to pay taxes ultimately impose the burden to support our government on all responsible citizens who honestly and fairly participate in the tax-collection system. We must denounce the tax-protester movement and avoid like the plague those who support or advance its concepts.
BY MARILYN PHELAN
Phelan is the Robert H. Bean Professor of Law at Texas Tech University School of Law. She is certified in tax law by the Texas Board of Legal Specialization.…