From Wikipedia, the free encyclopedia

Tax protesters Part of the U.S. Taxation series

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

This box: view • talk • edit

The term tax protester as used in the United States has been defined as a term applying to "persons who claim the tax laws are unconstitutional or otherwise invalid, and who therefore fail to file a tax return or file returns with no income or tax data supplied."^[1] Legal commentator Daniel B. Evans has defined tax protesters as people who "refuse to pay taxes or file tax returns out of a mistaken belief that the federal income tax is unconstitutional, invalid, voluntary, or otherwise does not apply to them under one of a number of bizarre arguments [ . . . ]"^[2]

Contents 1 Derivation of the term "tax protester" from the legal term "protest" 2 Protest after tax return examination 3 War protesters 4 Arguments that the U.S. Federal income tax is unconstitutional or invalid 5 History 6 Denial of tax liability 7 Monetary penalties for asserting frivolous arguments on tax returns or in court 8 Responses to tax protesters 9 Arguments about constitutionality in U.S. tax crime cases: The Cheek Doctrine 10 Notes 11 See also 12 External links

In the United States, the term “protest” as applied to a tax generally means “a declaration by a payer, esp. of a tax, that he does not concede the legality of a claim he is paying”^[3] Similarly, Black’s Law Dictionary defines a tax protest as:

The formal statement, usually in writing, made by a person who is called upon by public authority to pay a sum of money, in which he declares that he does not concede the legality or justice of the claim or his duty to pay it, or that he disputes the amount demanded; the object being to save his right to recover or reclaim the amount, which right would be lost by his acquiescence. Thus, taxes may be paid under "protest.”^[4]

In the case of U.S. Federal taxes, however, the taxpayer's failure to protest does not deprive the taxpayer of the right to file an administrative claim with the Internal Revenue Service (IRS) for a refund and, if the claim is not allowed by the IRS, to sue for a tax refund in Federal district court.^[5]

The term "protest" is also used to describe a taxpayer's formal written request for review, by the Appeals Division of the IRS, after the IRS issues a "Thirty-Day Letter" proposing an increased tax liability following an IRS examination of a tax return.^[6]

In 1972, the U.S. District Court for the Eastern District of Pennsylvania used the term tax "protestor" (protester) in United States v. Malinowski. This case, however, involved a taxpayer who was a member of the Philadelphia War Tax Resistance League who was protesting the use of tax money in the Vietnam War. The taxpayer was not making arguments that the tax law itself was invalid; he was essentially protesting the war, not the tax. The taxpayer had filed a false Form W-4, and admitted he knew that he was not legally entitled to claim the exemptions (allowances) he claimed on the W-4. Thus, Malinowski might be termed a tax resister rather than a tax protester. He was convicted, and his motion for a new trial or acquittal was denied.^[7]

Beginning in the mid-1970s, U.S. Federal courts began using the term “tax protester” in still another, more narrow sense -- to describe persons who raised frivolous arguments about the legality of Federal taxes, particularly income taxes. This particular technical sense of the term is the sense described in the remainder of this article.

The first two federal cases to use the term in this manner were Gilbert v. Miriami^[8] and United States v. Scott,^[9], coincidentally decided only two days apart. In Gilbert v. Miriami, the taxpayer (Walter Gilbert) sued the District Director of Internal Revenue (Charles Miriami) asking for injunctive and declaratory relief from enforcement of the internal revenue laws, including a request for a judgment that the statute prohibiting most suits to restrain the assessment or collection of Federal taxes was unconstitutional. The court rejected the taxpayer's claims. In Scott, the court noted that an undercover government agent had sworn out an affidavit regarding the agent’s infiltration into a "tax protester" organization. The case itself upheld the conviction of the leader of that organization, who had failed to file tax returns from 1969 to 1972, based on Constitutional arguments against the validity of the income tax.

Prior to the Internal Revenue Service Restructuring and Reform Act of 1998, the Internal Revenue Service defined a tax protester scheme as "any scheme without basis in law or fact for the ostensible purpose of expressing dissatisfaction with the substance, form, or administration of the tax laws be [sic; "by"] either interfering with tax administration or attempting to illegally avoid or reduce tax liabilities."^[10] Section 3707 of the 1998 Act now prohibits IRS personnel from designating a taxpayer as an “illegal tax protester” or using any similar designation for a taxpayer.

A person could be both a tax protester and a tax resister if he or she believes that tax laws do not apply to him or her and also believes that taxes should not be paid based on the use to which the taxes are put. Some tax resisters have put forth legal arguments for their position — for instance that they cannot pay taxes for nuclear weapons development because this would put them in violation of the Nuremberg Principles — that could be considered varieties of tax protester theories.

Main article: Tax protester history

While there have been people throughout history who challenged the assessment of taxes as beyond the power of the government, the modern tax protester movement began after World War II. One of the first people to fit this description was Vivien Kellems, a Connecticut industrialist and political activist who in 1948 refused to withhold taxes from the wages of her employees based on the claim that the government had no power to require such withholding. Kellems lost a case contesting withholding. She later asserted that the income tax itself was not being assessed in accordance with the law.

The tax protester movement began to develop a greater following in the late 1960s and early 1970s. Many books, lectures and other materials promised to help people avoid having to pay taxes. In 1975, the term “tax protester” began to appear in reported court decisions.

The Seventh Circuit Court of Appeals summed up one case as follows:

Like moths to a flame, some people find themselves irresistibly drawn to the tax protestor movement's illusory claim that there is no legal requirement to pay federal income tax. And, like the moths, these people sometimes get burned. Lorin G. Sloan believed these claims and because he acted upon them now faces four months in a federal prison; there can be little doubt that he has been burned.

[…]

The real tragedy of this case is the unconscionable waste of Mr. Sloan’s time, resources, and emotion in continuing to pursue these wholly defective and unsuccessful arguments about the validity of the income tax laws of the United States. Despite our rejection of Mr. Sloan’s legal analysis of the tax laws, we are not unmindful of the sincerity of his beliefs. On the other hand, we are less sure of the sincerity of the professional tax protestors who promote their views in literature and meetings to persons like Mr. Sloan, yet are unlikely ever to face the type of penalties incurred by him.^[11]

Ideas associated with the tax protester movement have been forwarded under different names over time. These ideas have been put forth, for example, in the broader Christian Patriot and Posse Comitatus movements, which generally assert that the Constitution has been usurped by the federal government.

Main article: Tax protester arguments

Arguments made by tax protesters generally fall into several categories: that the Sixteenth Amendment was never properly ratified; that the Sixteenth Amendment does not permit the taxation of individual income, or particular forms of individual income; that other provisions of the Constitution such as the First, Fifth, or the “Missing Thirteenth Amendment” eliminate an obligation to file a return; that citizens of the states are not also citizens of the United States; that the statutes enacted by the United States Congress pursuant to their constitutional taxing power are defective or invalid; and that the government and the courts engage in various conspiracies to conceal the above deficiencies.

In another Seventh Circuit case, the Court observed:

Some people believe with great fervor preposterous things that just happen to coincide with their self-interest. “Tax protesters” have convinced themselves that wages are not income, that only gold is money, that the Sixteenth Amendment is unconstitutional, and so on. These beliefs all lead — so tax protesters think — to the elimination of their obligation to pay taxes.^[12]

In the United States, "protesting" Federal income taxes is not, in and of itself, a criminal offense. The United States Congress has, however, enacted a law imposing a monetary civil penalty for taking a frivolous position on a U.S. Federal tax return. The penalty is $500 for positions taken on or before March 15, 2007. For positions taken after that date, the penalty amount has been increased to $5,000.^[13] The Internal Revenue Service has issued a list of positions considered to be legally frivolous.^[14]

The Congress has enacted a law imposing civil monetary penalties for making frivolous arguments in proceedings before the United States Tax Court. The law provides that frivolous arguments may result in a penalty of up to $25,000.^[15]

In a non-criminal case in a United States district court, a litigant (or a litigant's attorney) who presents any pleading, written motion or other paper to the court is deemed to have certified that, to the best of the presenter's knowledge and belief, the legal contentions "are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law".^[16] Monetary civil penalties for violation of this rule may in some cases be imposed on the litigant or the attorney.^[17]

A person who raises a frivolous argument in a Federal appeals court may be subject to monetary penalties under Rule 38 of the Federal Rules of Appellate Procedure.^[18]

Many Appeals Courts have made blanket statements repudiating tax protester arguments. For example, see the Seventh Circuit case of United States v. Buckner^[19]:

For the record, we note that the following beliefs, which are stock arguments of the tax protester movement, have not been, nor ever will be, considered “objectively reasonable” in this circuit:
(1) the belief that the Sixteenth Amendment to the Constitution was improperly ratified and therefore never came into being;
(2) the belief that the Sixteenth Amendment is unconstitutional generally;
(3) the belief that the income tax violates the Takings Clause of the Fifth Amendment;
(4) the belief that the tax laws are unconstitutional;
(5) the belief that wages are not income and therefore are not subject to federal income tax laws;
(6) the belief that filing a tax return violates the privilege against self-incrimination; and
(7) the belief that Federal Reserve Notes do not constitute cash or income.

A defendant prosecuted under Federal tax laws who argues that tax laws are unconstitutional incurs the risk that his or her own words may help the prosecution prove the element of willfulness, even if the defendant’s belief is genuine and in good faith. See generally Cheek v. United States and Tax avoidance and tax evasion.

The Cheek case is the most recent U.S. Supreme Court decision on tax protester arguments. The case involved a tax protester who was prosecuted for tax evasion under 26 U.S.C. § 7201. In Cheek, the Court stated:

Claims that some of the provisions of the tax code are unconstitutional are submissions of a different order. They do not arise from innocent mistakes caused by the complexity of the Internal Revenue Code. Rather, they reveal full knowledge of the provisions at issue and a studied conclusion, however wrong, that those provisions are invalid and unenforceable. Thus, in this case, Cheek paid his taxes for years, but after attending various seminars and based on his own study, he concluded that the income tax laws could not constitutionally require him to pay a tax.^[20]

The Supreme Court in Cheek continued:

We do not believe that Congress contemplated that such a taxpayer, without risking criminal prosecution, could ignore the duties imposed upon him by the Internal Revenue Code and refuse to utilize the mechanisms provided by Congress to present his claims of invalidity to the courts and to abide by their decisions. There is no doubt that Cheek, from year to year, was free to pay the tax that the law purported to require, file for a refund and, if denied, present his claims of invalidity, constitutional or otherwise, to the courts. See 26 U.S.C. 7422. Also, without paying the tax, he could have challenged claims of tax deficiencies in the Tax Court, 6213, with the right to appeal to a higher court if unsuccessful. 7482(a)(1). Cheek took neither course in some years, and, when he did, was unwilling to accept the outcome. As we see it, he is in no position to claim that his good-faith belief about the validity of the Internal Revenue Code negates willfulness or provides a defense to criminal prosecution under 7201 and 7203. Of course, Cheek was free in this very case to present his claims of invalidity and have them adjudicated, but, like defendants in criminal cases in other contexts who “willfully” refuse to comply with the duties placed upon them by the law, he must take the risk of being wrong.^[21]

After a remand by the Supreme Court, the tax protester in Cheek was ultimately convicted, and the conviction was upheld on appeal. The Supreme Court refused to hear his petition for review of his conviction after the remand, and he was sent to prison.^[22]

If a jury finds that a criminal defendant had a subjective good faith belief due to a misunderstanding based on the complexity of the tax law (and not based on an argument about its constitutionality), that belief may be a defense with respect to the element of willfulness, even if the belief is unreasonable.^[23] This is due to the general mens rea requirement needed to hold someone criminally liable and the specific intent needed in the Cheek case and word willfully in the statute (see specific intent crimes). Persons acquitted of criminal tax evasion may still be prosecuted civilly, and required to pay the taxes assessed, along with civil penalties.

• Christian Patriot
• Civil disobedience
• Tax resistance

• “The Truth About Frivolous Tax Arguments” — An Internal Revenue Service publication
• “Tax Protester FAQ” — By Daniel Evans
• Income Tax: Voluntary or Mandatory? A law professor explains the errors in some popular tax protestor myths.
• Is the Income Tax Unconstitutional? by Sheldon Richman, Foundation for Economic Education: In Brief June 23, 2006
• Here Is The Law Making the Average American Liable for Income Taxes by non-profit organization Financial & Tax Fraud Education Associates, Inc.