Friday, September 10, 2010

Home owners destroyed by economy get shafted by IRS.

With no legaly clear definition of income available to the general public, and legal professions, the IRS is again allowed to run amuck and do what ever it wants, to whom ever it wants, when ever it wants.

Their latest victims are the home owners who are facing foreclosure. That is right. The hard working middle class that has already carried the burden of this country, and who are now being destroyed by the very government that it has paid for, are not only loosing their jobs, and their homes, but now the IRS is rubbing salt into the wound.

Here is how it works.

The citizen who has worked all their lives for some corporate company, bought a house 25 years ago, with a 100k loan they obtained from a local lender agency. A 30 year pay off, they owe just under 50k and 90 percent of their payment is going to principal now.

Then the economy drops out and Mr. Citizen is no longer making 45k per year, but instead is drawing 12k on unemployment insurance benefits, which are now being taxed as income, (thank you Ronald Reagan).

So our Mr. Citizen looses his home due to not payment and the bank repossesses it.
And Mr. Citizen is shocked to get a tax bill at the end of the year for income taxes on the 45k he did not pay back to the bank.

The bank took the property which the loan was used to obtain. So the bank got its money back.

The IRS contends that the original 100k loan was that - a loan, and since 45k was not paid back, then the entire 45k must be income that is taxable, received by the former home owner.

Since the former owner has limited resources, paying off the taxes on the 45k becomes a decade long struggle, due to late fees and interests which can be as much as the amount due itself.

I say Horse hokey. The amount is NOT income. The bank took the property, therefore there is no gain to the former homeowner. Never mind the fact the bank can't resell the property given the economic climate. They were stupid for foreclosing. They would have been better off working with the homeowner. Instead, many banking institutions have properties scattered all over that are sitting empty and desolate, many of which are being broken into by thieves and homeless people. The property these homes sit on, are not being kept up, and local cities are starting to rake in revenue by fining the property owners (the banks) for failing to keep the property in shape. Meaning the grass has to be cut properly,and cannot be too long. Cities can make even more money of they send their own work crews out to take care of a properties lawn. - they charge the owning bank up to 1,000 dollars for each trip they have to make to cut the grass at that location.

Mean while the former homeowner has lost his job, lost his house and is now loosing his mind due to the IRS's not being held to ANY standard of proper responsibility.

Wednesday, June 9, 2010

IRS violates the 5th amendment rights of most Americans.

Due to the fact that the IRS is not held accountable for its actions by any legislative, or judicial branch, Nor the fact that the IRS is not held to any standard for the information it puts out in booklets, pamphlets, etc, and the fact that all American Corporations are held immune from lawsuit by workers when the case deals with IRS issues;

A large majority of American citizens are having their 5th amendment rights violated on a daily basis by the IRS, and the US Federal government in the name of revenue taxation.

The 5th amendment violation occurs when citizens are forced to participate in payroll withholding without liability having to be proven by the IRS or the Government before the citizen begins participation in withholding. The united States government is taking private property for public use, without compensating the Citizens.

The Burden of proof is put upon the citizen who must prove a negative, which is legally impossible. Thus the Government always wins in court, furthering the 5th amendment violation.

5th Amendment to the united States Constitution:

No person shall be held to answer for any capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

Tuesday, May 25, 2010

GAO (Government accounting office) with the PRA on the IRS forms and letters.

By William Greene

I think it is risky business to point to the fact that the IRS is breaking some law, as we continue to stand up for the constitution by saying “Show Me the Law,” so it nice to see the U.S. Government Accountability Office (U.S. GAO) standing up there to do it for us for a change.

However, as I’ve tried to explain in the past, I think they need help though and believe that an answer might come from a “Citizens Grand Jury.” Yet, I suspect that there will be someone out here who will find some kind of error in my perception, and seek to set the record straight.

That being said, if you take the time to look at the GAO report, you'll find that the GAO reviewed a selection of IRS forms, and page 33, Table 4 of that report shows that, of the 474 approved forms, 0 (0%) had a “missing or incorrect” OMB number, 0 (0%) had a missing expiration date, and although the GAO reported that of the 474 forms reviewed 202 (43%) were "missing one or more notices", on page 34 the GAO report explains that "most of the agency’s noncompliance resulted from forms that did not cite the tax law that requires the information to be collected. OMB regulations … state that agencies are to cite the law or other authority whenever the collection of information is required to obtain or retain a benefit … or is mandatory (with civil or criminal sanctions imposed for failure to respond).”

In fact, the issue presented in the GAO report (again page 34) is that “… the following typical PRA notice on IRS forms omits the required reference to the law:

We ask for the information on this form to carry out the Internal Revenue laws

of the United States. You are required to give us the information. We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax.”

The IRS’s justification for the missing “specific tax law requiring information to be reported” was give in the GAO report (again page 34) where “… the IRS Reports Clearance Officer stated that IRS’s burden estimation methodology increases the burden estimate when a specific law is mentioned in order to include the time required to read the law.”

WOW! The IRS's Justification for not stating the law is that it would be a "burden" because we might actually be "required to read the law." Additionally, although the GAO report which IRS officials espoused the notion that “… that citing the “Internal Revenue laws of the United States” provided adequate disclosure and that on many forms, it would be impractical to cite a specific law authorizing the collection…”, the GAO report reported despite such espoused notion, “… Nonetheless, the regulations require citation of the law so that respondents are fully informed. Until IRS corrects this language on the forms, respondents may not know what law is associated with the information requested.”

And that being said, once again, I think it is risky business to point to the fact that the IRS is breaking some law, as we stand up for the constitution by saying “Show Me the Law,” so it nice to see the U.S. Government Accountability Office (U.S. GAO) standing up there to do it for us for a change. I mean, I say this kind of tongue and cheek though, because the courts have a history of siding with the IRS, holding that "Congress did not enact the PRA’s public protection provision to allow OMB to abrogate any duty imposed by Congress." See United States v. Neff, 954 F.2d 698, 699 (11th Cir. 1992). Also, Salberg v. United States, 969 F.2d 379 (7th Cir. 1992); United States v. Dawes, 951 F.2d 1189 (10th Cir. 1991); United States v. Hicks, 947 F.2d 1356 (9th Cir. 1991); United States v. Wunder, 919 F.2d 34 (6th Cir. 1990).

Thus, I ask the reader to not get too excided over the fact that the GAO report indicates that the IRS is violating the law, for as noted on page 24a (United States v. Clayton, (5th Cir. 2007) (per curiam), cert. denied, case no. 07-904 (April 14, 2008) “… those courts that have examined the issue post-1995 have decided that the PRA does not invalidate the statutory requirement to file tax returns. Citing United States v. Ouwenga, 173 F. App’x 411, 417 (6th Cir. 2006); Alford v. United States, No. 3:02-CV-1719-M, 2002 WL 31415800 (N.D. Tex. Oct. 22, 2002); United States v. Foster, No. CRIM.97-700103JMRRLE, 1997 WL 685371 (D. Minn. May 27, 1997).

I mean, even though the courts of the past have implied that it is their duty to correctly interpret even the Acts of Congress in the context of the Constitution, as well as to enforce the Acts of the Congress that are deemed constitutional, when it comes to the IRS the modern day courts themselves also have a history of turning away from Acts passed unanimously by the Continental Congress, to kind of pick and choose, even when the People act to peaceably procure relief, as evidenced by WTP’s historic suit which was dismissed and the decision upon appeal was to treat the subject of an Acts of Congress as a “debate.” See We the People Found. v. United States, 485 F.3d 140 (D.C. Cir. 2007), with rehearing en banc denied (Aug. 3, 2007), certiorari denied (January 7, 2008), and certiorari denied without comment on February 25, 2008.

Moreover, when it comes to the IRS, the modern day courts themselves also have a history of turning away from Acts of Congress, to kind of pick and choose even ignore Causes of Action like that of the that IRS Officials being involved in the suppression of evidence submitted to the Senate Finance Committee (Exhibit 3), following which IRS Officials publicly announced that WTP Petitions were being responded to with enforcement actions (Exhibit 4). As such, when I ask the reader to not get too excided over the fact that the GAO report indicates that the IRS is violating the law, I pray that the above will perhaps make my statement that “I think they need help though and believe that an answer might come from a “Citizens Grand Jury” a bit clearer.

Hendrickson Rebuttle to a tax rat.

On May 19th, 2010, Pete Hendrickson sent this message to Bob Hurt, of the Florida Lawman group.

"You asked for a response to this ill-informed nonsense from "Pablo" (which you might have asked for before broadcasting his "analysis"...). Here are a few quick words:

"Pablo" (I'll dispense with the quote marks around the pseudonym behind which this fellow conceals his identity-- the reader will just have to imagine them through the rest of these comments) begins with the idiotic rhetorical question of "How was the DOJ able to declare that Mr. Hendrickson did in fact earn wages contrary to his first-hand knowledge and sworn testimony?"

It's a prosecution, Pablo! They can declare any damn thing they want. Frankly, if they BELIEVED what they "declared" here, they would have long since made an effort to assess taxes for these years. See This rhetorical question should alert the reader from the very beginning that Pablo's screed is in service to a theory or argument engaged in a desperate search for convenient facts, and he is not unwilling to creatively "misunderstand" things in order to find some...

It would be nice if Pablo would actually read the material about which he presumes to comment. At the very least, he should have gotten right what the IRS did in response to my 2002 and 2003 filings, which was NOT "didn't believe for a second" or "go to court". The actual response to those filings was complete refunds-- the first in history, followed by four efforts to get my book out of circulation with "promotion of an abusive tax shelter" charges, all ultimately dismissed on the DoJ's own motions-- four more historic firsts.

Only after that failed was the hokey, evidence-free "civil complaint" launched in which, as Pablo conveniently forgets to mention, the government is trying to force me to replace my filings with others saying what the government needs for me to say in order to have a pretext for claiming I owe a tax. This recognition of the primacy of what is said on a form, rather than the mere use of any particular form, completely contradicts the misunderstanding that Pablo is trying to sell here, which is likely why he overlooks these facts when spinning out his fiction...

Pablo also should understand that my filings said nothing whatever about "employee" or "employer"-- these things are secondary. It is enough to respond to allegations of the payment of XX of "wages" with a rebuttal of XX of "wages". I don't have to explain myself, and didn't. Frankly, since nothing on my filings says anything about "employer" or "employee", Pablo's reference to this is inexplicable, unless it is just a cheap effort to twist (or invent) facts in order to serve his thesis.

Frankly, as I have pointed out ad nauseum, even those who ARE "employees" can be paid remuneration which doesn't qualify as "wages". Again, Pablo should actually read the things filed. He would see this prominently in my filings in the criminal case. Even the DoJ was forced to admit this point in its own briefs, and this point alone completely and dispositively eviscerates Pablo's entire arguments on the subject of the use of forms, the fact that withholding has taken place, and so on.

Indeed, he should take note of the fact that while Kim Halbrook was never called as a witness in the civil case (nor was anyone else, of course, as no testimony or other evidence was ever introduced in that pretense of a litigation) she WAS called as a witness in the criminal trial, but no examination such as he imagines took place. Instead, the government didn't ask her, or any other witness from the company I worked for, ANY such questions, neither in support of anything on any W-2, nor even about whether I was paid anything. It simply couldn't risk allowing the subject to face cross-examination.

Pablo goes on to make another idiotic assertion and conclusion about the civil case. Referring to Kim Halbrook, Pablo says: "She basically stated that her company paid Mr. Hendrickson wages." No, she didn't. She signed a DoJ-written affidavit attesting to the fact that the W-2 put into the record by the government was a true copy of the one in the file cabinet of the company at which she didn't even begin working until after some of the period in question had passed, and she gave no testimony subject to cross-examination at all. Her "affidavit" was nothing but hearsay about hearsay.

Pablo goes on to say: "The IRS moved for summary judgment shortly after this because, in their view, there were no justiciable facts in contest." This is either breath-taking naiveté, or deliberate disingenuousness (to put it in the kindest possible way). The IRS (actually the DoJ) moved for summary judgment because it felt it had a cooperative court that had been sitting on my immediate motions to dismiss and for other relief-- including jurisdictional challenges-- for months without a ruling at that point, and figured it might as well take its shot. Six more months would then go by before the court would grant the bogus MSJ on the same day that it finally ruled against my motions, and would do so by explicitly reversing the "burden of proof" rules for MSJs. As I pointed out in my petition to the SC:

A. The courts below have abused their discretion in the award of summary judgment to the government, and have thereby also committed an assault on the Seventh Article of Amendment to the United States Constitution.

The District Court granted the “U.S.’s” motion for a summary judgment in this case by making “findings of fact” which elevate all of the (hear-say) allegations presented by the “U.S.” to gospel and disregard entirely our sworn testimony to the contrary-- despite having no independent knowledge of these matters whatsoever, and alluding to none. The court then declares that, lo and behold! no genuine issue of fact exists and (based on the same “found facts”) summary judgment for the “U.S.” is appropriate! This is highly convenient to the “U.S.”, of course, but flatly violates the well-established doctrine regarding such motions:

“Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, whether he is ruling on a motion for summary judgment or for a directed verdict. The evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor. Adickes, 398 U.S., at 158 -159”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986).

“[I]n ruling on a motion for summary judgment, the nonmoving party's evidence "is to be believed, and all justifiable inferences are to be drawn in [that party's] favor." Anderson , supra, at 255”

Hunt v. Cromartie, 526 U.S. 541 (1999)

It also flatly violates the admirable and accurate position well-expressed in Beaty v. United States, 937 F.2d 288 (6th Cir. 1991):

“A central tenet of our republic--a characteristic that separates us from totalitarian regimes throughout the world--is that the government and private citizens resolve disputes on an equal playing field in the courts. When citizens face the government in the federal courts, the job of the judge is to apply the law, not to bolster the government’s case.”

Frankly, it is just this sort of contrivance that the rules concerning summary judgment are designed to prevent, and that the 7th Amendment to the U.S. Constitution makes illegal by providing that the right of trial by jury shall be preserved. If permitted to favor one side in this fashion, any court could keep any case-- the outcome of which it wished to control-- from reaching a jury by making convenient “findings of fact” favoring one side, just as has been done by the District Court in this case. Nonetheless, when allegedly considering the matter de novo on appeal, the panel of the Circuit Court simply repeats the District Court’s bad behavior.

Perhaps the Appellate Court’s error results from confusion as to both who was the moving party in this case and as to the rules regarding summary judgment. Discussing those rules in its opinion, it says, "Thereafter, the nonmoving party must present significant probative evidence in support of the complaint to defeat the motion. The nonmoving party is required to show more than a metaphysical doubt as to the existence of a genuine issue of material fact.” (Citations omitted.) However, the “non-moving party” in this case were the defendants, who obviously do NOT need to “present significant probative evidence in support of the complaint to defeat the motion”; more significantly, the “non-moving party” is NEVER “required to show more than a metaphysical doubt as to the existence of a genuine issue of material fact” On the precise contrary, it is the MOVANT that must attempt to raise doubts as to the existence of an issue of material fact; the non-movant need merely show that there IS an issue of material fact in controversy.

In this case, a third party has alleged that “Event A” occurred, on the basis of which alleged event the “U.S.” argues that we are indebted to it. We have testified-- both long before this case began and directly in response to the motion for summary judgment-- that “Event A” did not occur. There can be no plainer “issue of material fact.”

Neither the District Court nor the Circuit Court have any first-hand knowledge whatever as to the occurrence of “Event A”, and thus have no basis upon which to make “findings of fact”, even if such findings were not the proper province of a jury in any case. Yet both courts presume to make such findings.

The courts below thus abuse their discretion and, without regard to the fact that the only proper disposition of this case is dismissal, do violence to the spirit of the 7th Amendment as well. The appellate Court compounds the abuse and that violence by punishing us with sanctions for invoking its supervisory authority over the District Court! This Honorable Court has plainly declared, “The evidence of the nonmovant is to be believed.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986). We appealed a District Court ruling based on the straightforward meaning of this declaration, among other things, and the Appellate Court declares our appeal to be “frivolous” and punishes us with sanctions! We appeal to this Honorable Court for its protection from this abuse.

We feel obliged to observe that in addition to sharing the Circuit Court’s “confusion” about the rules concerning summary judgment, the District Court exhibited considerable “confusion” about matters of concrete fact throughout its Final Rulings. For example, in those rulings the court deliberately quotes one line of Peter Hendrickson’s book, ‘Cracking the Code- The Fascinating Truth About Taxation In America’ out of context so as to suggest that the book argues that income tax-related withholding only applies to federal workers. The book does contain that one line, but makes no such argument. Income tax-related withholding in other cases is discussed in depth in the book.

Similarly, the District Court refers to “the false and frivolous claims set forth in 'Cracking the Code' that only federal, state or local government workers are liable for the payment of federal income tax”; and “the assertion that wages do not constitute income for federal tax purposes”. No such claims are made in the book; in fact, the book specifically says otherwise in great detail.

Most egregiously, perhaps, the District Court makes the following declaration in its final ruling:

“The only new argument is that “the statutes invoked or relied upon by Plaintiff and the Court . . . are unconstitutional, being plainly violative of at least the ‘necessary and proper’ clause of the eighth section of Article One, and the First, Fifth, Seventh, Ninth, and Tenth Articles of Amendment to the U.S. Constitution.” (Defs.’ Mot. for Reconsideration at 9.)”

What we actually said in the referenced motion is:

4. Regarding Plaintiff’s requests for an injunction and coerced testimony and the Court’s related decisions, it is self-evident that to dictate what cannot be said is to dictate what must be said, or to impose silence. It is not necessary to discuss Plaintiff’s calculated mischaracterizations of what is said in Defendant Peter Hendrickson’s book or Plaintiff’s pretensions in suggesting that it possesses some mystic knowledge about the underlying meaning of our tax return testimony in order to observe that neither Plaintiff, nor anyone else on Earth, has the lawful authority to dictate the content of our testimony, or to impose silence, in the face of allegations concerning us, such as those on the “information returns” made so much of by Plaintiff in this case.

To whatever degree the statutes invoked or relied upon by Plaintiff and the Court can be construed to provide for such an injunction and coercion of testimony, those statutes are unconstitutional, being plainly violative of at least the “necessary and proper” clause of the eighth section of Article One, and the First, Fifth, Seventh, Ninth, and Tenth Articles of Amendment to the U.S. Constitution. Such efforts to dictate or control testimony also violate various federal criminal statutes regarding witness tampering and intimidation, as well as the fundamental principles of due process.

The very fact that Plaintiff has sought such an injunction, and a coerced change in testimony we have already made, is a plain acknowledgment that Plaintiff has no legal basis for disputing the freely-made testimony on our returns. The same plain truth is revealed by Plaintiff’s inability to carry its burden of proof throughout this contest, and its failure to even try to do so. Plaintiff CANNOT substantiate the allegations made on the “information returns” upon which it relies, and therefore seeks to prevent those allegations from being rebutted.

It is not for us to say whether these mis-statements and contrivances are calculated to plant false notions about our arguments and positions in the minds of those who read only the rulings by the court and not the actual materials we filed in the proceedings below, and to suggest that we are “tax protestors”. However, if left unaddressed, these mis-statements will leave such false notions. Therefore, we bring them to this Honorable Court’s attention here.

Returning to Pablo's errant thesis: he should have read my posts in the last few newsletters of the following:

THOSE IN THE "TAX HONESTY" COMMUNITY who persist with nonsense about the use of 1040s or 4852s as amounting to inherent, adverse "admissions" (and those confronted with this nonsense) should take careful note of the fact that no effort was made by the DoJ to argue such a thing in its "response", even while it DID argue that my having not explicitly rebutted my receipt of "wages" on my pre-CtC-research filings amounted to such admissions...

Its arguments in this regard were futile, as my reply makes clear. But the point here is that the DoJ evinces a definite interest in trying to make a case that I made admissions supporting its allegations but only tries to do so by making the one argument, and not the other.

It is thus clear that even the DoJ won't go so far as to venture the absurd proposition that the use of forms specified by its own laws as those with which allegations of the conduct of taxable activities are rebutted somehow constitutes evidence that taxable activities WERE conducted, or makes the user into some kind of entity whose every economic act or gain is subject to the tax. Had that kind of twisted notion been viable, the DoJ would have simply pointed out that I used such forms in, and concerning, the years of the charged offenses, and that would be that.

The agency does not, and in fact, does the virtual opposite. It argues that because I FAILED to deploy 4852s in my earlier filings to explicitly rebut the characterization of my earnings as "wages", I should be deemed to have admitted them to be (just as is pointed out in CtC...).

Similarly, where it makes a reference to my completion of W-4s, the DoJ does so not with the assertion that my completion and submission of such forms made me into an "employee", but rather by suggesting that my doing so indicated that I "accepted the characterization" of myself as an "employee" (and thus the jury could conclude that I was an employee and my remuneration was "wages"). Unfortunately for this argument, it was the government's burden to actually try and prove that I really DID receive "wages", if it could-- not just paint a picture from which something theoretically COULD be concluded (but hey, when it's all you got...). Further, the last W-4 I submitted prior to the period involved in these charges was accompanied by documents making clear that I DID NOT "accept the characterization" of myself as an "employee" and my earnings as "wages".

But the larger point is that this riff is just another example of the principles and legal realities pointed out in CtC, and is NOT an argument that the filling out and/or submission of the forms itself made anything into a reality, or even just into an unrebuttable presumption.

PRECISELY THE SAME POINT APPLIES to the "citizenship/residency" (c/r) nonsense persistently flogged throughout the community by those seeking to distract Americans away from the liberating truth revealed in CtC and keep them from lending their strength to the one effort that will win this war against the lies about the tax-- standing up and standing firm on behalf of that truth, while spreading the word...

That ridiculous "c/r" argument holds that merely by being (or allowing or encouraging oneself to be deemed) a "United States citizen" or "resident" (sometimes viewed as "citizenship or residency" in the "federal zone"), one's earnings are all transformed into profits from the exercise of some federal function or prerogative. The underlying "reasoning" here is that "United States citizenship or residency" is a privilege granted by the United States, and subsequent economic activity while enjoying this "privilege" is therefore taxable.

Writing about this just gave me a great idea! I'll just grant my neighbors the privilege of citizenship of "Hendricksonland", and start collecting taxes from them. If any of them refuse to pay, I'll sue, and just quietly explain to the judge that the protestor is my citizen, that being so is a privilege, and that I've laid a tax on all the economic activity of anyone to whom I've extended a privilege, based on the reasoning that the "privilege" is a sort that simply hangs on them 24/7, and that therefore anything they do at any time is facilitated by that "privilege" and I can claim a piece of its outcome by right.

Or maybe I'll be subtle.

I'll send my neighbors notes indicating that unless they tell me not to, by returning the form I provide for that purpose, I will cut their lawns this summer and bill them accordingly. Then, if they don't reply, I'll presume them to have agreed, and enforce the charges accordingly (and who knows, perhaps I'll even actually cut some of their lawn). If they DO reply--even just to say "No!"-- I'll deem them to have admitted to being my citizens, or residents on my property, by virtue of their use of my reply form to decline the "service agreement" (and in either case because they never deny being my citizens or residents, for which no means for doing so will be provided or explained, in any case), and I'll take the charge from them as a "tax" of a portion of all their economic activity, based on the reasoning outlined above...

TO RETURN TO SERIOUSNESS, the proponents/injectors of this nonsense hope that their marks will forget that unapportioned capitations remain prohibited, and that as the Supreme Court clearly points out and/or upholds in many cases over a century-and-a-half of relevant jurisprudence, the government can't evade this prohibition by crafting a tax scheme that effectively amounts to an unapportioned capitation, while pretending that it isn't one, and is just an application of its excise authority on the "privilege" of earning money as a "citizen" or "resident" of the "United States (however that latter term is defined). (In fact, the court has flatly said that all Constitutional prohibitions apply even to those who really are citizens and/or residents of its territories and possessions. See for an extended discussion and case-law.)

The DoJ isn't so bold as to make this ridiculous argument, even while it finds itself compelled to try the equally lame argument that, "He didn't [explicitly] deny that his earnings were "wages" back in the '90s, your honor, so he must have been lying when he began [explicitly] saying said he didn't believe that they were starting in 2002!" As in the case of the "use of government forms" issue, if the government actually operated on the basis of the "c/r" concept, the DoJ would never have bothered with the argument it DID attempt, and would have simply said, "Hendrickson hasn't argued that he isn't a citizen or resident of the United States, your honor, and therefore, since the law imposes a tax on all income of any citizen or resident..."

THAT THE DoJ DOES NOT MAKE THIS ARGUMENT (or anything like it, such as arguments involving Social Security numbers, or whatever other distracting notions not found in CtC, WGRaM or on non-forum pages at clutter up the landscape) must be accorded its proper significance. By the same token, what the DoJ DOES argue, and the conformity of that argument with what is pointed out in CtC, must also be accorded its proper significance.

Finally (because I can't take the time to parse out all the errors in this well-meant but disturbingly ill-informed "analysis"), Pablo should read my motions on the "person" issue, rather than imagine himself to know what this issue is about by osmosis (or whatever he did rely upon in lieu of study). All of those motions are posted, and none of them are very long.

An evening of studious attention would make a world of difference in the quality of future analysis. The "person definition at 7343 is NOT one met by merely being an "employee"-- it hinges on being an "employee under a duty (as a fiduciary) to complete and subscribe a form on behalf of a corporation or partnership (or other entity of like kind or class)-- a definition that was completely and tellingly evaded by the government and court, both of which lamely tried to argue that the "person" definition just meant "a person" as defined in the dictionary.

Were Pablo correct in his various notions about this subject, these actors would just have said, "Hey, you're an "employee", so you're covered". Nothing of the sort was attempted.

Pablo needs to dig deep and come to grips with the fact that this trial, like the bogus civil case in which the court was reduced to actually reversing the "motion for summary judgment" rules-- and actually say them backwards, on paper-- in the refused for publication appellate ruling-- are just corrupt efforts to overcome the complete and correct truth about the tax revealed in CtC.

In short, Pablo needs to stop his speculations and "analyses" and spend his time reading what I present to be read by those who want to know and understand what's going on, and why. I really wish he would, because I still believe he's a good and valuable man, but he is actually doing much more harm than good right now.



Tuesday, May 18, 2010

Challenge to IRS: Does OMB apply? US V Springer case.

US V Springer. 2010.

On May 2nd, Lindsey Springer wrote:
" I realize there are many people who simply do not have time to understand the issues I am raising. I will herein provide a more simple understanding of the issues.

"For most of you, only 2 issues I am raising matter. The first has to do with Form 1040 and whether that form or any other tax form are subject to the Paperwork Reduction Act. Subsidiary to this question is whether the Form 1040 complies. If it does not, then you cannot be penalized for anything that involves a failure to file such forms.

"The Tax Division has been propagandizing everything it can to convince the public that the Form 1040 and the requirement to same is not subject to the PRA. Every United States Circuit Court who has addressed the issue has repeatedly said Form 1040 MUST comply. There are a few cases in passing that said the law which requires use of the Secretary’s tax forms withstands the public protection provision at Title 44 Section 3512.

"Section 3512 begins "Not withstanding any other provision of law, no person shall be subject to any penalty...". Those few cases referenced above are completely in opposition to the Supreme Court and 10th Circuit holdings on the subject of the PRA.

"At my trial, for example, the Tax Division argued before the jury that although the Dole decision in 1990 by the Supreme Court said "tax forms" were "typical" information collection requests subject to the PRA, and that no where in the Dole decision was the Form 1040 ever specifically mentioned. That argument will not withstand scrutiny at the 10th Circuit,. The 10th Circuit has repeatedly told the Tax Division that Form 1040 is subject to the PRA. The Tax Division continues to tell the public my PRA claims are "legalistic gibberish".

"The Tax Division told judge Friot on May 6 2010 that I have been repeatedly told numerous times that my specific PRA claims are frivolous and meritless. The last time Tax Division made that argument in the 10th Circuit, they were told by the 10th Circuit for the 1st time ever, they were making a frivolous argument to that court. The frivolous argument found by the 10th Circuit, that Tax Division maintains, was that they(10th Circuit) had ruled on the merits of my PRA claims. Again, the 10th circuit told the Tax Division that their claim was false.

"The reason why the Tax Divisions continues to maintain the argument they made in Springer v. the Commissioner, 08-9004 is because at the time I was indicted, the 10th Circuit had not entered it’s published decision extending from 08-9004. That decision came out 8-31-09. Recently, the 10th Circuit ordered the Tax Division to address each issue in my motion for release from jail pending appeal on or before May 19,2010.

"In particular, the 3rd issue I raised in the 10th Circuit demands that they explain why they told Judge Friot the requirement to file a Form 1040 tax return withstands Section 3512 and PRA. The 10th Circuit has held for over 19 years that the Form 1040 MUST comply with the Paperwork Reduction Act or no person can be subject to any penalty including criminal for any claim inexorably linked to failing to file a Form 1040 tax return. If there is any doubt at this point by anyone as to whether the requirement to pay a tax to the Secretary has any independent basis than from a Form 1040, the Tax Division in it’s Bill of Particulars left no room to question this proposition. While describing the requirement by law to file the Form 1040 tax return, they informed the Court and me that Title 26 Section 6151 was their basis and theory for my failure to pay a tax. Anyone who reads Section 6151 will no doubt recognize that you are only required to pay a tax that you show is owed UPON the requirement to file a Form 1040 tax return.

"I have tried to get this relief under the Paperwork Reduction Act for many years. Each time I get closer to getting it as in 2007, the 10th Circuit told me I can only raise the PRA as a defense and not on the offense. If the Form 1004 was not subject to the PRA, they would have affirmed Judge Eagan on her erroneous claim the requirement to file was not subject to the PRA. In 2009, the 10th Circuit said in a published opinion, I raise difficult issues between the tax code and the PRA. They also said the Tax division made a frivolous argument when they argued to the 10th Circuit that the 10th circuit had ruled on the merits of my PRA claims which they informed the Tax Division again, they had not EVER made any such ruling.

"I know it has been a long and difficult time to get these PRA issues ruled upon on their merits by the 10th Circuit and I believe that time is now here.

"The second issue is what the impact should be on the revelation by the Tax Division that since 2000, there has been no delegates of the Secretary of Treasury authorized by law to act outside of the District of Columbia in the enforcement for administration for the Internal Revenue laws.

"In my case the Tax Division admits those offices or districts simply no longer exist. There are now 4 cases in the 10th Circuit to which I am prosecuting or defending. "

Many times I’ve wondered which would be better for me and my family and my mission-a not guilty verdict, which was certain to have been the result without Judge Friot threatening the jury. He had previously found certain "facts" in regard to the PRA and Form 1040 "I have found the From 1040 does not and did not violate the PRA"; or a ruling by the 10th Circuit finally unequivocally telling the public Form 1040 violates the PRA and must comply to the PRA. The 10th Circuit has repeatedly stated both without ever finding what the violations were. In Lewis, the 10th circuit 2008 allowed the unchallenged non-accompanying instruction booklet to save the Form 1040 violations. And in passing stated Mr. Lewis did not challenge the instructions.

The Tax Division told the 10th Circuit last Wednesday that their argument of the PRA protection against all charges against me was that I was wrong because the phrase "tax forms" as announced by the Supreme Court in Dole v. United Steelworkers(1990) was subject to the PRA while a "tax return" was not. So, to put this into perspective the requirement to file a tax form is subject to the PRA while the requirement to file a tax return is not protected by the PRA.??

After trying each of these phrases over and over again, I have come to the conclusion the TAX Division has gone simply nuts. Ask yourself why would they tell the 10th Circuit something preposterous intentionally. If they are correct, then how would anyone have ever known that the requirement to file a tax return was different than a requirement to file a tax form. The "Form 1040 us individual income tax return" uses both terms in it’s heading. The reason the tax Division made this erroneous claim was because their other 3 previous intentions failed miserably. First, the statutory mandate theory ran into the PRA mandate by the law, which is not a theory. Second, the Form 1040 was argued to purportedly comply and is clearly false simply making the comparison between the Form 1040 and the law and regulations. Third, the instruction accompanying Form 1040 purportedly satisfies the PRA mandate is simply not sustainable. These three now aborted propositions that the tax division dismissed have given birth to their latest position that somehow a requirement to file a tax return is not subject to the PRA protection while the requirement to file a tax form is subject to the PRA.

Besides the obvious problem that the face of the Form 1040 contains both the term Form and return, it creates even greater problem created by this new song and dance.

If return is not defined, and it’s not, then how would anyone know what that term means in Federal law? Congress settled this problem by directing the Secretary by regulation to provide the form and made it the duty of every person to use that specified form. The Tax Division think tank certainly was aware that the supreme court in commissioner v. Lane wells,321 US 219(1944), and 26 CFR 601.105, and even in the tax Divisions bill of particulars which they provided Title 26 Section 6011 and 26 CFR 1.6011 and 1.6012. They also admit the return is to be "filed" and that such filing requires a form to satisfy.

I understand many of you are just now starting to realize to put the dots together regarding why the PRA is not only so important but has caused the United States Tax Division to make Federal law look like it is only designed to ensnare or entrap citizens by being made so complicated no one could understand it. Fortunately for each of us, under criminal statutes the law is to be strictly construed and the Tax Division has virtually no hope that strictly construing the word "return" will exclude the term "form" from it’s meaning. I just thought I would clarify this for you since those who do not want you to understand it and their continued attempt to

Friday, May 14, 2010

Not enough Clear, accurate, reliable information available to act properly.

After being part of the tax protester and tax honesty movement for the last 25+ years, I have seen a lot happen. I have witnessed many friends try to take on the beast and be defeated, despite their best efforts. When the courts system becomes an equal adversary, assisting the prosecution who is representing the Treasury department whom hides the IRS from scrutiny, it is all but impossible for a citizen to prevail in court.

The current "policy" of this government is to shift the burdent of proof on the American citizen. The IRS claims that if it had the burden of proof, it could not do its job. This sounds silly to me at best, and is a lame excuse for avoiding its duty.

Where does a citizen turn to, to obtain VALID, correct, and accurate information?
The courts give us a few hints:

"We sympathize with the taxpayer who in fact relies upon what he accepts as an
authoritative interpretation of the laws and of the Treasury publications. But
nonetheless it is for the Congress and the courts and not the Treasury to declare
the law applicable to a given situation." (Carpenter v. United States, 495 F.2d 175)

"It is hornbook law that informal publications all the way up to revenue rulings are
simply guides to taxpayers, and a taxpayer relies on them at his peril." (Catipillar
Tractor Co. v. United States, 589 F-2d 1040)

The procedures in the Internal Revenue Manual do not have the force of law, so
neither the IRS nor the individual is legally bound to follow them [paraphrased].
(First Federal Savings and Loan Ass'n of Pittsburgh, WD Pa., F.Supp. 101)

In other words, the IRS publications are worthless, and cannot be relied upon.
Some court cases can, Such as some Tax Court cases, and most US district cases, unless they have been sent to the US supreme court, of which their decisions take precidence over all others.

The avarage citizen relies on the IRS giving acurate information, but as stated above, that information may not be correct.

One must look to the Published law. The Federal Register. Most Americans don't have a clue as to how to acccess these publications.

If one goes to the public library and looks in the legal section, you might find copies of the nations laws. There, in title 26, one finds the Internal Revenue Code.

Upon reading chapter 1, one finds congress imposed a tax, but continual reading shows congress did not write a liablity statute. Continuing reading you would find other taxes imposed, in other chapters, many of which do in fact, contain a liablity section. But there is none for chapter 1, Income tax. Why?

Upon further reading of the IRC, you will come across section 61A. Gross income defined. Notice Income itself, is not. Gross income, Adjusted Gross income, taxable income, ordinary income, and unordinary income are all defined by law, but these are types of income, not the defintion of income itself.

If a citizen is trying to find out what income is, and he cannot find it within the context of the written law, how can he be expected to follow a law that is vague at best?

Unable to determine if the citizen has income, he gives up and decides he has none.

Then the IRS uses its "unreliable" publications to create a legal presumption of liablity, via the work sector. That is the W4 form, and will be discussed in another posting.

If a citizen can read the Internal revenue code, and find taxes imposed, with proper liablity sections for taxes on Distilled Spirits, on rubber products, on tires, on automobiles, on petrolum products, why isn't there a clear liablity statute for the income taxes imposed by congress, in chapters 1 and 2?

The citizen is left in a state where there is not enough accurate information for him or her to determine if he or she has income, and with out the ability to make a proper determination of that, if he or she has taxable income, and thus would be required give service according to the law. In this case it would mean filing a 1040 tax return.

Wednesday, May 12, 2010

Question of the Century.

The income tax, is an excise tax, not subject to apportionment. This is what the courts have said, and repeatidly held to be the truth about this tax.

An excise is a tax that is 'laid upon the manufacture, sale or consumption of commodities within the country, upon licenses to pursue ceratin occupations, and upon corporate privileges.'"

So my question of the century, is how did Joe Doe and hourly worker and Bob Smith a salaried worker, both of whom are non corporate officers, end up owing an excise tax if they are not benifiting from corporate privileges, do not have licences to pursue specific occupations, or are not involved in the sale, or manufacture of commodities, or are not actual government workers, drawing paychecks from the US Treasury?
In other words, when did working for a living to provide for ones self, become an excise taxable activity?

Just because they both work for ABC Inc., does not mean they enjoy the status of limited liablitity that the corporate Officers do. In fact, officers of corporations are included as "persons" as a person is defined in chapter 75. Hourly and salaried workers are not.

Friday, May 7, 2010

IRS V Hendrickson (Cracking the code)

Right or wrong, Mr. Hendrickson was convicted of knowingly filing false documents with the IRS.

When you read the IRS’ complaint, it specifically points out that Mr. Hendrickson received Forms W-2 from his employer but chose to declare $0 wages earned even in the face of evidence that he did in fact earn wages. How was the DOJ able to declare that Mr. Hendrickson did in fact earn wages contrary to his first-hand knowledge and sworn testimony?

This is the IRS's position, in these cases. That the company has provided an information return, signed under penalties of perjury, that they paid us wages, and that we had taxable income.
The IRS then expects us to accept that information as factual, and to use it on the 1040 form, to declare tax owed and paid, as shown on the w2 forms.

This is Hendricksons Position: Since he is risking felony conviction(s) every time he files a 1040 form, then it is up to him to ensure the information is correct.
Hendrickson does not accept the information return filed by the company (employer) to be legaly accurate. It is accurate as much as the comany worker who filled it out is concerned, but that is based on that individuals belief, not on facts.

Hendrickson then relys on the IRS's own forms, the 4852 which allows a citizen to correct the record given to the IRS by another party, in this case the company he worked for (employer).

Imaginary Direct testimony given by Mr. Holbrok, to the DOJ from the witness stand:

DOJ: “Ms. Halbrook, did your company pay Mr. Hendrickson wages?”
MH: “Yes.”
DOJ: “Ms. Halbrook, are the amounts you paid based on the business
records of your current company?”
MH: “Yes.”
DOJ: “Ms. Halbrook, do you have any knowledge or belief that these
records are incorrect?”
MH: “No.”
DOJ: “Ms. Halbrook, are the amounts you paid Mr. Hendrickson accurate?”
MH: “Yes.”
DOJ: “Ms. Halbrook, are the Forms W-2, which your company made in the
course of its regular business activities, accurate in every detail?”
MH: “Yes.”
DOJ: “Ms. Halbrook, are you the custodian of these records now?”
MH: “Yes.”

So, let’s be fair to the DOJ here. They actually met their burden of proof. The IRS had a Form W-2 that is presumed correct. Mr. Hendrickson produced a correction to the document using Form 4852. In both instances, each has met the burden of production and they are at a standstill. However, the Supreme Court has ruled that in instances like this, the courts are required to favor Mr. Hendrickson’s claim over the IRS’. And the IRS still has a burden of persuasion. And that’s where 26
U.S.C. § 6201(d) comes into play. The Secretary is now required to provide credible and probative information in addition to the information return (in order to overcome the equality of evidence).

Mr. Hendrickson’s Response:
Mr. Hendrickson’s appeal stated that Ms. Halbrook had no personal knowledge of his activities since he didn’t work there when he worked and he cannot attest to the accuracy or the veracity of the records upon which the assignment of wages was made. Mr. Hendrickson believes his declaration is the DOJ’s sole evidence.

In addition, the form is internally consistent and reinforces the existing presumptions because Mr. Hendrickson included withholding of federal income tax, Social Security tax, and Medicare tax. Withholding (26 U.S.C. § 3402) is defined as amounts deducted from an employee’s wages by his employer in anticipation of a tax liability. Thus, when Mr. Hendrickson declared on his Form 4852 that he had federal income tax withheld, he necessarily declared he was in an employer-employee relationship and earned wages.

Hendrickson belives that he is not an "employee" as defined by 26 U.S.C §3401 and therefor did not recieve wages as defined in chapter 24. Nor did he receive wages as defined for chapter 21 (social security). Thefore the entire w-3 form the Company sent to the IRS, is wrong.

This whole case boils down to 2 questions of Jurisdiction.
1. Does the federal government have the authority to lable citizens so that they can be taxed under that lable?
2. Does the word includes mean expanding a definition or is it a restrictive term?

If the word includes is restrictive, then Henderickson is correct. If it is not then the issue becomes item 1. Does the government have the authoriy to declare people who work for another and get paid, to be labled employees so that the government can impose an excise (privilege) tax upon them?

That is what the courts must decide. Insted, they declared that Hendrickson violated 26 U.S.C § 7206, by filing false information on the 1040 forms. As such Hendrickson should be facing felony conviction under 7206, not the current charges he is under.

In effect, the DOJ is prosecuing Hendrickson for perjury without charging him with the proper statute.

Tuesday, April 27, 2010

Tax Honesty Foundation Law cases.

The Tax Honesty movement is based upon a number of US Supreme court decisions.
There are some, but not all of those cases.

Ever since the income tax was imposed by the Lincoln administration, there has been legal argument over its administration.

When the law was expanded and appeared to include the citizens of the 50 States of the union, the court was beseiged with court cases. The key court cases are listed below, and why the Tax Honesty movement relys on them.

First understand this: To file a tax return or form of any kind, usually requires that a citizen take an oath under penaltes of perjury which can subject them to severe penalties under 26USC7206, which will be discussed in another post.

Therefore we the people have the right to know exactly what we are doing and that it is correct and true to best of our knowedge. This espically in light of the fact that the Court system now allows the burden of proof of liability to be placed on the Citizen rather than on the US treasury collections division.

The cases:

The revenue laws are a code or system in regulation of tax assessment and collection. They relate to taxpayers AND NOT TO NON-TAXPAYERS. The latter are without their scope. No procedure is prescribed for non-taxpayers, and no attempt is made to annul any of their rights and remedies in due course of law. With them Congress does not assume to deal, and THEY ARE NEITHER OF THE SUBJECT NOR OF THE OBJECT OF THE REVENUE LAWS."
Stuart v. Chinese Chamber of Commerce, 168 F.2d 709, 712 (9th Cir.,1948);
Long v. Rasmussen, 281 F. 236, 238).
HERE the Tax Honesy movement uses this case to show that not everyone is a "taxpayer" which is a legaly defined word.

The Sixteenth Amendment must be construed in connection with the taxing clauses of the original Constitution and the effect attributed to them before the Amendment was adopted.
- Eisner v. Macomber, 252 U.S. 189, at 205 (1920)
The 16th Amendment does not extend the power of taxation to new or excepted subjects... Neither can the tax be sustained on the person, measured by income. Such a tax would be, by nature, a capitation, rather than an excise.
- Peck v. Lowe, 247 U.S. 165
The 16 Amendment conferred no new power of taxation but simply prohibited the income tax from being taken out of the category of indirect taxation to which it inherently belonged...
- Stanton v. Baltic Mining Co., 240 U.S. 103

The Tax Honesty movement uses these 3 cases to show that the 16th amendment did not change the wording of Article 1 section 8 clause 1, nor any other part of the constitution involving taxation. The IRS claims it did modify A1S8C1.

Congress has taxed income, not compensation.
- Connor v. U.S., 303 F.Supp., 1187 (1969)

The Tax honesty movement claims that our pay is comphensation and not income.
It also uses this as proof that not all money that comes in, is income. This fact is one that the courts have upheld in numerous cases.

In the interpretation of statutes levying taxes it is the established rule not to extend their provisions, by implication, beyond the clear import of the language used, or to enlarge their operations so as to embrace matters not specifically pointed out. In case of doubt they are construed most strongly against the Government, and in favor of the citizen.
United States v. Wigglesworth, 2 Story, 369'
American Net & Twine Co. v. Worthington, 141 U.S. 468, 474;
Benziger v. United States, 192 U.S. 38, 55"
Gould v. Gould, 245 U.S. 151, 153.
Tax Honesty uses this, becase of the conflict of the word Includes as used in the IRC. If the statutes mean what they say, and are not to be made expansive unless otherwise clearly done so, then the Tax Honesty movment is correct when it claims that the avarage american worker is not the employee as defined in Subtitle C, chapter 24 (employment taxe and collection of income tax at the source) at section 3401(c).

Title 26 of the U.S. Code, Sub-Title C, Chapter 24,
Sec. 3401. Definitions
Sub paragraph (c) Employee:
"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."

Tax Honesty People use this defintion, as proof that citizens are not subject to withholding under chapter 24, because they are not the employee described, and as such the pay they receive is not a wage as defined by §3401(a).

The Income tax is an excise tax:
The 16th Amendment empowers Congress to lay and collect an income tax (not a direct tax) subject to the explicit rules and requirements of Article I, Section 8, of the Constitution; i.e., the words "income" tax and "excise" tax are synonymous under the 16th Amendment. Brushaber v. Union Pacific R.R., 240 U.S. 1 (1916)
"An income tax is neither a property nor a tax on occupations of common right, but is an excise tax. But the legislature may declare it as a privilege and tax as such for state revenue those pursuits and occupations that are not matters of common right, but has no power to declare as a privilege and tax for revenue purposes, occupations that are of common right." Sims v. Ahrens, 271 S.W. 720.
"Excises are 'taxes laid upon the manufacture, sale or consumption of commodities within the country, upon licenses to pursue ceratin occupations, and upon corporate privileges.'" Cooley, Constitutional Limitations 7th ed. 680." 31 S. Ct. at 349.

Here the tax honesty movement claims that the avarage american worker is involved in acts of common rights. That is to work for a living to provide for ones self, and that doing so is not an excise taxable activity as it involves no government privlege. Working as an hourly worker for say, McDonalds Corporation making hamburgers, or as a warehouse worker for StealCase Inc., or as a welder/dock worker for Bethlehem Ship Building Companies are not privileges but acts of common right. For the tax honesty movement, privileged occupations would be like working for the government (obtaining a paycheck from the government), working in a federal licenced occupation (such as a lawyer or doctor) or that kind of thing.

Congress cannot define income:
". . . (I)t becomes essential to distinguish between what is and what is ot 'income' . . . Congress may not, by any definition it may adopt, conclude the matter, since it cannot by legislation alter the Constitution, from which alone it derives its power to legislate, and within whose limitations alone, that power can be lawfully exercised." Eisner v. Macomber, 252 U.S. 189 (1920), 40 S. Ct. at 193.

Here the tax honesty movement uses this case to show that congress cannot declare that everything that comes in, is income. That income is a specific thing. And that no one has successfully defined or described in any standard way, what that thing is.

U.S. vs. Malinowski, 347 F.Supp. 347, affirmed on Appeal by the 3rd Circuit
472 F.2d 850 and Certiorari Denied May 7, 1973 (USSC).

Tax Honesty movement uses that case to justify Filing exempt on a w-4 then raising a stink when the IRS uses an unsigned un jurat letter sent to the company, to change the citizens claim/status. The Citizen had to make his/her claim under penalties of perjury and Tax Honesty believes the IRS has no authority to change that status without a court order.

Silence can only be equated with fraud where there is a legal or moral duty to speak or where an inquiry left unanswered would be intentionally misleading. ... We cannot condone this shocking conduct by the IRS. Our revenue system is based upon the good faith of the taxpayers and the taxpayers should be able to expect the same from government in its inforcement and collection activities ....
This sort of deception will not be tolerated and if this is the "routine" it should be corrected immediately.
[U. S. v. Tweel, 550 F.2d 297, 299 (1977), emphasis added]
[quoting U.S. v. Prudden, 424 F.2d 1021, 1032 (1970)]

Tax Honesty uses this case, US V Tweel, to justify their actions when the IRS failes to answer questions sent to them by citizens. However, this has all changed. In 2007, the 2nd district court ruled against Bob Shultz's We the people, in a landmark lawsuit which covered the governments requirement to respond. The court ruled that under the constitution, the US government has no obilgation to respond to any inquires or petitions set forth befor it.

Stapler v U.S., 21 F Supp 737 AT 739 (1937): "Income within the meaning of the Sixteenth Amendment and the Revenue Act, means 'gain'... and in such connection 'Gain' means profit...proceeding from property, severed from capital, however invested or employed, and coming in, received, or drawn by the taxpayer, for his separate use, benefit and disposal... Income is not a wage or compensation for any type of labor."

Oliver v. Halstead 86 S.E. Rep 2nd 859 (1955): "There is a clear distinction between `profit' and `wages', or a compensation for labor. Compensation for labor (wages) cannot be regarded as profit within the meaning of the law. The word `profit', as ordinarily used, means the gain made upon any business or investment -- a different thing altogether from the mere compensation for labor."

Helvering v Edison Bros. Stores, 133 F2d 575 (1943): "The Treasury cannot by interpretive regulations, make income of that which is not income within the meaning of the revenue acts of Congress, nor can Congress, without apportionment, tax as income that which is not income within the meaning of the 16th Amendment."

Flora v U.S., 362 U.S. 145, (1959) never overruled: "... the government can collect the tax from a district court suitor by exercising it's power of distraint... but we cannot believe that compelling resort to this extraordinary procedure is either wise or in accord with congressional intent. Our system of taxation is based upon VOLUNTARY ASSESSMENT AND PAYMENT , NOT UPON DISTRAINT" [Footnote 43] If the government is forced to use these remedies(distraint) on a large scale, it will affect adversely the taxpayers willingness to perform under our VOLUNTARY assessment system.

Evens v Gore, 253 U.S. 245 (1920): US Supreme court, never overruled "After further consideration, we adhere to that view and accordingly hold that the Sixteenth Amendment does not authorize or support the tax in question. " (A tax on salary)

Edwards v. Keith, 231 F 110,113 (1916): "The phraseology of form 1040 is somewhat obscure .... But it matters little what it does mean; the statute and the statute alone determines what is income to be taxed. It taxes only income "derived" from many different sources; one does not "derive income" by rendering services and charging for them... IRS cannot enlarge the scope of the statute."

McCutchin v Commissioner of IRS, 159 F2d: "The 16th Amendment does not authorize laying of an income tax upon one person for the income derived solely from another."[wages]

Blatt Co. v U.S., 305 U.S. 267, 59 S.Ct. 186 (1938): "Treasury regulations can add nothing to income as defined by Congress."

Olk v. United States, February 18, 1975, Las Vegas, Nevada."Tips are gifts and therefore are not taxable." (yet they are now taxing tips as income becasue the IRS gets away with it).

Commissioner of IRS v Duberstein, 363 U.S. 278, 80 S. Ct. 1190 (1960):
"The exclusion of property acquired by gift from gross income under the federal income tax laws was made in the first income tax statute 4 passed under the authority of the Sixteenth Amendment, and has been a feature of the income tax statutes ever since. The meaning of the term "gift" as applied to particular transfers has always been a matter of contention. 5 Specific and illuminating legislative history on the point does not appear to exist. Analogies and inferences drawn from other revenue provisions, such as the estate and gift taxes, are dubious. See Lockard v. Commissioner, 166 F.2d 409. The meaning of the statutory term has been shaped largely by the decisional law."

Central Illinois Publishing Service v. U.S., 435 U.S. 21 (1978): "Decided cases have made the distinction between wages and income and have refused to equate the two."

Anderson Oldsmobile, Inc. vs Hofferbert, 102 F Supp 902: "Constitutionally the only thing that can be taxed by Congress is "income." And the tax actually imposed by Congress has been on net income as distinct from gross income. THE TAX IS NOT, NEVER HAS BEEN, AND COULD NOT CONSTITUTIONALLY BE UPON "GROSS RECEIPTS" ..."

Conner v US, 303 F Supp 1187 Federal District Court, Houston, never overruled. "..whatever may constitute income, therefore, must have the essential feature of gain to the recipient. This was true at the time of Eisner V Macomber, it was true under section 22(a) of the Internal Revenue Code of 1938, and it is likewise true under Section 61(a) of the IRS code of 1954. If there is not gain, there is not income, CONGRESS HAS TAXED INCOME, NOT COMPENSATION"!!!

Bowers vs Kerbaugh-Empire Co., 271 US 174 (1926): "Income" has been taken to mean the same thing as used in the Corporation Excise Tax Act of 1909, in the Sixteenth Amendment and in the various revenue acts subsequently passed ...."

Brushaber v. Union Pacific R.R. Co., 240 U.S. 1 (1916): "The conclusion reached in the Pollock Case did not in any degree involve holding that income taxes generically and necessarily came within the class of direct taxes on property, but on the contrary recognized the fact that taxation on income was in its nature an excise entitled to be enforced as such..."

Simms v. Ahrens, 271 SW 720 (1925): "An income tax is neither a property tax nor a tax on occupations of common right, but is an EXCISE tax...The legislature may declare as 'privileged' and tax as such for state revenue, those pursuits not matters of common right, but it has no power to declare as a 'privilege' and tax for revenue purposes, occupations that are of common right."

Eisner v. Macomber, 252 US 189 (1920), US Supreme court, never overruled: "...the definition of 'income' approved by this court is: The gain derived from capital, from labor, or from both combined, provided it be understood to include profits gained through sale or conversion of capital assets."

Laureldale Cemetery Assoc. v. Matthews, 345 Pa. 239 (1946): "Reasonable compensation for labor or services rendered is not profit"

Schuster v. Helvering, 121 F 2nd 643: "Income is realized gain."

Butchers' Union Co. v. Crescent City Co., 111 U.S. 746 (1883). One of the most eloquent opinions ever delivered by the Court..

"Among these unalienable rights, as proclaimed in the Declaration of Independence is the right of men to pursue their happiness, by which is meant, the right any lawful business or vocation, in any manner not inconsistent with the equal rights of others, which may increase their prosperity or develop their faculties, so as to give them their highest enjoyment...It has been well said that, the property which every man has in his own labor, as it is the original foundation of all other property so it is the most sacred and inviolable..."

Pollack v. Farmers Loan, 157 U.S. 429, 158 U.S. 601 (1895): The Corporate Excise Tax of 1909 was a 2% tax on PROFITS OF CORPORATIONS. The Supreme Court had, in POLLOCK v. FARMERS LOAN , in 1894, ruled as UNCONSTITUTIONAL the EXACT SAME KIND OF TAX MOST AMERICANS ARE NOW PAYING! [A direct tax without apportionment.] This decision has NEVER been overturned! Both BEFORE and AFTER the sixteenth amendment passed (?), THE COURTS SAID INCOME WAS CORPORATE PROFIT! The Separation of powers doctrine says only CONGRESS can collect a tax!

The Internal revenue code is made up of 7 or more subtitles with the first one being income tax. The chapter is income tax, the 2nd self employment tax, the 3rd tax on nonresident aliens and foriegn corporations. Fact: the first liablity statute found in Subtitle A, (income tax) is found in chapter 3, the tax on Non resident aliens and foriegn corporations. There is no liablity section found it chapters 1 or 2.

Monday, April 26, 2010

Cracking the Code Overview

Opinion By Blogger Ed.

Cracking the Code, by Pete Hendrickson is a book by a Tax Honesty member, which trys to explain how citizens can overcome the built in burden of proof which is imposed on the american people for the income tax which many who have researched the laws, know does not exist.

Basical the book begins with 4 presumptions.
1. That any citizen who files any forms with the IRS, where a jurat is required, does so risking felony conviction. The Jurat is the "under penalties of perjury claus found on 1040 forms and w4 forms, for example.
2. That the IRS is NOT held accountable for the accuracy of its records, and that it is up to us, the people to correct those records. And that the the current tax system is set up to create a legal presumption of liablity.
3. That there must be an administrative procedure to overcome said presumption. And that procedure is to use IRS form 4852.
4. The terms within the IRC (internal revenue code) mean what they say, and that the term includes is inclusive, and not expansive. This legal presumption/argument has been going on for years, without proper clarification, despite the rulings of the US Supreme Court on the subject matter.

The premise of the book, is that the IRS knows there is no liablity for income tax for most Americans. And that most Americans might be liable for social security taxes (presuming that we have volunteered into the system, which we have not.) And that the IRS thinks that everyone who works for any artifical created entity, or "person" as defined by law (see IRC 7701A1 ), which means things like corporations, trusts, companies, trusts, parternships, etc, and who gets paid by said entity is involved the legaly defined "employment" as defined by IRC Subtitle C, Chapter 24, and thus is an employee also defined in the same chapter, who is subject to employment taxes. These employees get paid wages, which are taxable.

The IRS uses chapter 24 to justify withholding of parts of a workers pay check. Notice 3 things are withheld. 2 Social security taxes (medicare/medicade and fica) and income tax. The IRS claims it is the income tax being withheld by authority of chapter 24.

Companies at the end of the year, use form w3 to report social security withholdings to the Secretary of the SocSec Administration, however CTC contends this form (like many of the IRS forms) is incomplete and inaccurate and does not reflect enough specific information.

The w3 is signed under Jurat, that is penalties of perjury. It clearly says that it is a return. This means it is an information return. The IRS uses this information to create a presumption of income tax liablity.
How can they (the IRS) do that?

Simple: the form says amongst other things that the citizen was paid x amount of money in income taxable wages.

Line 1 asks for Wages, tips and Other Comphensation, but does not make it clear which wages are being reported. Are these Chapter 21, 23 or 24 wages? It also asks for comphensation. in 1969, the US Courts ruled that congress has taxed income, not comphensation (Connor v. U.S., 303 F.Supp., 1187) and there have been numerous other related decisions that are simular. So why is the IRS asking for comphensation?

Line 2 then asks for the amount of income tax withheld. If the company withheld any amount, it is shown here.

Line 3 asks specificaly for social security wages, (which are defined in chapter 21) and line 5 asks for Medicare wages (also defined in chapter 21).

Understand this: wages has more than 1 legal meaning within the IRC. There are 3 definitions of the word, each one is applicable only to the chapter (and tax) where it is found. Chapter 21 (social security taxes), Chapter 23 (unemployment taxes), and chapter 24 (employment taxes and collection of income tax at the source).

There are NO chapter 1 (income tax) definitions for wage or wages.

Note: Some people claim that the w3 form has the OMB number 1546-0008 same as 1040 form, so some question its validity as a form, according to Office of Managment and Budget rules.

So the company sends the W3 to the Secretary of the Social security administration claiming you received wages. The IRS takes that information and claims that since you were paid wages, you owe income tax on those wages. The IRS claims wages is a part of gross income as defined in section 61A of the IRC, but you will never find wages listed as an item of gross income in that definition.

The IRS uses the information sent to the Sec of Soc Sec and creates a presumption of liablity for the chapter 1 income tax. So how do you over come that presumption?

CTC author discovered an administrative remedy. Using the avilable IRS for 4852, you correct the presumptive record. That is, you file a claim that the information sent to the IRS by the company is WRONG and that your information is correct. The company has 3rd hand knoweldge, while you have first hand knoweldge.

Can the payroll clerk testify how he/she knows you were paid wages, and that how you meet the definition of employee (found atchapter 24)? No. Most will testify that they filed out the forms as instructed by the IRS or someone else. This makes their testimony (they signed the w3 under penalties of perjury), null and void and worthless.

By correcting the record in this manner, no taxable income is shown on a 1040 form. And this is what the IRS hates, and finds intollerable. \

Yet this is being done all perfectly lawfull.And within their rules and regulations and filing guidelines.

It shifts the burdent of proof back to the IRS who knows cannot show roff of liablity. They cannot show what does not exist.

It all boils down to this: If we the citizens have to risk felony charges (IRC 7206)as a condition to being in compliance with this law, then they have an obligation to present us with proof of liablty when challenged to do so. And for the last 50 years, they have refused to.

Thursday, April 22, 2010

Timeline 2000 to 2010

2000 Stuart M. Smith gets a partial victory today against the IRS in Tax Court,
reported at T.C. Memo 2000-43. Mr. Smith, pro se, did not file tax returns and refused to cooperate with the IRS. At trial, he took the 5th when the IRS attorney questioned him about his tax liabilities. The Court ruled that the burden of proof rested on the IRS to prove Smith's receipt of income. The IRS could only substantiate partial proof to support its determination and the Court disallowed the reconstruction of Smith's income citing Senter v. Commissioner, T.C. Memo 1995-311.

2001 June Barry Konicov of Detaxing America is convicted of 1 count of conspiracy and 3 counts of failure to file. During his trial he refused to stand for the judge when asked to, kept trying to give testimony during opening statements, and engaged in pointless debates over the courts jurisdiction.

2002 WTP - Bob Shultz's We The People foundation, a grass roots movement, submits a "petition of redress of grievances" to every member of the US congress and the US president. This petition is demanding answers to questions covering several subjects including the income tax and its application by the IRS.

2003 Larkin Rose promotes the 861 argument and is later convicted of tax evasion.
The 861 argument deals with income from within the US as being non taxable and that only foreign earned income is taxable.

2003 Federal judge in Texas convicts Small business owner Dick Simkanin, of tax crimes, after 7 US grand juries failed to bring charges agianst the man for refusing to collect and withhold Income and social security taxes from his workers pay.

After two failed attempts to indict Dick Simkanin, The Assistant U.S. Attorney, David Jarvis, succeeded in obtaining an indictment from the Grand Jury that was legally insufficient, severely flawed in its construction, and completely devoid of legal facts. The insufficient indictment should have immediately been dismissed by Judge John McBryde.

The U.S. Supreme Court on May 1 2006 denied certiorari to Richard Simkanin,who was convicted in 2004 on multiple counts of willfully failing to collect and remit employment taxes as well as failing to file income tax returns. Simkanin, a Texas business owner, was sentenced to serve 84 months in prison and pay $302,000 in restitution to the IRS.

The Fifth Circuit upheld Simkanin's 2004 conviction, dismissing his challenges to the lower court's jury instructions, sentencing, and admissibility of evidence. The appellate court found that any errors the lower court committed were harmless and that its sentencing was reasonable. Simkanin petitioned the Supreme Court, asserting the jury instructions were flawed. The Court declined granting certiorari.

Blog Editors Note: Wrongfull jury instructions are now common practice. Is it no wonder people think the court system is corrupt?

In June 2003, Judge McBryde imprisoned Dick Simkanin (in isolation) based on unsubstantiated, hearsay information from an IRS agent who said he received information from an “informant” that Simkanin was a threat to society. Note: The “informant” was a disbarred attorney who was apparently under pressure from the IRS for lying on his tax returns. The “informant” never appeared in court and never submitted a sworn affidavit. On the other hand, Judge McBryde did have direct, sworn testimony from two other people - evidence that contradicted the IRS’ hearsay evidence. However, ignoring the direct evidence, McBryde imprisoned Simkanin based on the IRS’ hearsay evidence. Simkanin was denied his Constitutional Right to confront the witnesses and evidence against him. He then had to prepare for his trial and try to keep his business running while caged in a federal prison cell.

The Grand Jury was misled and manipulated by Assistant U.S. Attorney, David Jarvis, in its secret proceedings. The indictment of Dick Simkanin contained no specific charging statute/s (the actual law that he allegedly violated). The indictment contained only penalty statutes, for which Simkanin could not possibly be lawfully indicted, until found guilty of violating the underlying law upon which the penalty statutes were applied. The indictment of Dick Simkanin was a blatant act of government conspiracy and fraud.

This was the test case. Does a busness have an obligation to be a tax collector for the government? Apparently the answer is: "you will do what we say or you will be beat up."

2004. FED EX pilot Vernese Kulgan is charged with tax evasion. Despite her acquittal of criminal charges, on September 12, 2004, Kuglin entered a settlement with the IRS in the Tax Court in which she agreed to pay more than half a million dollars in back taxes and penalties. Kuglin v. Commissioner, Docket No. 21743-03

2004 Irwin Schiff is convicted of tax evasion a 2nd time and sentanced to 13 years in prison, with the government claiming he owes over 2 million in back taxes.

2005 Jan National Taxpayer Advocate Releases 2004 Report to Congress; Cites Tax Law Complexity as Most Serious Problem Facing Taxpayers.

National Taxpayer Advocate Nina E. Olson today released a report to Congress that identifies the complexity of the Internal Revenue Code as the most serious problem facing taxpayers and the IRS alike.

“Without a doubt, the largest source of compliance burdens for taxpayers and the IRS alike is the overwhelming complexity of the tax code, and without a doubt, the only meaningful way to reduce these compliance burdens is to simplify the tax code enormously,” Olson writes. The report cites the alternative minimum tax (AMT), the earned income tax credit (EITC), and the large number of provisions designed to encourage taxpayers to save for education and for retirement as key illustrations of the problems of complexity wrought by the 1.4 million-plus word tax code.

2005 U.S. Court of Appeals Rules IRS Cannot Apply Force Against A Tax Payer Without A Court Order in case brought by We The People founder Bob Shultz.

2005 Friday, April 22, 2005 WASHINGTON, April 14 - The Internal Revenue Service is illegally withholding information about its operations, claiming without substantiation that some of the unclassified information would compromise homeland security if released to the public, according to a federal lawsuit filed today by the Public Citizen Litigation Group on behalf of open-government scholars.

The lawsuit is part of an ongoing effort by the Transactional Records Access Clearinghouse (TRAC) to obtain statistical information from the IRS about enforcement actions. Reversing 30 years of policy, the IRS under the Bush administration has stonewalled requests for public disclosure of such information.

2005 May The Justice Department today asked a federal court to bar John Baptist Kotmair, Jr., of Westminster, Maryland, and his organization,
"Save-a-Patriot Fellowship," from selling alleged tax-fraud schemes. The
civil injunction suit, filed in Baltimore, also seeks an order directing
Kotmair and Save-a-Patriot to give the Justice Department their customers'
names, mailing and e-mail addresses, and telephone and Social Security

It is now standard procedure for the IRS to sue people and demand acccess to their membership records. The IRS seeks the names, social security numbers, addresses, phone numbers of people buying into what the IRS calls illegal taxprotester scams.

2006. Louisana Lawyer Tom Cryer is charged with 2 counts of tax evasion for a trust he was incharge of, for his mother. Cryer asserted that since the trust had no income for the years in question, (and the IRS records agreed) that there was no obligation to file.
As part of the procedings, this 20 year vetran lawyer filed a memorandum of law, which today remains unchallenged, showing every tax liability found in the Internal Revenue Code. Only 1 was found in Subtitle A, the income tax, and that was found in chapter 3, which is the tax on non resident aliens and foriegn corporations.
The prosecution dropped its allegations of tax evasion (on which the law provides a maximum prison term of five years)[7] against Cryer on July 9, 2007. Cryer was then tried on two counts of willful failure to file tax returns, for which the maximum jail sentence is one year in prison.

Cryer was found not guilty by a jury of his peers. Although the jury was not convinced of Cryer's willfulness to avoid filing the tax returns, the theories he raised in his motions for dismissal have been repeatedly rejected by the courts.

Blog editors note. How can someone be found guilty of failing to file for a liablity that does not exist? The court rejects this common sense question. Such actions by the courts, cause the common citizens to believe the court system is corrupt and cannot be fixed.

2006 The word INCOME looked at closely. August 22, 2006, the United States Court of Appeals for the District of Columbia decided the appeal of Ms. Marrita Murphy in her case against the IRS. For the first time in a long time the court took a serious look at the definition of the word “income” as it is used in the Sixteenth Amendment. The case centered on whether or not an award of $70,000 received by Murphy for damages she experienced was taxable. Murphy had been retaliated against because she had been a whistleblower, and the award was to “make her whole.” An administrative law judge awarded the monies for "compensatory damages..., of which $45,000 was for 'emotional distress or mental anguish', and $25,000 was for 'injury to professional reputation'".

Murphy had reported some environmental problems at the New York Air National Guard. Her whistleblower actions got her not only fired, but blacklisted too. The entire ordeal was stressful for Murphy and she sued her former employer. The National Whistleblower Center lawyers successfully prosecuted the case, as they are an organization specializing in whistleblower cases.

The IRS wanted a cut of the award, but Murphy believed the award was nontaxable. Murphy, who must have developed faith in her whistleblower lawyers, retained them to litigate the tax case against the IRS, even though, as a firm, they had no experience in tax litigation. What was at issue was whether or not the $70,000 Murphy received for these damages was taxable. The federal District Court said, “yes,” but the Appeals Court said, “no.” The Appeals Court remanded the case back to the District Court "instructing that the Government refund the taxes Murphy paid on her award plus applicable interest."

The Appellate Court ruled that the monies received by Murphy were taxable under 26 USC 104 (a), but that this section of the United States Code was unconstitutional on the grounds that the monies received by Murphy were not "income" within the meaning of the Sixteenth Amendment.

Section 104(a) of title 26, the Internal Revenue Code provides that "gross income does not include the amount of any damages received... on account of personal physical injuries or physical sickness." The Government claimed that because the administrative law judge did not specifically identify any physical injury of Murphy, none of the monies awarded Murphy were exempt from taxation.

Murphy’s lawyers put their legal training to good use: they questioned everything including the meaning of the word "income" as it was used in the Sixteenth Amendment. Not only did her lawyers do so, but so did the panel of three appellate judges. Since these judges normally don’t handle tax cases, they were likely more open minded and not biased by the tax mantra of today.

What does the word "income" mean as it is used in the Sixteenth Amendment? Let us start with what the District of Columbia Appeals Court said; as for this narrow decision, they got it right.

The Court started at the beginning by determining what the framers of the Sixteenth Amendment intended the word "income" to mean. The Appeals Court quoted the Supreme Court, "in defining 'incomes,' we should rely upon 'the commonly understood meaning of the term which must have been in the minds of the people when they adopted the Sixteenth Amendment.’ Merchants' Loan and Trust, Co. v. Smietanka, 255 U.S. 509, 519 (1921).” The Appeals Court also said "The Sixteenth Amendment simply does not authorize the Congress to tax as 'incomes' every sort of revenue a taxpayer may receive. As the Supreme Court noted long ago, the 'Congress cannot make a thing income which is not so in fact.’ Burk-Waggoner Oil Ass'n v. Hopkins, 269 U.S. 110, 114 (1925).”

The Appeals Court was correct on all fronts. Congress derives its powers from the Constitution, as authorized by We the People. If Congress could change the meaning of words in the Constitution, then the whole principle of "limited government" would fly out the window. The Appeals Court got it right too when they stated "The Government of the United States is a government of limited powers: 'Every law enacted by Congress must be based on one or more powers enumerated in the Constitution.' United States v. Morrison, 529 U.S. 598, 607 (2000)."

Of the definition of the word "income" the Supreme Court said long ago, "Congress cannot by any definition it may adopt conclude the matter, since it cannot by legislation alter the Constitution, from which alone it derives its power to legislate and within whose limitations alone that power can be lawfully exercised." Eisner v. Macomber, 252 U.S. 189, 206 (1919). And the Appeals Court said, " would not be consistent with our constitutional government, and the sanctity of property in our system, merely to rely upon the legislature to decide what constitutes income."

The lawyers for Murphy also started at the beginning. They researched the legislative history of 26 USC 104 (a) and the meaning of the word "income" as it was used by the framers of the Sixteenth Amendment.

They discovered that back in the 1913 period, when the Sixteenth Amendment was purportedly ratified, awards for personal injury type damages were considered a "return of capital" and an attempt to make the injured party "whole." In making the injured party "whole," such an award was thought to only be returning something that was earlier lost. Murphy's lawyers discovered that the history of this area of law was rich with examples of both state and federal cases.

The analogy was made that the injury depleted Murphy's "human capital" just as an injury to say a building (by fire, lighting strike or some act of negligence) would diminish the building's value. The cost of bringing the building back up to its condition before the injury would be restoring the building's capital in the same way as Murphy's award was restoring her human capital. The Appeals Court agreed.

The entire case turned on whether or not Murphy's award represented a return of diminished capital, or an economic gain? The entire Murphy Case was about setting the boundary line between direct taxes and indirect taxes. Direct taxes are taxes on capital, indirect taxes are taxes on gains. This lack of experience of Murphy’s lawyers and the three-judge panel allowed them to do their legal research and analysis with an open mind. And these open minds, aided by their legal training, caused them to arrive at the correct interpretation of the intent of the Sixteenth Amendment as it relates to this narrow issue.

The odd man out was the government. This is not surprising when one realizes that the main source of all the confusion over the Sixteenth Amendment is the government, aided by Congress, who writes these confusing taxing statutes. The more confusing the tax code is, the more money that can be collected. That this is the source of the confusion is confirmed by the "follow the money" principle.

The Sixteenth Amendment provided for an income tax that was to be an "excise tax," a species of an "indirect tax." In an 1895 decision that angered the American People, the Supreme Court called an income tax on the net income from investment a direct tax in the Pollock Case. The genesis of the Sixteenth Amendment was to nullify the theory upon which the Pollock Court declared the income tax to be a direct tax; that being the idea that an income tax on net income was the same as a tax on the underlying source of the income. In other words, it was a tax on the underlying asset; so said the Pollock Court. With the ratification of the Sixteenth Amendment, the Pollock Theory died.

With the Pollock Theory gone, the Sixteenth Amendment returned us to the criteria for determining what constitutes a direct tax and an indirect tax as laid down by the man who gave us those terms, Adam Smith. Adam Smith's book, Wealth of Nations, was the economic bible in the hands of every one of the framers of the Constitution. The meaning of these terms can be found in a 1909 quote from Utah Senator Sutherland as he debated the Sixteenth Amendment.

“The most generally received opinion, however, is that by direct taxes in the Constitution are those meant which are raised on the capital or revenue of the people; by indirect, such as are raised on their expense... it will not be improper to corroborate it by quoting the author from whom the idea seems to have been borrowed. (Naming Doctor Smith's Wealth of Nations)" 44 Congressional Record 2094 (1909).

Murphy’s attorneys argued that her award constituted only monies that “made her whole.” The award was a return of her “human capital.” Murphy’s attorney, David K. Colapinto, who successfully argued the case, said of the government’s position, “The government had the audacity to argue that non-wage compensatory damages for emotional distress and loss of reputation can be taxed as income because the economic value of human life is zero. The taxing of non-wage damages is highly destructive and punishes whistleblowers and other civil rights plaintiffs for prevailing in their cases. Hopefully, today’s ruling will stop this arcane and regressive policy.” See,

Colapinto’s position is further buttressed by what some of the leading supporters of the Sixteenth Amendment had to say, in 1909, about the income tax while it was being debated in Congress. Senator Bailey of Texas said,

“I believe that in earning an income by personal service every man consumes a part of his principal, and that fact ought always to be taken in to consideration. The man who has his fortune invested in securities may find in a hundred years, if he spent his income, that fortune still intact, but the lawyer or the physician or the man engaged in other personal employment is spending his principal in earning his income. That fact ought under every just system of income taxation to be recognized and provided against.” 44 Congressional Record, 4007 (1909).

Senator Bailey also said,

“I have no hesitation in declaring that a tax on any useful occupation can not be defended in any forum of conscience or of common sense. To tax a man for trying to make a living for his family is such a patent and gross injustice that it should deter any legislature from perpetrating it.” 44 Congressional Record, 1702 (1909).

The author of the Sixteenth Amendment, Senator Brown from Nebraska, had this to say about the object of the income tax: “It is the theory of the friends of the of the income-tax proposition that [income from] property should be taxed and not individuals.” 44 Congressional Record 1570 (1909).

The three-judge panel was correct it its determination that it was not the framers of the Sixteenth Amendment intent to tax “human capital.” Such a tax on the “human capital” of Murphy would be a direct tax. The Supreme Court has already ruled that the Sixteenth Amendment only authorizes an excise tax, a species of an indirect tax.

In the first modern tax case to be litigated after the Sixteenth Amendment was purportedly ratified, the Supreme Court ruled in Brushaber v. Union Pacific Railroad Co., 240 U.S. 1 (1916) that the income tax was an excise tax even though both the government and Burshaber argued that it was a direct tax exempted from apportionment.

In Brushaber v. Union Pac. R.R. Co., Mr. Chief Justice White, upholding the income tax imposed by the Tariff Act of 1913, construed the Amendment as a declaration that an income tax is indirect, rather than as making an exception to the rule that direct taxes must be apportioned. The Income Tax and the Sixteenth Amendment, 29 Harvard Law Review 536 (1915-6).

Cornell Law Quarterly also weighed in on the Brushaber Case.

The contention of the appellant was as follows:

(1) The Sixteenth Amendment provided for a new kind of a direct tax, a tax on incomes from whatever source derived.

The court, through Chief Justice White, held that the tax [in Brushaber] was constitutional. The major proposition of the appellant's argument is not true. Hence, the conclusion does not follow. The sixteenth amendment [sic] does not permit a direct tax, (in fact as it will later be shown, the court does not think that the amendment treated the tax as a direct tax at all), carrying with it the distinguishing characteristic of a hitherto unrecognized uniformity.

The amendment, the court said, judged by the purpose for which it was passed, does not treat income taxes as direct taxes but simply removed the ground which led to their being considered as such in the Pollock case, namely, the source of the income. Therefore, they are again to be classified in the class of indirect taxes to which they by nature belong. Ramon Siaca, The Federal Income Tax Law of 1913: Construction of the Sixteenth Amendment, 1 Cornell Law Quarterly 298, 299 and 301 (1916).

Years later we have Congress reaffirming in a couple of reports that the income tax is an excise tax. Reporting on AThe Revenue Bill of 1941," the House's Committee on Ways and Means prepared House Report No. 1040 dated July 24, 1941. On page 17 of this report, in the section called Constitutionality of Proposal, the Committee on Ways and Means stated:

It seems clear that Congress has the constitutional power to enact this proposed amendment. Generically an income tax is classed as an excise (Brushaber v. Union Pac. R.R. Co., 240 U.S. 1). The only express constitutional limitation upon such taxes is that they be geographically uniform. H. Rep. No. 1040, at 17 (1941).

And finally, appearing in the Congressional Record in 1943 we find a reprinting of a report by,

“Mr. F. Morse Hubberd, formerly of the legislative drafting research fund of Columbia University, and a former legislative draftsman in the Treasury Department.

…The sixteenth amendment authorizes the taxation of income ‘from whatever source derived’…. So the amendment made it possible to bring investment income within the scope of a general income-tax law, but did not change the character of the tax. It is still fundamentally an excise or duty with respect to the privilege of carrying on any activity or owning any property which produces income.
The income tax is, therefore, not a tax on income as such. It is an excise tax with respect to certain activities and privileges which is measured by reference to the income which they produce. The income is not the subject of the tax: it is the basis for determining the amount of tax.” 89 Congressional Record 2579-80 (1943).

2007 Sherry Peel Jackson, former IRS agent turned Tax Honesty advocate (after leaving the IRS service with award winning performance reviews) is charged with 4 counts of failure to file income tax returns.

2007 9th Circut. For what it's worth, the 9th circuit panel of San Francisco has been reversed. The Internal Revenue service had ruled that Valerie and Robert McKee (or McKey?) had owed the government $31,000 in unpaid taxes until Valerie and Robert demonstrated in court that the tax law was so complex that nobody could understand it. And the court had to agree. The law was so complex that nobody could understand it and the court reversed itself and the IRS gets the bill. The government sought and got a stipulation that this verdict would not be made public.

2007 DOJ Obtains injunction against Pete Hendrickson (Cracking the code) LostHorizonsdotcom.

2008 IRS brings charges against Pete Hendrickson (Cracking the code) despite the fact that they agreed that he owed no taxes for the years they were charging him with evasion for.
The IRS itself had sent Pete several "no tax due" notices after adjusting his account per the tax returns he filed, but these admissions of "everything's cool" by the IRS were ignored by the prosecution, and the Hendricksons' many certificates of assessment issued by the IRS -- stating $0 due -- were never shown to the jury.
The charge against Pete is that he didn't believe what he wrote on his tax returns filed between 2002 and 2007. This is a matter of philosophy -- did he or didn't he?
During the trial, the judge ordered Hendrickson to commit a Felony, that is to lie on his 1040 forms, to commit perjury.

2009 IRS gets conviction. Guilty is the verdict against Pete Hendrickson of Cracking the Code.

2010 April. Pete Hendrickson, Author of Cracking the Code, sentanced to prison for 2 years and 9 months. Pete contends the Judge in his case gave the jury wrong instructions, intentionaly misleading them on the legal defintion of wages, employee, employer. Judge also dismissed 2 jurors who asked to see the law in his case.

2010 May US V Springer, Lindsey Springer is challenging the OMB/PRA requirement of the 1040 tax form. Lindsey appeals on the 19th. More on that in another post.