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
numbers.

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, "...it 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, www.whistleblowers.org

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.