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Who is Liable for the Income Tax? by Larry Becraft
Tax Attorney Confirms Article on W-4
by Larry Becraft, Jr.
[Reprinted from `American Information Network', Sept/Oct. 1988 in
`The Correspondent']
Presently, I have an appeal in a criminal tax case pending before the
Eleventh Circuit which raises the issue as to who is liable for the
federal income tax. The government filed its brief in this case and I
was utterly amazed at the government's answer to my argument. Due to
the admission so made, I now realize that my argument is monumentally
significant and I feel compelled to tell other attorneys involved in
similar litigation.
Last year, I tried a case in Orlando, Florida wherein Dehur D. Ward
was charged with tax evasion. Ward was a student and follower of a man
named George Arlen, who, like Irwin Schiff, advocated the who's liable
argument built around 26 USC sections 6001, 6011, and 6012. Ward
had engaged in a constant stream of letters to both the IRS and his
employers which squarely raised the issue that he didn't believe he
was liable for the tax because he found no section of the Code that
made him expressly liable.
This position formed the factual foundation for our defense that he
didn't act willfully. It also afforded me the excellent opportunity to
raise the same legal argument via requested instructions and motions
for judgement of acquittal. The essence of my argument was that the
income tax, pursuant to Subchapter N of the Code, imposed the tax only
on aliens and foreign corporations who had sources of income outside
the U.S., and also within U.S. possessions. The only persons expressly
made liable for the income tax are section 1461 withholding agents for
aliens and foreign corporations. This was the legal argument created
by my requested instructions and my Rule 29 Motion.
My brief in Ward's case to the Eleventh Circuit had several major
parts which constitute my ultimate conclusion that state citizens were
not taxed on their sources of income within the states.
First, I treated the question of the jurisdiction of the United
States and showed that its jurisdiction was only in Washington, D.C.,
the federal enclaves within the states and the territories and insular
possessions of the United States.
Next, I discussed all the federal income tax statutes from the
1913 act forward and showed that, statutorily, the tax was one imposed
only in its jurisdiction.
I then treated all prior regulations promulgated for all the
prior income tax acts and showed that the regulations clearly stated
that the tax was jurisdictional.
My argument was thus ended with the conclusion that state citizens are
outside the jurisdiction of the United States and were not thus taxed.
As my brief says: For U.S. citizens, the sources subjected to taxation
are treated in Section 911 and 931. In Section 911, a U.S. citizen
living and working abroad, and thus having sources without the U.S.,
is subjected to taxation. In Section 931, the sources subjected to
taxation are those sources earned within a possession of the United
States.
For U.S. citizens, who were born in the U.S., who are domiciled in the
U.S., and who have sources of income within the U.S., there is no
income tax imposed. Since Ward did not fall within the statutory
classes of individuals subject either to the tax or filing requirement
under section 6012, the District Court committed error in denying his
motions for acquittal.
I then presented the subchapter N argument and concluded that the only
persons liable for the tax pursuant to 26 USC sections 6001, 6011, and
6012, were section 1461 withholding agents. I had expected that the
government would respond with a lengthy, detailed argument showing
that state citizens were taxed via some complicated manner that
directly or indirectly so imposed the tax. But, when I received the
government's brief, I found one page thereof that addressed my
issue.
After calling my argument frivolous, the U.S. attorney then stated as
follows:
"The government is unable, therefore, to offer case authority for the
universally accepted proposition that a citizen of the United States,
working and residing in the United States, subject to federal law,
earning wages, and responsible for filing an income tax return, is
liable for taxation."
Although these are the words of Bruce Hinshelwood, I feel confident
that most other prosecutors would have been compelled to make the same
admission. There, indeed, is no case, or statute, that expressly holds
a state citizen liable for the income tax. It is my hope that you and
other attorneys will study this issue. From my viewpoint, we certainly
need to raise this issue in other circuits. P.S. Why is it that the
only court which has been given jurisdiction of Title 26 crimes is
the U.S. District Court in Guam? See 48 USC 1421.
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