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Weeding The Garden

Shining A Little Disinfecting Sunlight Into The Law-Defier's Toadstool Factory

THE AMERICAN LEGAL LANDSCAPE HAS BECOME a tangled mess. Once a well-tended garden, it is now an ugly, weed-infested disgrace in which evil things find plenty of places to lurk, grow, and be used against the people. It is up to those of us who cherish the rule of law and take our responsibilities to our posterity seriously to correct this problem by pulling the weeds and making clear that error and lies will not be tolerated.

This will happen by CtC-educated Americans, who have learned how to read the law, and how to research precedents accurately, taking charge of the legal landscape. In legal contests with the enemies of the law, the good guys need to debunk every inapposite citation deployed against them and keep the courts honest and on-point, something too many in the legal profession apparently abandoned long ago for reasons of their own.

In order to facilitate this effort, I'm setting up this special space in which to post material debunking abused and misconstrued "precedents" such as the 'Lovell' rulings, 'Latham', 'Sullivan' and all the rest. These junk- and misrepresented-rulings litter government legal filings and have too often been taken by courts (without investigation) as actually standing for the proposition in the context of which they are cited, even though knowledgeable examination actually proves this to be untrue.

I'm inviting and encouraging every Warrior to take on the task of pulling at least a few weeds by subjecting one or more cases used as "precedent" by government lawyers and "ignorance tax" beneficiaries to proper analysis and investigation, and then sending the results to WeedWhackers (at) losthorizons.com (fix the email address appropriately when sending). In a short time, we should have a large collection of ready-for-prime-time, ACCURATE material concerning these cases, able to be used by anyone facing government corruption in a courtroom.

I hope you'll all dive in here and contribute to this project. Submissions should be in html format, and should include the full text of the case being analyzed and any preceding cases cited within the misused ruling (going back in like manner as far as necessary). Analysis should focus on claims of authority within the subject ruling which are not actually supported by the references cited, if any (which could be "case law" or statutes), or claims and conclusions actually contradicted by logic, Constitution, statutes or other rulings (which should be included in the submission). Layout should be:

1.) The citation being misused;

2.) A concise statement of "what is wrong with this picture" and why;

3.) The analysis proving the statement made in 2, with references cited and quoted as necessary and appropriate; and

4). an appendix containing the complete text of the analyzed case and referenced authorities (or links thereto within the analysis).

It's our law, people, but only if we take charge of it. For far too long, the American people have left care of this oh-so-important resource to our competitors, who have unsurprisingly twisted it to their own purposes. There's a lot of truth in the old adage that says if you want something done right, you have to do it yourself, and it's hard to imagine too many areas where it's more important that things be done right.

BTW: As you read what follows, don't ever lose sight of the fact that the false authorities revealed here are relied upon because there ARE no actual authorities supporting what those who use them want to be imagined true.

Weeds

United States v. Sloan, 939 F.2d 499, 501 (7th Cir. 1991)

Lovell v. United States, 755 F.2d 517 (7th Cir. 1984) (and Parker v. Comm'r, 724 F.2d 469, (Fifth Cir. 1984))

United States v. Latham, 754 F.2d 747, 750 (7th Cir. 1985) and Sullivan v. United States, 788 F.2d 813 (1st Cir. 1986)

"LexisNexis" Misrepresentations Regarding Pacific Nat'l Ins. v. United States and the Limited Meaning of "Person" in 26 U.S.C. § 6671(b)

In re Meador, 16 F. Cas. 1294 (ND Ga. 1869)

Hartman v. Comm'r, 65 T.C. 542 (1975)

U.S. v. Hendrickson

Hendrickson v. United States

Hendrickson v. United States

May v. Commissioner, 752 F.2d 1301 (8th Cir. 1985)

 United States v. Sloan

THIS 1991 7th CIRCUIT CASE is cited for presentation of this excerpt: ""All individuals, natural or unnatural, must pay federal income tax on their wages," regardless of whether they requested, obtained or exercised any privilege from the federal government. Lovell, 755 F.2d at 519".

Now, we could pause for a moment and discuss the fact that "wages" is a statutorily-defined term referring only to remuneration for the exercise of privilege, making the court's pronouncement confusing (or confused), at a minimum. And we could observe that had the court said, "on their earnings", we would be given a real reason to pause, but it did not, even though that expression, were it true, would be far more useful a statement for any court to make in any effort to slap down those pesky and intransigent "tax protestors"...

We're here for a different purpose, though, so we won't pause at all. Instead we'll note that the Sloan court doesn't take responsibility for its "privilege" assertion and move to the case Sloan relies upon for the proposition that there is no privilege-exercise aspect to the tax (even though it doesn't appear that Sloan ever claimed there was), Lovell v. United States, 755 F.2d 517 (7th Cir. 1984).

Lovell v. United States

THIS 1984 7th CIRCUIT CASE is cited (by the Sloan court and others) as authority for the proposition that the "income tax" is not an excise on gains from the exercise of privilege (and therefore, by implication, that is must be a tax on undistinguished economic activity-- that is, ALL economic activity). Here is the language from the ruling relied on for this purpose:

"Plaintiffs argue first that they are exempt from federal taxation because they are "natural individuals" who have not "requested, obtained or exercised any, privilege from an agency of government." This is not a basis for an exemption from federal income tax. Holker v. United States, 737 F.2d 751 (8th Cir. 1984) All individuals, natural or unnatural, must pay federal income tax on their wages, regardless of whether they received any "privileges" from the government.

So, just as Sloan relies upon Lovell, so Lovell relies in turn upon Holker v. United States, 737 F.2d 751 (8th Cir. 1984) as the authority for its otherwise unsupported declaration about "privilege". However, upon examination it turns out the Holker court not only also doesn't supply any authority for the contention made in Lovell (and nor, therefore, in Sloan) it doesn't address the issue at all.  Here is that ruling in its entirety:

Louis E. Holker, pro se.

Before HEANEY, Circuit Judge, FLOYD R. GIBSON, Senior Circuit Judge, and ARNOLD, Circuit Judge.

PER CURIAM.

1. Louis E. Holker was assessed a $500 penalty under 26 U.S.C. Sec. 6702 for filing a frivolous tax return. He then commenced this suit under 26 U.S.C. Sec. 6703(c)(2) for abatement of this assessment. The district court granted the government's motion for judgment on the pleadings pursuant to Fed.R.Civ.P. 12(b) and we affirm.

2. In a letter to the IRS, Holker requested a tax refund for 1982, arguing that he owed no tax because he is a "natural individual and unenfranchised freeman" who "neither requested, obtained nor exercised any privilege from any agency of government." Holker enclosed with this letter an unsigned Form 1040 marked "NOT A TAX RETURN--For information only," two W-2 forms marked "INCORRECT," and a Schedule C profit and loss statement. On Schedule C, Holker claims to be in "construction" and he lists, among other things, gross receipts of over $15,000 which were also deducted as labor costs (despite directions in Schedule C not to include salary that the taxpayer paid to himself).

3. Under 26 U.S.C. Sec. 6702, the questions presented to this Court are whether Holker filed "what purports to be a return" but which contains insufficient information by which the substantial correctness of the self-assessment may be judged or which contains information that on its face indicates that the self-assessment is substantially incorrect; and, if so, whether filing the purported return is due to a position which is frivolous. As the district court correctly noted, these are issues of law for the court to decide. See United States v. Grabinski, 727 F.2d 681, 686 (8th Cir.1984) (citing United States v. Moore, 627 F.2d 830, 834 (7th Cir.1980), cert. denied, 450 U.S. 916, 101 S.Ct. 1360, 67 L.Ed.2d 342 (1981)).

4. Although Holker denies having filed any document that purports to be a tax return, his argument is meritless. Taxpayers may not obtain refunds without first filing returns. 26 C.F.R. Sec. 301.6402-3(a)(1) (1983). With Holker's refund request to the IRS, he appended a Form 1040 and W-2 statements. Under the circumstances, we can only construe these documents as elements of a purported return. Nichols v. United States, 575 F.Supp. 320, 322 (D.Minn.1983). Any other construction of section 6702 would flout the intent of Congress to penalize any individual filing a frivolous return. See S.Rep. No. 97-494, 97th Cong., 2d Sess., reprinted in 1982 U.S.Code Cong. & Ad.News 781, 1024.

5. Holker's return facially indicates that his self-assessment is incorrect and that his position is frivolous. His W-2 forms show his receipt of wages totaling $15,060.96, yet he reported no wages on his Form 1040. His unexplained designation of his W-2 forms as "INCORRECT" and his attempt to deduct his wages as his cost of labor on Schedule C also establish the frivolousness and incorrectness of his position. See Funk v. Commissioner, 687 F.2d 264, 265 (8th Cir.1982) (designation of wages received for services as untaxable income is frivolous).

6. Accordingly, the judgment of the district court is affirmed on the basis of 8th Cir.R. 14.

The Holker court recites Holker's argument that he should get a refund of amounts withheld because (as he says) "he is a "natural individual and unenfranchised freeman" who "neither requested, obtained nor exercised any privilege from any agency of government."" But the court in no way proceeds to analyze or even refer a single time further to this argument. It neither accepts nor disagrees with the argument, instead [carefully? who knows...] stepping right past it.

In fact, the Holker court DOES declare what it DOES actually find to be "frivolous" about Holker's filing, and his "privilege-related" position is notable by its absence: "Holker's return facially indicates that his self-assessment is incorrect and that his position is frivolous. His W-2 forms show his receipt of wages totaling $15,060.96, yet he reported no wages on his Form 1040. His unexplained designation of his W-2 forms as "INCORRECT" and his attempt to deduct his wages as his cost of labor on Schedule C also establish the frivolousness and incorrectness of his position."

Thus, the plain fact is that Lovell cites a false authority to support its actually empty words about privilege, as does the Sloan court in turn.

NOW, IT TURNS OUT THAT Lovell offers another good lesson in "garbage in, garbage out". Immediately following the declaration about "privilege" discussed above, Lovell goes on with, "Plaintiffs also contend that the Constitution prohibits imposition of a direct tax without apportionment. They are wrong; it does not. U. S. Const. amend. XVI--" .

In support of THIS contention, the Lovell court relies on Parker v. Comm'r, 724 F.2d 469, (5th Cir. 1984). This is a case involving a routine "Fifth Amendment" tax protestor who "conceded unreported income from wages, pension benefits and long-term capital gains" in trial in Tax Court, drawing an unsurprisingly adverse outcome.

In his appeal, though, Parker argued-- among other things-- that "the IRS and the government in general, including the judiciary, mistakenly interpret the sixteenth amendment as allowing a direct tax on property (wages, salaries, commissions, etc.) without apportionment." This led the appellate court to make the following amazing declaration, upon which the Lovell court relies in making its own ridiculous contention: "The Supreme Court promptly determined in Brushaber v. Union Pacific Ry. Co., 240 U.S. 1, 36 S.Ct. 236, 60 L.Ed. 493 (1916), that the sixteenth amendment provided the needed constitutional basis for the imposition of a direct non-apportioned income tax.”

It'd be nice for the revenue-hungry government if that were true... However, proceeding to Brushaber in order to look for ourselves, we find that what is ACTUALLY said by that unanimous Supreme Court is rather otherwise:

"We are of opinion, however, that the confusion is not inherent, but rather arises from the conclusion that the 16th Amendment provides for a hitherto unknown power of taxation; that is, a power to levy an income tax which, although direct, should not be subject to the regulation of apportionment applicable to all other direct taxes. And the far-reaching effect of this erroneous assumption will be made clear by generalizing the many contentions advanced in argument to support it...”

After generalizing the many contentions advanced in argument to support the erroneous conclusion that the 16th Amendment provides for a power to levy an income tax which is both direct and not subject to the regulation of apportionment, the Brushaber court goes on to point out that the very suggestion of a non-apportioned direct tax is idiotic (okay, they didn't use the word "idiotic"...), because that would cause:

“...one provision of the Constitution [to] destroy another; that is, [it] would result in bringing the provisions of the Amendment [supposedly] exempting a direct tax from apportionment into irreconcilable conflict with the general requirement that all direct taxes be apportioned."

Brushaber v. Union Pacific R. Co., 240 U.S. 1 (1916)

Contemporary expert commentary on the Brushaber decision emphasizes the fact that it actually says the opposite of the bizarre and incorrect declaration of the Parker court:

"The Amendment, the [Supreme] 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."

Cornell Law Quarterly, 1 Cornell L. Q. 298 (1915-16)

"In Brushaber v. Union Pacific Railroad Co., Mr. C. J. 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."

Harvard Law Review, 29 Harv. L. Rev. 536 (1915-16)

...as do later expert statements on the subject:

"[T]he amendment made it possible to bring investment income within the scope of the general income-tax law, but did not change the character of the tax. It is still fundamentally an excise or duty..."

Treasury Department legislative draftsman F. Morse Hubbard in Congressional testimony in 1943

"The Supreme Court, in a decision written by Chief Justice White, first noted that the Sixteenth Amendment did not authorize any new type of tax, nor did it repeal or revoke the tax clauses of Article I of the Constitution, quoted above.  Direct taxes were, notwithstanding the advent of the Sixteenth Amendment, still subject to the rule of apportionment…"

Legislative Attorney of the American Law Division of the Library of Congress Howard M. Zaritsky in his 1979 Report No. 80-19A, entitled 'Some Constitutional Questions Regarding the Federal Income Tax Laws'

Twenty years after Brushaber, the Supreme Court reiterates its unequivocal holding that the 16th Amendment did NOT authorize a "direct, non-apportioned tax" of any kind or on anything in dismissing an argument that a federal tax on "income" (in this case under the provisions of the Social security act) can be construed as a direct non-apportioned tax:

"If [a] tax is a direct one, it shall be apportioned according to the census or enumeration. If it is a duty, impost, or excise, it shall be uniform throughout the United States. Together, these classes include every form of tax appropriate to sovereignty. Cf. Burnet v. Brooks, 288 U. S. 378, 288 U. S. 403, 288 U. S. 405; Brushaber v. Union Pacific R. Co., 240 U. S. 1, 240 U. S. 12 Whether the tax is to be classified as an "excise" is in truth not of critical importance. If not that, it is an "impost", or a "duty". A capitation or other "direct" tax it certainly is not."

Steward Machine Co. v. Collector of Internal Revenue, 301 U.S. 548 (1937) (Emphasis added.)

So, the 5th circuit was flatly wrong in its declaration in Parker. Indeed, the Parker court is crazy wrong. The Brushaber court says the exact opposite of what Parker asserts and in no uncertain terms. (A write-up on Parker explaining how its dodge is actually a critical admission can be found here.)

Thus, the 7th circuit has actually cited no authority for its own declaration in Lovell about the 16th Amendment, just as it actually has none for its declaration about "privilege" (which hinges on the false statement about a "non-apportioned direct tax"). And yet, the Lovell ruling is presented as authority for both of these actually unsupported and incorrect contentions, as are, in turn, other cases relying on Lovell, such as Sloan.

Latham and Sullivan

THE IRS HAS RELIED FOR DECADES on excerpts from two rulings-- United States v. Latham, 754 F.2d 747 (7th Cir. 1985) and Sullivan v. United States, 788 F.2d 813 (1st Cir. 1986)-- to suggest judicial support for several of its frivolous "arguments" concerning the meaning of "employee", "wages" and "includes". However, neither of these excerpts actually say what the tax agencies use them to infer.

In fact, both Latham and Sullivan explicitly and carefully AVOID saying what the agencies hope they will be misunderstood to say. This doesn't stop the agencies from doing their best to make lemonade out of lemons, though.

These excerpts have been cited scores of times in IRS/DOJ briefs, and in virtually every "Answer to Frivolous Arguments" publication the 'service' churns out. They have also been used as the precedential foundation for a number of subsequent-- and thus, equally meaningless-- rulings in various courts.

Simple logic deals with the first of these cases, in which the Latham Court makes the vague definitions-dependent non-statement that an "[argument] that under 26 USC §3401(c) the category of ‘employee’ does not include privately employed wage earners is a preposterous reading of the statute”. This snippet is presented in the hope that it will be misunderstood to be a declaration that "all workers" (or everyone meeting the common, non-specialized, dictionary-definition of 'employee') are included in the custom definition of the legal term "employee" provided in 26 USC §3401.

However, the Latham court's facile declaration plainly DOES NOT say the category of ‘employee’ under 26 USC §3401(c) INCLUDES ALL WORKERS. Instead, the court's declaration explicitly and carefully AVOIDS saying this.

In fact, Latham goes on to say, "It is obvious that within the context... ...the word "includes" is a term of enlargement not of limitation, and the reference to certain entities or categories is not intended to exclude all others."  Since under the rule of construction applying to "includes" (26 USC §7701(c)) the term allows for limited expansion to other things not listed but of like kind and class as those which are, this declaration is certainly correct. In that sense, and to that degree, "includes" IS a "term of enlargement", as the Latham court says. It is simply not a term of "unlimited enlargement", and the court tacitly admits this with its careful wording, "...not intended to exclude all others." (Emphasis added.) 

At the same time, the fact that the term "employee" is defined in the statute at all makes inescapably plain that it isn't intended to INCLUDE all others, either. If the term was meant to cover everybody meeting the standard dictionary definition of 'employee', it wouldn't have been given a statutory definition in the first place.

(We'll note in passing that the quoted language of the Latham court doesn’t clarify what is meant by “privately employed wage earners”. This construction opens a “depends-on-what-the-meaning-of-“is”-is escape hatch big enough to navigate a bound edition of the tax code through, since "wage" is a custom defined, inherently-limited term in the tax law itself...)

***

REGARDING THE "Sullivan" ruling, the snippet presented by the tax agency is as follows:

“To the extent Sullivan argues that he received no ‘wages’ because he was not an ‘employee’ within the meaning of 26 U.S.C. § 3401(c), that contention is meritless. Section § 3401(c), which relates to income tax withholding, indicates that the definition of ‘employee’ includes government officers and employees, elected officials, and corporate officers. The statute does not purport to limit withholding to the persons listed therein."

As is the case in Latham, even on its face this excerpt says nothing of any significance. Saying that, "The statute does not purport to limit withholding to the persons listed therein," is in no way the same as saying that "Withholding applies to everybody, period," although this is how the tax agencies would like this language to be misunderstood. In fact, "The statute does not purport to limit withholding to the persons listed therein," is language which explicitly and carefully AVOIDS saying: "Withholding applies to everybody, period."

The language here does happen to be technically accurate, though. Due to the meaning of "includes" in these statutes-- itself a custom defined term-- the definition of "employee" cited by the Sullivan Court is capable of limited expansion. As is helpfully clarified by the Department of Treasury:

Meaning of Terms: The terms “includes and including” do not exclude things not enumerated which are in the same general class."

27 CFR 72.11

Nonetheless, this remains a far cry from, "Withholding applies to everybody, period." Instead, it translates only to, "Withholding [under 3401(c)] DOES NOT apply to everyone-- only those listed and others that might also belong in the class established by the characteristics of those listed"  (which is to say, members of the federal workforce, in this case). Again, the very fact that misleading, empty nonsense such as this is what the tax agencies must rely upon in attempting to suggest universal applicability of the "income" tax emphasizes the complete lack of substance in that ridiculous contention.

***

CLEARLY, THE IRS EFFORT to gin up "case-law" support for its preferred misunderstanding of the law is an exercise in futility when deployed against anyone willing to go to the trouble to look and think beyond the superficial. This is particularly true as regards the "words of art" issues on which we are focusing here. See the detailed discussion of the "includes" mechanism in 'The Law Means What It Says' for an accurate presentation of the reigning Supreme Court doctrine regarding these matters.

Still, it is worth keeping in mind that a specific point-by-point correction of each effort to mislead regarding the use of "includes" isn't actually necessary. It is enough to simply point out that unapportioned capitations are prohibited.

Thus, ANY construction of the term "includes" (and any other term in which it is used), OR OF ANY OTHER STATUTORY ELEMENT AT ALL which would suggest that an unapportioned capitation has been imposed is clearly and inarguably a misconstruction of the statute. No further analysis is really required:

"It is elementary law that every statute is to be read in the light of the constitution. However broad and general its language, it cannot be interpreted as extending beyond those matters which it was within the constitutional power of the legislature to reach."

McCullough v. Com. of Virginia, 172 U.S. 102, 112 (1898)

Nonetheless, let's finish this "includes"-related discussion with an example of the fact that when courts aren't trying to evade the inconvenient realities of the law as in Sullivan and Latham (where both exploiting and sustaining confusion about the meaning of "includes" appears to have been very much on the judge's minds), they are capable of perfect clarity on the point. This is revealed in Mobley v. C.I.R. (6th Circuit No. 07-2019, 2008), in which the three-judge panel ruminates over whether a definition of “courts” referred to in 28 USC 1631 could encompass the Tax Court.

The definition involved is from 28 USC § 610- Courts defined:

"As used in this chapter the word “courts” includes the courts of appeals and district courts of the United States, the United States District Court for the District of the Canal Zone, the District Court of Guam, the District Court of the Virgin Islands, the United States Court of Federal Claims, and the Court of International Trade".

Weighing various different approaches to considering the question, the panel observes that, "One might think, for example, that all of the "include[d]" courts listed in section 610 are Article III courts, which would exclude the Tax Court-- an Article I court." (Emphasis added.) That is, the panel admits that if all the courts listed in the statutory definition were courts of the Article III class, those of other classes-- despite being well within the common meaning of "courts"-- would necessarily be recognized as being EXCLUDED from the meaning of “courts” for the purposes of this statute.

The panel goes on to point out that, in fact, an Article I court-- the Court of Federal Claims-- IS listed in the definition, and so Tax Court can qualify as included within the meaning of the statutory term "courts" despite not being listed (but only for this reason).  This is precisely the doctrine of statutory construction applicable to definitions using “includes” in the internal revenue laws, as explicitly expressed by statute:

“Includes and including: The terms ''includes'' and ''including'' when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined.”

Rev. Act of 1938 §901(b) (Codified at 26 USC 7701(c),

and as reflected in various Treasury Department interpretations of this statute over the years:

26 CFR 170.59 and 27 CFR 72.11- Meaning of Terms: "The terms “includes and including” do not exclude things not enumerated which are in the same general class."

(It's worth pointing out that Title 26 contains numerous explicit exceptions to the statutory meaning of the terms "includes" and "including", adding the qualifying language "but is not limited to" or "but not limited to" in various places in the tax code where "includes" and "including" are deployed. This by itself is enough to make clear that the only expansion or enlargement provided by the terms of 26 USC 7701(c) IS INHERENTLY LIMITED. If it were not, there would be no point in adding "but is not limited to" anywhere in Title 26, because that would be already true of every deployment of the term "includes" throughout the law.)

"LexisNexis" Misrepresentations Regarding Pacific Nat'l Ins. v. US and the Limited Meaning of Person in 26 U.S.C. § 6671(b)

Frankly, I could devote an entire page-- maybe a book-- to misrepresentations of "case-law" by LexisNexis. I have seen many, and they are important because attorneys on both sides of a case often resort to LexisNexis for a "cliff-notes" rendering of precedents on a point of law. (Judges may well do the same.) This is sheer laziness, and leads to completely mistaken or outright bogus conclusions such as those discussed elsewhere on this page.

No attorney should ever use this service. A competent attorney bringing integrity to his or her job will always follow the practices of case analysis shown in the examination of Sloan above. It's more work, but it's also the only way to keep things real.

Anyway, while I may write that book eventually, for the moment I will just present one misrepresentation made by the service in its offering of precedents concerning the term "person" as statutorily defined at 26 U.S.C. § 6671(b).

The statutory definition reads:

(b) Person defined.-The term "person", as used in this subchapter, includes an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.

Now, read without craft and corruption, this definition plainly confines "persons" (as the term is used in the subchapter) to the class described by the examples given (officer[s] or employee[s] of a corporation, or a member[s] or employee[s] of a partnership, who as such officer[s], employee[s], or member[s] [are] under a duty to perform the act in respect of which the violation occurs), per the "includes" rule of construction at 26 U.S.C. § 7701(c):

(c) Includes and including

The terms “includes” and “including” when used in a definition contained in this title shall not be deemed to exclude other things otherwise within the meaning of the term defined.

This rule is explained by the Treasury Department as:

“The terms “includes and including” do not exclude things not enumerated which are in the same general class;” 27 CFR 26.11 and 27 CFR 72.11 (that is, things within the general class described by the enumeration in the definition can be considered to also be within the meaning of the defined term as it is used in the statute).

Here’s how the United States Supreme Court explains the rule:

“[T]he verb “includes” imports a general class, some of whose particular instances are those specified in the definition.”

Helvering v Morgan’s, Inc, 293 U.S. 121, 126 fn. 1 (1934);

and,

“[I]ncluding... ...connotes simply an illustrative application of the general principle."

Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 62 S.Ct. 1 U.S. (1941).

However, in its lead "precedent" presented concerning the meaning of "person" under 6671(b), LexisNexis offers this:

Definition of "person" in 26 USCS § 6671 is not restricted to class of persons specifically listed. Pacific Nat'l Ins. Co. v United States (1970, CA9 Cal) 422 F.2d 26, 70-1 USTC If 9238, 25 AFTR 2d 714, cert den (1970) 398 US 937, 26 L Ed 2d 269, 90 S Ct 1838, reh den (1970) 400 US 883, 27 L Ed 2d 121, 91 SCt 116

This is a completely misleading rendering of what the Ninth Circuit actually said in Pacific National.

Here is what the Pacific court REALLY said:

We think Pacific reads sections 6672 and 6671(b) too narrowly. Briefly, it is our conclusion that the language of these provisions is broad enough to reach an entity which assumes the function of determining whether or not an employer will pay over taxes withheld from its employees; that this reading of the language serves the evident purpose of the statute; and that the district court's finding that Pacific performed this function with respect to Central is fully justified by the record.

The definition of "persons" in section 6671 (b) indicates that the liability imposed by section 6672 upon those other than the employer is not restricted to the classes of persons specifically listed --officers or employees of corporations and members or employees of partnerships. "By use of the word ['includes'] the definition suggests a calculated indefiniteness with respect to the outer limits of the term" defined. First National Bank In Plant City, Plant City, Florida v. Dickinson, 396 U.S. 122, 90 S. Ct. 337, 24 L. Ed. 2d 312 (1969). 8 As we said in United States v. Graham, 309 F.2d 210, 212 (9th Cir. 1962): "The term 'person' does include officer and employee, but certainly does not exclude all others. Its scope is illustrated rather than qualified by the specified examples." 9

The language is broad enough to reach corporations and other artificial entities, as well as natural beings. The Code expressly provides that unless "otherwise distinctly expressed or manifestly incompatible with the intent * * The term 'person' shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation." 26 U.S.C. § 7701 (a)(1). And since artificial entities commonly provide operating, accounting, and management services for independent businesses, it is not "manifestly incompatible" with the intent of section 6672 to include them within its reach.

We may assume that when the employer is a corporation the statutory language does limit liability under section 6672 to those who exercise the corporation's power to determine whether or not to pay over the withheld tax. But the definition of "persons" does not require that they be formally vested with the office or employed in the position normally charged with this function; the definition simply "includes" such persons. 10 Indeed, the language itself does not require that they be officers or employees of the corporation at all, so long as they are in fact responsible for controlling corporate disbursements. 11 As we held in Graham, supra, 309 F.2d at 212, "the section must be construed to include all those so connected with a corporation as to be responsible for the performance of the act in respect of which the violation occurred"; it reaches those who have "the final word as to what bills should or should not be paid, and when." Wilson v. United States, 250 F.2d 312, 316 (9th Cir. 1958). See a/so White v. United States, 372 F.2d 513, 517, 178 Ct.CI. 765 (1967).

Pacific National Insurance Co. v. United States, 422 F.2d 26 (9th Cir.) (1970) (Emphasis added.)

The misleading LexisNexis rendering of this ruling: "Definition of "person" in 26 USCS § 6671 is not restricted to class of persons specifically listed," virtually guarantees that this ruling will be incorrectly taken as holding that the definition of "person" does not confine its meaning to those within the class described in the definition. This would mean, of course, that the court said the meaning of "person" as used in the subchapter is not confined at all by the definition.

This is plainly wrong. What the Pacific court ACTUALLY said is merely that the class described in the definition is bigger than just the officers, employees and members specifically enumerated-- it also embraces others who are under the same duty:

"[I]t is our conclusion that the language of these provisions is broad enough to reach an entity which assumes the function of determining whether or not an employer will pay over taxes withheld from its employees..."

"[T]he definition of "persons" does not require [that in order to qualify as a relevant "person" someone] be formally vested with the office or employed in the position normally charged with this function...so long as they are in fact responsible for controlling corporate disbursements."

An accurate "cliff-note" rendering of Pacific would read: "Definition of "person" in 26 USCS § 6671 includes those sharing the characteristics of relevant duty with the enumerated examples; the class of "persons" defined by the statute is that of persons under such a duty, whether technically an officer, employee, or member of the entity in regard to which the duty arises."

Accurately rendered, it is clear that the Pacific ruling plainly and properly confines the meaning of "person" as used in 26 U.S.C. Chapter 68, Subchapter B- Assessable Penalties, contrary to what is so strongly suggested by (and easily misread into) the LexisNexis misrepresentation of this ruling. STAY AWAY FROM LEXISNEXIS!!

***

By the way, it is also clear that, accurately rendered, the Pacific ruling fully supports, and can be read in no way other than as acknowledgement of, the accurately limited meaning of "includes". The Pacific court clearly construes "includes" not as an "also includes" supplement of some other, broader definition, but merely as permitting limited expansion of a definition to objects not mentioned but within the class actually illustrated by the examples given (which is not the class of the examples themselves, but of what they exemplify)-- and therefore, axiomatically, to no one outside that illustrated class-- just as the authorities say:

“The terms “includes and including” do not exclude things not enumerated which are in the same general class;” 27 CFR 26.11 and 27 CFR 72.11 (that is, things within the general class described by the enumeration in the definition can be considered to also be within the meaning of the defined term as it is used in the statute).

“[T]he verb “includes” imports a general class, some of whose particular instances are those specified in the definition.”

Helvering v Morgan’s, Inc, 293 U.S. 121, 126 fn. 1 (1934);

“[I]ncluding... ...connotes simply an illustrative application of the general principle."

Federal Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95, 62 S.Ct. 1 U.S. (1941).

For more on this subject, and how the Pacific ruling has been cited in other proceedings to illustrate the proper understanding of "includes" and the limited meaning of "person" in statutory definitions like that of 6671(b), click here. For more on "includes" generally, see this.

Another Reeking Example Of Judicial GIGO

PROPER UNDERSTANDING OF LEGAL ISSUES can wither by many different causes. The most obnoxious cause is sheer judicial stupidity which goes not only unchallenged but is treated as a precedent upon which a wholly-errant doctrine is founded. An example of this can be seen in the ruling in In re Meador, 16 F. Cas. 1294 (ND Ga. 1869), concerning the authority granted under section 49 of the revenue act of 1868 for the federal government to to "examine all persons, books, papers, accounts and premises", and to compel persons to appear, and to produce books and records, in order to ascertain the correctness of a return.

The Meadors had challenged this authority as repugnant to the Constitution's Fourth Amendment when exercised without a warrant. The court hearing the case ruled otherwise, based on mistaking the meaning of a ruling ten years prior:

"The objection made to the power given to the supervisor by the statutes is, as just mentioned, that it is forbidden by the fourth amendment to the constitution. But this is a civil proceeding, and in no wise does it partake of the character of a criminal prosecution; no offense is charged against the Meadors. Therefore, in this proceeding, the fourth amendment is not violated. Said Merrick, J., in pronouncing the judgment of the court in Robinson v. Richardson, 13 Gray. 454: 'Search warrants were never recognized by the common law as processes which might be availed of by individuals in the course of civil proceedings, or for the maintenance of any mere private right; but their use was confined to cases of public prosecutions, instituted and pursued for the suppression of crime or the detection and punishment of criminals.1 Murray v. Hoboken Land & Imp. Co., supra; 1 Bish. Cr. Proc. § 716. I do not perceive any likeness in principle between the summons issued by the supervisor and either general warrants or writs of assistance."

AS IS READILY SEEN, the Meador court mistakes the Robinson court as having declared warrants to be unnecessary in searches conducted pursuant to investigations for purposes of civil prosecutions. The court seems to think the Founders were fine with the idea of government agents rooting through someone's stuff at will, as long as they were only looking for tax-related contraband (precisely the use of the "general warrants" and "writs of assistance" against which the Fourth Amendment was most specifically provided).

In fact, all Robinson actually says regarding civil actions is that private citizens can't deploy search warrants pursuant to their civil litigations. The Robinson court's further declaration that warrants can only be used in criminal prosecutions isn't a statement that searches can be conducted for other reasons, and without warrants, to boot; on the contrary, it is a statement consistent with the Founders' plain and well-settled doctrine on the Fourth Amendment principle that searches can only be conducted at all if pursuant to criminal investigations (and based on sworn declarations by competent witnesses alleging what will be found and where)". Nonetheless, the Meador court uses this ruling as authority for the proposition that "civil" searches are lawful, and need nothing but a tax examiner's curiosity as their basis.

This is a classic case of "garbage in, garbage out", with the "out" taking the form of many decades of judicial doctrine that no warrants were needed for a search, as long as the search was not pursuant to an ongoing criminal investigation! Here, then, is another in an endless list of available examples of why nothing coming out of any court should ever be automatically accorded the least respect or significance as to the competent determination of a point of law.

Interestingly, court issuing the Meador ruling availed itself of a pretextual escape hatch a few pages later in its ruling:

"And here a thought suggests itself. As the Meadors, subsequently to the passage of this act of July 20, 1868, applied for and obtained from the government a license or permit to deal in manufactured tobacco, snuff and cigars, I am inclined to be of the opinion that they are, by this their own voluntary act, precluded from assailing the constitutionality of this law, or otherwise controverting it For the granting of a license or permit—the yielding of a particular privilege—and its acceptance by the Meadors, was a contract, in which it was implied that the provisions of the statute which governed, or in any way affected their business, and all other statutes previously passed, which were in pari materia with those provisions, should be recognized and obeyed by them. When the Meadors sought and accepted the privilege, the law was before them. And can they now impugn its constitutionality or refuse to obey its provisions and stipulations, and so exempt themselves from the consequences of their own acts?"

With this reasoning, the court puts itself on arguably valid ground for deeming enforcement of the examiner's actions not a Fourth Amendment violation, and perhaps is signaling its own recognition of the flaws in its earlier declaration. But this hedge was overlooked by courts subsequently citing to the ruling as precedent for finding warrantless "civil" searches Constitutional, resulting in a simple, errant and enduring doctrine that searches conducted for ostensibly "civil' purposes simply have no meaningful Fourth Amendment implications.

Hartman v. Commissioner

The IRS and DOJ routinely cite to a 1975 Tax Court ruling, Hartman v. Commissioner, 65 T.C. 542 (1975) (or subsequent cases which cite to Hartman)-- a "deficiency" case concerning a non-filer in which it was held that no 6020(b) was required for a deficiency proceeding to go forward when no return had been filed. The case is said to stand for the proposition that a[n actual] 6020(b) return need not be signed under penalties of perjury.

But though the ruling of this agency court does indeed say these words (purely as a disposal of an irrelevant contention, since neither a 1040 nor a 6020(b) return was involved in the case), it does so in a complete obfuscation of the truth. While 6020(b) doesn't impose the oath obligation itself (as the Hartman court says), that obligation is imposed on 6020(b) returns by action of 26 U.S.C. § 6065 (which the Hartman court neglects to mention).

Further, the Hartman court's rambling on the signature issue conflate two different issues, reflecting confusion probably borrowed from Hartman himself, who apparently argued that the 6020(b) language somehow imposed a requirement for a signature under oath for mere deficiency determinations and findings:

"Finally, petitioner argues that the "so made and subscribed" language of section 6020(b)(2) (see p. 544 supra) requires that all determinations and findings of the Commissioner must be under oath. (Emphasis added.) Contrary to petitioner's position, section 6020(b)(2) imposes no oath requirement at all. The language cited by petitioner simply refers to a return made by the Secretary or his delegate pursuant to section 6020(b)(1) and "subscribed" by him. Webster's Third New International Dictionary (1965) defines "subscribe" as "to write (as one's name) underneath; sign (one's name) to a document." We find no reason to believe Congress intended to give the word other than this ordinary and well-known meaning."

Hartman v. Commissioner, 65 T.C. 542 (1975)

Can't argue with the court about the meaning of "subscribed" by itself, but of course that subscription must be made in conformity with other rules, one of which is found in 26 U.S.C. § 6065 and does impose the oath requirement on 6020(b) returns. In short, the citation of this case by government attorneys is just corrupt lawyering in an effort to abuse a non-precedential judicial expression of ignorance or corruption, done in the hope that their opponent won't know enough to debunk this phony claim of authority for a proposition that is actually false..

May v. Commissioner

Contributed by Dave Scotese

Citation being misrepresented: May v. Commissioner, 752 F.2d 1301, 85-1 U.S. Tax Cas. 9156 (8th Cir. 1985). The misrepresentation is that May made a meaningful assertion in a tax court petition that because he "enjoys no grant of privilege or franchise", he is not liable for federal income tax, and that this was addressed as a point of law by the appellate court and rejected.

What’s wrong with this picture:  The court did NOT reject the argument about privilege. In fact, the court deliberately avoided mentioning that argument even when listing others in May's petition to tax court.

Analysis:

May engaged in frivolous litigation while also making an honest claim that would have been honored if not for the frivolous litigation and his failure to properly rebut presumptions created by information returns.  Alleging something in a complaint that happens to be true does not require that the court find in favor of the complainant.

The court determined his complaint was frivolous, saying, in the first paragraph of the "Background" section, that "On July 22, May filed an amended petition contesting the deficiency determination in which he asserted, inter alia, that he is not subject to federal income tax because the Internal Revenue Code contains no definition of ‘income’; that his income for these years was derived solely from wages which is neither "gain" nor "profit" subject to the federal income tax; that the filing of a tax return is voluntary and he did not "volunteer to self-assess himself" for the years in question; and that the Commissioner violated the Privacy Act of 1974, 5 U.S.C. Sec. 552a (1982), an act of fraud which vitiates his obligation to comply with any act."

May had indeed asserted all the points the court lists above. But he also declared in his petition that he "has received nothing during the years in question of a known tangible value that qualified as income and enjoys no grant of privilege or franchise," and this assertion the court specifically declines to identify as one to which its ruling is addressed. It is therefore false to present this as a ruling standing for the rejection of this point.

Further, even if the court HAD acknowledged the point, its failure to award May a victory simply because he had made this assertion is NOT a "rejection" of the "privilege" point. First of all, May was a non-filer in regard to the years involved here. Thus, he had failed to make his "privilege" assertion where it had legal substance-- on 1040s addressing these years. On the contrary, he had acquiesced to the unrebutted assertions of "information returns" that he HAD exercised privilege. Saying he hadn't years later and only in a tax court petition was legally-meaningless, and in no way dispositive of the case in his favor.

Further still, according to the appellate court's characterization of May's argument, he admitted even in his petition that he had received "wages". The court was therefore bound to judge his petition to be "frivolous" and without merit, because the legal definition of "wages" in Title 26 implies the exercise of privilege (and the creation of a tax liability). The court needed nothing more; even had May's "privilege" point been considered by the court, rather than not, this "wage" assertion contradicted it.  

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