Taxing times for 16th Amendment rebels.

Bob Schulz announces this in late January to a rapt crowd of 200 gathered in an auditorium in Crystal City, Virginia. It’s the first national conference of the We The People Foundation for Constitutional Education, a nonprofit advocacy group Schulz founded and runs.

He delivers his declaration not with reckless bravado but with a dignified, quiet, middle-management-lifer assurance, in keeping with his general mien. Schulz is a serious white male in a nice conservative dark suit, a former environmental engineer for both General Electric and the Environmental Protection Agency.

He’s been married for 38 years to the same woman, and he has four children of whom he is quite proud. Yet when his kids begged him to reconsider the path that requires him to declare publicly that he won’t go to jail, his wife Judy told them, "Your father put his country before his family, and I support him."

Schulz has stopped paying federal income tax, and he isn’t afraid to let anyone, including the Internal Revenue Service (IRS), know it. Not only is he not paying, but he’s also leading a national movement telling everyone else they shouldn’t pay either.

When I talk to him after the conference, he doesn’t seem quite so confident he won’t go to jail. But he doesn’t seem to care one way or the other. "Clearly [the government is] going to react," he says. "They may well sooner or later come at me in one way or another. You hear people say, ‘Bob, they’re going to take you out. Dozens of armed agents will come turn your life upside down.’ You hear all these things. I have to say I have no fears. I fear God and God alone."

Americans have been protesting and avoiding taxes since before the U.S. officially existed. We are a nation born of tax protests. This tradition feeds the attitude that unites the serious, almost obsessed crowd here: the belief that they are the true patriots,staunch constitutionalists fiercely dedicated to the ideals that make America great. A radical transvaluation of values is going on right here in Crystal City. Far from being the very foundation of solid citizenry, acceding to the federal personal income tax is, among this crowd, an act of treason against what defines America: its Constitution and its "true laws."

Schulz’s We The People Foundation is transforming the often subterranean struggle to deny the legitimacy of the income tax. For decades this movement has been an inchoate collection of small congregations following varied gurus. Schulz and his crew, by contrast, offer a unified church with a canon of Right Arguments. The anti-income tax movement now has, through Schulz, a united, highly activist national membership organization claiming around 5,000 dues-paying members, a mailing list of 64,000, and local coordinators in 39 states and 600 counties.

While in the past evangelists of the "income tax is a fraud" message have tended to sell books and seminars, the We The People Foundation has the advantage of being hard to blithely condemn as a scam. It is not a business selling advice but a nonprofit dedicated to spending money -- more than $1 million since taking up this fight -- to spread the word. Its founder claims Gandhi as his influence: From him Schulz learned that to fight an unjust tyranny, you need a proactive, nonviolent mass movement, and that is what he is trying to create.

The movement against the income tax has lately adopted one of the tropes that define an on-the-rise minority in modern America: Its members want to be called what they call themselves -- the "tax honesty" movement -- and not be slapped with the pejoratives that most people have known them by (if aware of them at all).

At the politest, their nemesis the IRS calls them "tax protesters." (Less politely, they’ve been known as "income tax cranks.") A woman who runs a small business making and selling display boards in Massachusetts, who claims to have not paid personal income tax for a few years now with no practical repercussions, tells me that "when people say ‘tax protester movement,’ it drives me nuts. I do not protest taxes. I think they are absolutely necessary. I protest illegal confiscation of assets, which is what the income tax is." She has no problem, she assures me, with sales taxes, property taxes, or corporate taxes.

The partisans of the tax honesty movement go beyond complaining that the income tax is too high, or that out-of-control IRS agents enforce it in thuggish ways. They claim, for a dizzyingly complicated variety of reasons, that there is no legal obligation to pay it. The continued life -- and even flourishing -- of that notion, in the face of obloquy, fines, and jail sentences, says something fascinating about a peculiarly American spirit of defiance. It may even say something encouraging about what it means to live in a nation of laws, not of men.

Bob Schulz has a long history of fighting the government in the name of constitutionally limited powers and proper procedure. His battles date back to 1979, when he successfully sued to halt a new sewage treatment system near Lake George in New York. (According to Schulz, the proposal ignored environmental impact requirements.) Since then he’s been involved in more than 100 such lawsuits and won many.

All that is small beer compared to his latest crusade. Since 1999 Schulz has presented his contentions regarding the income tax’s illegality to the IRS, the president, the Department of Justice (DOJ), and every member of Congress. He has humbly beseeched them to answer a list of questions regarding whether he, or any American citizen, has an actual constitutional, statutory, legal obligation to pay the federal income tax.

He’s led marches around IRS headquarters in D.C., and he went on a brief hunger strike in 2001. In July of that year his persistence prompted representatives of the IRS and DOJ to promise to show up at a public meeting Schulz was organizing. They promised to lay forth their official arguments as to why we do indeed have a legal obligation to pay income tax. That meeting was scheduled for September 25-26, 2001. The 9/11 attacks made Schulz reschedule, and the feds bowed out of appearing at the rescheduled event. Schulz feels he has pursued every proper step to find an answer to his questions. Now, he says, it’s time to fight.

When The New York Times asked IRS spokesman Terry Lemons why the Schulz petition was being ignored, Lemons "said that courts had upheld the validity of the tax laws and that the agency did not want to waste time and resources dealing with well-settled issues. Mr. Lemons added that the recent spate of enforcement actions taken by the IRS against promoters of abusive tax schemes...show other ways that government is answering the petition."

Not the answer the movement wants, obviously. But it’s one they should have expected. Never has any court anywhere -- much less the IRS -- accepted as valid any of the many arguments the movement offers for how and why there is no legal obligation for individuals to pay federal income tax. In fact, courts will fine you up to $25,000 for even raising them, insisting such arguments have been rejected so often by so many courts at so many levels that they are patently frivolous and time-wasting.

Despite this, the dominant vibe at this conference, even among those whose pursuit of these curious doctrines has led them to conflicts with government or employers, is hopeful in a religious sense. They clasp valiantly to belief in their own righteousness and the certainty that through that righteousness they one day will be delivered.

I eavesdrop on one smiling lady with a shock of short white hair telling a fellow attendee of her long fight over garnishment of her wages from a tax lien. It sounds like plenty of trouble came her way, and in the end the courts were taking her money anyway. But she was still cheerful, evincing no regret for the path she’d taken. Wrapping up her tale, she confided, with a smile and an only slightly wistful sigh, "I used to be normal, but...."

No one at the conference -- from the man who tries to pay for his Au Bon Pain lunch with a privately minted silver coin to the airline employee whose union is getting tired of his fights over tax withholding -- strikes me as merely fumbling for some scam to avoid paying taxes. Their concerns are higher than that. The Constitution and a properly limited government are their guiding lights. Indeed, the conference isn’t only about the income tax: Panels about the Second Amendment, jury nullification, and the questionable pedigree of the Federal Reserve are also offered, and also well attended. Mel Gibson’s controversial father, Hutton Gibson, gives a rousing speech on the need to fight the New World Order to defend our traditional liberties and is cheered heartily. Most everyone here seems aware there’s a good chance they will pay a price far higher than the mere cash of taxes for pursuing the movement’s difficult truth. When a speaker announces that his listeners need to be prepared to go to jail, almost all clap.

In one question-and-answer session, a woman airs her concerns about all the practical difficulties that accompany the tax honesty path. How, for example, can one get a mortgage loan without tax returns to show? She seems to be begging for some loophole in the loopholes -- some reason she doesn’t have to refrain from paying income taxes. But the crowd and Schulz are pitiless. After she offers up too many what-ifs and how-do-yous, Schulz acknowledges that this path of truth might not be for everyone -- only, by implication, for the bravest and staunchest of patriots.

Reality does, however, toss the tax honesty movement the occasional sweet crumb of hope. A couple of the crumbs that materialized in the last year seemed substantial and nourishing at first nibble.

Most significantly, a tax honesty true believer named Vernice Kuglin, a vivacious and attractive Federal Express pilot who has a crowd of admirers following her everywhere during the conference, was slammed with criminal charges for failure to file and for tax evasion. She beat the rap in August, acquitted of all charges by a federal jury in Memphis.

Also last year, Texas plastics manufacturer Dick Simkanin was finally brought to trial for failure to withhold income taxes for his dozens of employees. Simkanin had been a poster child in We The People-sponsored ads in USA Today, featured as a businessman who honestly believes it is his right under law not to withhold. Two grand juries who had gotten to speak to Simkanin failed even to indict him. Finally a third grand jury, whom he didn’t get to speak to, did indict. But at the end of his first trial in November, the jurors could not reach a verdict.

Both these events occasioned great rejoicing in the tax honesty community. But both had grimmer denouements. Kuglin stayed out of jail, but she was slapped with civil liens for past taxes due and penalties. These days she’s only collecting around $290 per pay period from her FedEx job, with the rest snatched by the IRS. Simkanin was promptly retried and found guilty in January, and he now faces a potential 129 years in prison.

How the Simkanin case played out should give the tax honesty movement pause. Judge John McBryde was not entirely fair to his client, says Simkanin’s lawyer, Arch McColl, who spoke at the conference. Schulz and other movement heroes testified on Simkanin’s behalf in vain. McBryde prevented McColl from mounting a real defense, the attorney complains, sustaining the prosecutors’ objections almost every time he tried to raise tax honesty arguments.

The jury sent back a question to the judge asking to see the codes that directly stated Simkanin was required to withhold. (Some of the defendant’s ideas clearly had gotten through.) The judge told them simply to trust him when he said the law required Simkanin to withhold -- essentially directing the verdict, since Simkanin never denied not withholding. (McColl has strong expectations that this response, among other things, will help guarantee a successful appeal.)

Other aspects of how the system treated Simkanin should further discourage tax rebels. Despite being a 59-year-old heretofore-respectable small-business owner not yet convicted of anything, he has been in jail since June. (A federal plant claimed via hearsay, denied in court testimony by someone who was present when the comment was allegedly made, that Simkanin had threatened to kill some judges. The prosecutors sure knew their audience.) During the trial Simkanin was dragged into court in leg irons. The IRS doesn’t resort to criminal prosecution very often, so when it does, it wants to make a vivid example.

The We The People conference brought together many of the movement’s leading lights. It also presents some new strategies. Schulz, with the help of superstar radical lawyer Mark Lane, is in the process of launching a class action lawsuit to call the government’s cheating hand on this whole income tax matter.

Lane has a mysterious tendency to be wherever the quirky action is in American politics and law. He’s famous for being one of the first Warren Commission revisionists with his 1966 book Rush to Judgment and for being the lawyer for People’s Temple death cultist Jim Jones. He has successfully defended some tax honesty clients, though he tells me: "I pay taxes and never advise any client not to. But I can tell you, I’ve read all these cases, and I don’t see where it says you have to pay, and I don’t understand why the government doesn’t answer [Schulz’s] questions."

The planned suit relies on interestingly fresh grounds: Schulz is claiming that all these government officials who refuse to answer his questions about the income tax are violating his First Amendment right to petition the government for a redress of grievances. Surely, after all, that right must include the ability not merely to send in such petitions but to get some sort of reasonable response.

Schulz recruits plaintiffs at the conference for another planned class action, this one against employers who have refused to stop withholding income tax from their paychecks when employees request it. This is illegal according to Schulz’s reading of U.S. Code Title 26, Subtitle C, Chapter 24, Section 3402(n), which does indeed seem to indicate, to quote that section, that "notwithstanding any other provision of this section, an employer shall not be required to deduct and withhold any tax under this chapter upon a payment of wages to an employee if there is in effect with respect to such payments a withholding exemption certificate...furnished to the employer by the employee certifying that the employee -- (1) incurred no liability for income tax imposed under subtitle A for his preceding taxable year, and (2) anticipates that he will incur no liability for income tax imposed under subtitle I for his current taxable year."

This is an option on every W4 form. Schulz maintains that the language of the law clearly implies the employer can’t get in trouble with the IRS for not withholding as long as the employee thus certifies. As a matter of fact, if not law, the IRS will regularly question such W4s (or ones that claim "too many" exemptions) and lean on employers to start deducting as if a straight one-exemption W4 has been filed. Schulz thinks any employer doing that -- and some do so even without the IRS’s prodding -- should be sued, and he intends to do so in the spring.

To his mind, and those of the 200 gathered at the conference, they are doing everything an American citizen needs to do when faced with injustice: using every legal, reasonable means to seek a redress. The Constitution will not defend itself, Schulz tells me; it is just a piece of paper. Keeping it healthy requires bold action, often expensive and time-consuming action, from those who love it.

After Lane gives his presentation about the redress of grievances suit, with its announcement that parties to the suit intend to withhold their cooperation with the income tax until the questions are answered, a sour-voiced, heavy-set woman toward the back is appalled. No one owes the tax, she exclaims, so what kind of weapon is that to hold over the government’s head, withholding something that wasn’t even due in the first place?

In his role as general MC for the conference, Schulz is clearly wearied by the obsessions of some of his audience members -- for example, the notion that hiring an attorney means abandoning personal sovereignty before the law, or that having a yellow-fringed flag in a room means you are under martial law. But he is generally polite about it, if in a pained way. He tries to explain to the woman that lots of people are paying, and that they were seeking to enjoin the IRS from enforcing any tax liabilities on them until the petition is answered.

Sessions at the three-day conference often run late -- through lunch and into the evening, past the announced closing time -- and the crowds stay through it all. I meet computer industry workers, violin makers, and even ex-IRS agents, from all across the country; they are overwhelmingly white, about two-thirds male, and mostly between 30 and 60 years old. Their comportment and appearance are not kooky by any means. They dress in business casual mostly, evincing no untoward whooping or mania or anger. Gauging audience reaction to certain statements from the podium, I’d say the majority of them are serious Christians. They are serious people in general: rebels without cool, with no sense of humor or irony, armed merely with the conviction that they are right.

Their devotion to their beliefs is certainly religious. Indeed, tax litigation consultant Daniel Pilla, author of The IRS Problem Solver, says they’re "like programmed cult members -- you can’t reason with them." More charitably, the tax honesty people are staunch exemplars of America’s glorious Protestant heritage.

This observation is not merely a pun on their status as "tax protesters." Their attitude toward the Constitution and the statutes and legal decisions regarding the income tax are uniquely Protestant, relying on a layman’s ability -- indeed, obligation -- to read and study and parse the original documents himself, to come to his own personal relationship with the law and the cases, and to prefer his understanding to that of the priesthood of lawyers, judges, and accountants.

"Case law" -- the kind that proves that you can and will be arrested or fined for not filing or paying income tax -- means nothing to them; they like to rely strictly on the statutes as written, or on Supreme Court cases and straight constitutional interpretation. Irwin Schiff, the godfather of the movement, is insistent that you shouldn’t just take his word for anything: You should check the statutes. He is, he declares, the biggest reseller of the published version of the U.S. tax code. He sells specially tabbed copies leading you straight to the pages in the multithousand-page behemoth you must see to understand his own interpretations.

Not merely Protestant, the tax honesty people are strangely reminiscent of fandom -- of the comic book, fantasy, science fiction, role-playing-game variety. They have the same obsession with continuity and coherence within a created fantasy world of words. It’s just that, in this case, that world of words isn’t a multivolume fantasy epic or a long-running TV series -- it’s U.S. law. When these people try to reconcile the definition of income in this subsection of Title 26 of the U.S. Code with the definition in a 1918 Supreme Court case, it’s like hearing an argument over the inconsistencies between a supervillain’s origin as first presented in a 1965 issue of The Amazing Spider-Man and the explanation given in a 1981 edition of Peter Parker, the Spectacular Spider-Man.

The tax honesty movement’s vision of the world is fantastical in another way. It is not merely obsessed with continuity; it is magical in a traditional sense. It’s devoted to the belief that the secret forces of the universe can be bound by verbal formulas if delivered with the proper ritual. There are numerous formulae in the tax honesty spellbook, with rival mages defending them. Which spell is best: The summoning of the Sovereign Citizen? The incantation of the Constitutional Definition of Income? The banishing spell of No Proper Delegation?

The tax honesty folks similarly believe that their foe the IRS must also be bound by these grimoires of magic: that without the properly sanctified OMB number an IRS form holds no power, that without uttering the mystic word liable no authority to tax can truly exist.

And always, always, the ultimate incantation, The Question: Where does it say that I owe income taxes? Show me the law!

You hear this all the time. When presented with the simple request to "show me the law that unambiguously requires me to pay income tax," I was told, everyone from congressmen to tax lawyers to IRS agents is stymied, even when Schiff and others offer enormous rewards to anyone who can do so. It didn’t take me long to find what seemed to be an answer to that question.

In U.S. Code Title 26, Subtitle A, Chapter 1, Subchapter A, Part I, Section 1, it says, "There is hereby imposed on the taxable income of...," followed by subcategories that seem to include most Americans, complete with tables showing the percentage owed for each income range. (Subchapter A even comes close to that magic word liable that many in the movement insist is nowhere applied to personal income taxes -- it’s called "Determination of Tax Liability.") But "taxable income" is the rub. Tax honesty types claim the "constitutional" definition of income, as set forth in such Supreme Court cases as Doyle v. Mitchell Brothers (1918), is corporate profits, not individuals’ wages. (Courts have knocked down this claim regularly during the last 30 years.)

The movement has an argument against the income tax for every level of abstraction, from the highest (taxing the fruits of our labor is against our natural rights as sovereign individuals) to the lowest (the IRS can’t manage to get everyone, so it is reasonably safe just not to file). One California paralegal who speaks at the We The People conference relies on everything from the Magna Carta to the Treaty of Paris of 1765 to the U.N. Declaration of Human Rights to defend her contention that she doesn’t owe any income tax. Massed together, the chorus of tax honesty voices can’t help but remind you of the lawyer in the old joke who argued that his client was not even in town when the victim was killed; and if he was in town, he didn’t kill him; and if he did kill him, he was insane when he did it.

At the conference you learn that taxing violates our natural rights; and anyway, the Constitution does not permit an unapportioned direct tax like an income tax; and if you think the 16th Amendment took care of that, well, it wasn’t properly ratified; and even if it was, it didn’t give any new taxing powers to Congress; and even if it did, the statutes and codes of the IRS as written aren’t officially U.S. law; and even if they were, they don’t define liability and income such that any normal working American owes taxes; and anyway, if you just don’t file they might never catch you. And there are plenty of complications on every step of this tangled path. (The claim that the 16th Amendment wasn’t properly ratified actually holds up pretty well. To judge from the pathbreaking research of Bill Benson -- a marvelous example of legal Protestantism -- there were enough procedural irregularities in its passage that it technically should not have been declared ratified in 1913. Still, it was thus certified, and the courts tend to respond to Bensonite arguments by saying it’s too late to do anything about it now, and it isn’t the court’s problem.)

This doesn’t mean anything goes in stabbing at the income tax. There are fringe beliefs even on this fringe. Larry Becraft is a lawyer who has actually won a handful of acquittals -- including one for Vernice Kuglin -- in defending people on trial for tax evasion. He gives a talk that is basically a warning to the movement to get its act straight and stop being absurd. Among the beliefs even others in the movement condemn as silly are the notions that by using a ZIP code or allowing a government document to spell your name in all capital letters, you surrender your sovereignty and make yourself a serf of the federal government, and that the income tax applies only to people who live in a federal territory or district, not to residents of the states.

Far from that sort of futile reliance on concepts of personal sovereignty that U.S. law just does not recognize, I encounter a remarkably frank and refreshing approach from Peymon Mottahedeh and his Freedom Law School. (Technically, he tells me, the school is a function of a church he runs.) Peymon has a table set up at the We The People conference seeking customers ("students," he prefers to call them) for the "tax defense funds" he sells (both "simple" and "royal" packages).

Peymon and his crew do believe the basic catechism of the movement: that one technically does not have a legal obligation to pay the individual income tax. They also know these arguments never succeed in court. When we meet later at his U.S. Code-lined office, attached to his home on the rural outskirts east of Los Angeles, he tells me he’s never seen much value in waving your hands in the air tauntingly and bellowing, "Here I am, IRS, and I don’t believe in you!"

Thus Peymon advocates simply not filing and relying on the luck of the draw. Peymon claims more than 60 million Americans a year don’t file. (There is no official number for this, though some more recent estimates from the government have it that only around 10 million people a year who are supposed to be filing aren’t. The IRS admits that in the last three years fewer than 230 nonfilers a year have been convicted.)

The next step is to ignore the threatening letters and audit re--quests you receive until you get an official Notice of Deficiency from the IRS. Then you go to Tax Court and stonewall like crazy, making the IRS prove you owe them something without the aid of the "tax confession form," as Peymon calls the 1040. (This all works better for you if you are self-employed and the IRS hasn’t already gotten its hands on your money through withholding.)

Peymon is a natural-born salesman, a handsome Iranian man with thick black hair swept back. He says he doesn’t really fear retaliation from the IRS since, after escaping from the Shah’s Iran, he feels he’s living a second life now anyway. "If we lose our freedom here, where else are we going to go?" he asks. Since he’s been selling this advice for only a couple of years, and tax court proceedings often stretch out that long, he says he doesn’t have solid stats on how well this approach is doing, and he shies from announcing his number of customers -- wouldn’t the IRS love to know? But he thinks his approach is the smartest one the movement has come up with. The IRS is a big bully; the smartest thing to do is stay out of the bully’s way and not call attention to yourself.

It’s too late for that for the movement’s biggest star, Irwin Schiff. At the We The People conference I witness a young fellow enthusiastically shake the hand of this compact 75-year-old man with a broad and squeaky voice and call him his hero; Schiff takes it in stride. He is the man, the granddaddy, in many ways the Founding Father of the modern tax honesty movement. Some of his signature ideas were floated by earlier figures, including Pete Soehnlen and Robert Golden, but he became the first mass phenomenon of tax honesty with his 1982 book How Anyone Can Stop Paying Income Taxes, originally self-published and later distributed by Simon & Schuster. He says he’s sold nearly half a million copies of his various books. Schiff used to sell tax shelters, and he first came to prominence in anti-statist circles with a 1976 Arlington House hit called The Biggest Con -- which, despite the title, is a standard right-wing peroration against taxing, spending, and Social Security and does not take a radical anti-income tax stance.

Even though he tells us anyone can stop paying income taxes, Schiff has spent a few years in prison as a result of criminal prosecutions on various charges stemming from his own failure to pay taxes. He has been out of jail since the early ’90s and has avoided "failure to file" convictions since then by filing an innovation he popularized, the "zero return." That means you file a 1040 but claim to have had no taxable income -- which by Schiff’s reading of the tax code and various Supreme Court cases, he does not (and neither do you).

His latest book-length disquisition on these matters, The Federal Mafia, is a work of baroque complexity. Yet when Schiff hears I’m a reporter writing about the movement, he says the truth about taxes is easy to grasp. "It’s so simple, it’s ridiculous," he tells me.

Sometimes Schiff’s arguments are not really about the law, just an appeal to a basic sense of fairness. For example, how can a country with a Fifth Amendment require us to file and sign 1040s under penalty of perjury when the information on them can be used against us in civil and criminal prosecutions?

Mostly, though, his shtick is based on various sorts of word magic. While some sections of the excise tax code specifically list the circumstances under which one becomes liable for them, for example, there appears to be no such section for the income tax. Therefore, Schiff argues, no one is actually liable for it -- even though, as detailed above, the tax is "imposed." Similarly, he posits a terribly significant distinction between a "notice of levy" and a "levy."

I get hit with a hilarious application of Schiff’s verbal judo as he attempts to convince me and another apparently confused attendee that "compensation for services" could not mean the same thing as "wages" for tax liability purposes. (This all fits in with his argument that only corporate profits should be considered "income.") He shows us a place in the code that seems to define "compensation for services" as taxable while not mentioning "wages." The other guy objects that surely a wage falls into the category of a "compensation for services."

"It’s not the same!" barks Schiff, the Socrates of the tax code. "And I’ll prove it to you: Can a corporation receive compensation for services?"

His interlocutor admits that yes, wise Schiff, it cannot be denied this is indeed so.

It all seems so sensible with the energetic Schiff yapping at you. Of course, to say that something falls into a category is not the same as saying it is identical to the category. Schiff’s argument is ultimately as convincing as saying that if an ap-ple is a fruit, and an apple is not an orange, then an orange can’t be a fruit. Still, he seems happy with it.

How, one might ask (and many have), can Schiff continue to maintain there is no legal obligation to pay income taxes when he has spent time in jail for not paying income taxes? He addresses this question in the latest edition of The Federal Mafia: "Unfortunately, some peo-ple who were persuaded by [my books] that they could legally stop paying income tax (they could) went to jail. How many, I don’t know. But they and their families paid a terrible price because of what they learned....I must again warn you regarding the use of this information. There is no question that it is all correct. Paying and filing income taxes are, by law, voluntary. The law...also provides you with a means for stopping the withholding of that tax, which, by any legitimate standard, you have a perfect right to do. But, by doing so, you run the risk of going to jail!"

The reason for that seeming paradox, Schiff says, is simple: The IRS and the judges it brings cases before are corrupt and don’t care what the law says. Which is why, since February 2003, Schiff has had his Las Vegas office raided and records of all his clients seized; the IRS has moved for judgment on $2.5 million in back taxes and penalties it claims he owes; and a federal judge has banned the sale and distribution of The Federal Mafia by Schiff and forbade him from publicly saying what he believes about the income tax. (That ban is under appeal now.)

Schiff tells a group of well-wishers this latest wave of statist oppression swamped him momentarily -- he went into a depression and lost 20 pounds -- but "I’m back! I’m back! I’m going to kick their ass!"

He proudly points out that all the back taxes in the $2.5 million judgment are from many years ago and that the IRS has done nothing to him for his more recent zero return filings. This proves to him that strategy must be foolproof.

Vernice Kuglin’s acquittal on criminal charges has made her one of the movement’s new saints and heroes. I witness her taking aside a man troubled by the mess he’s in because he advocated these beliefs as an accountant; she tells him kindly but firmly, "We know in our core that’s what we have to do." She was involved in Libertarian Party activities in the early ’90s and through that was exposed to tax honesty ideas. By 1995 she was sending letters to the IRS asking what specific section of U.S. code or statutes made her liable for the federal income tax. Were she legally liable, she insisted, she would be more than happy to pay.

Despite the liens on her income, Kuglin is optimistic. A juror in her case, she tells me, had a dream during deliberations in which he heard Kuglin repeating, "Liable, liable, what makes me liable?" This was apparently the crack in his mind that convinced him to lead the jury to acquittal. And then her son had a dream in which she and her lawyer were standing in front of the courthouse, and a ball of light spread around them and enveloped the world. She believes it is all fate, that the universe is taking care of her, that her victory is the beginning of the end of the whole evil lie of the income tax, and that "every setback is one more step to the win" in this battle.

A sober assessment of the empirical evidence shows that the exact opposite is true -- that victories for the tax honesty movement (the occasional criminal acquittal or mistrial) lead inevitably to a later defeat (further convictions or civil seizures). But that realization doesn’t rely on contemplating the Constitution, statutes, codes, or rabbinical parsings of word definitions. Thus, it is not quick to occur to the devotees of tax honesty.

They move, with heavenly grace, through an existential hell: In their minds and hearts they are absolutely certain that they are right, and even doing God’s work. (The contention that the Constitution was divinely inspired elicits a fair amount of clapping and no open unrest at the We The People conference.) But they are also fully aware that all the powers and dominions of the earth are arrayed against them and regularly torment them.

They believe, in the face of all evidence to the contrary, that their citizen’s understanding of the written law should, and in some Platonic sense does, trump the realities of dealing with the government. This makes them uniquely American rebels -- more true, they maintain, to the nation’s core values than those of us who follow the pragmatic advice an accountant once gave to one man at the conference. When the tax honesty devotee showed him a Schiff-marked copy of the tax code, the accountant replied: "You mess with that shit, you are going to jail."

Well, not necessarily to jail. Tax honesty folks adore the Supreme Court’s 1991 decision Cheek v. U.S., which authoritatively ruled that a belief, however objectively unreasonable, that one was not liable to pay income tax could negate the element of willfulness necessary to establish criminal culpability for income tax crimes. In this area, in essence, ignorance of the law is an excuse. But as Daniel Pilla puts it, Cheek "might keep you out of jail, but it won’t mean you don’t owe the tax."

Still, the tax honesty folks believe, to their core, that a written Constitution and written laws truly can restrain the unbridled force of government. They push a naive Americanism, but an Americanism nonetheless. They are no more insane, in principle, then anyone else anywhere who has ever tried to fight city hall, sue the government, or halt congressional action by relying on, say, the Commerce Clause.

Their facts are mostly wrong. But whether wrong or not, they are irrelevant -- and the tax honesty folks know it. Not a one seems unaware that jail and property confiscation are a likely result of acting on their ardently held conclusions. But they refuse to believe it. This makes them foolish, to be sure. But it doesn’t necessarily mean they aren’t heroic. As one conference attendee tells me, "I don’t care how many cowards there are. There’s one less on the planet, and that’s me. Everyone has to stand up for something in their lifetime."

Senior Editor Brian Doherty is the author of This Is Burning Man, to be published this summer by Little, Brown.

Most significantly, a tax honesty true believer named Vernice Kuglin, a vivacious and attractive Federal Express pilot who has a crowd of admirers following her everywhere during the conference, was slammed with criminal charges for failure to file and for tax evasion. She beat the rap in August, acquitted of all charges by a federal jury in Memphis.

LOL, and ordered to pay the tax, as they all are whether or not they win "criminal cases" the responsibility remains to pay the tax.

kuglin_transcript_030808_vol_5

19 MR. MURPHY: Just one thing, to put Ms. Kuglin
20 on notice, she has got to pay taxes, I think the court
21 ought to instruct her that that is the law. She has got
22 to file returns and -- 23 MR. BECRAFT: Your Honor, that is going to be
24 cleaned up totally.
25 THE COURT: Okay. Well, Mr. Murphy is not
777
1 incorrect that it is the law, and I think what he's also
2 saying is there will still be civil penalties.
3 MR. BECRAFT: I expect probably 90-day letters 4 to be coming pretty quick.
5 THE COURT: Okay.
6 MR. BECRAFT: And there's going to be civil
7 proceedings, and she is going to being take
8 responsibility -- she is going to be doing things to
9 respond to all of that like file returns, Your Honor.
10 THE COURT: Well, I'm just the judge here, I'm 11 not the IRS, so I think I'll leave that up to the other
12 folks. Anything -- I asked the government. Anything from
13 the defense?
14 MR. BECRAFT: Your Honor, I think on behalf of
15 all the lawyers, I would like to say that it has been a
16 pleasure to be in your court.
17 THE COURT: Well, thank you. We're going to
18 let everybody be excused.

this fascist judge needs to not only be impeached today he need s to go to prison himself

For upholding the law?

FINAL-REG, TAX-REGS, §601.401. Employment taxes §601.401. Employment taxes

(a) General

(1) Description of taxes. --Federal employment taxes are imposed by Subtitle C of the Internal Revenue Code. Chapter 21 (Federal Insurance Contributions Act) imposes a tax on employers of one or more individuals and also a tax on employees, with respect to "wages" paid and received. Chapter 22 (Railroad Retirement Tax Act) imposes (i) an employer tax and employee tax with respect to "compensation" paid and received,(ii) an employee representative tax with respect to "compensation" received, and (iii) a supplemental tax on employers, measured by man-hours for which "compensation" is paid. Chapter 23 (Federal Unemployment Tax Act) imposes a tax on employers of one or more individuals with respect to "wages" paid. Chapter 24 (collection of income tax at source on wages) requires every employer making payment of "wages" to deduct and withhold upon such wages the tax computed or determined as provided therein. The tax so deducted and withheld is allowed as a credit against the income tax liability of the employee receiving such wages.

IRC, 2004-CODE-VOL, SEC. 3402. INCOME TAX COLLECTED AT SOURCE.

3402(a) REQUIREMENT OF WITHHOLDING. --

3402(a)(1) IN GENERAL. --Except as otherwise provided in this section, every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with tables or computational procedures prescribed by the Secretary. Any tables or procedures prescribed under this paragraph shall --

3402(a)(1)(A) apply with respect to the amount of wages paid during such periods as the Secretary may prescribe, and

3402(a)(1)(B) be in such form, and provide for such amounts to be deducted and withheld, as the Secretary determines to be most appropriate to carry out the purposes of this chapter and to reflect the provisions of chapter 1 applicable to such periods.

3402(a)(2) AMOUNT OF WAGES. --For purposes of applying tables or procedures prescribed under paragraph (1), the term "the amount of wages" means the amount by which the wages exceed the number of withholding exemptions claimed multiplied by the amount of one such exemption. The amount of each withholding exemption shall be equal to the amount of one personal exemption provided in section 151(b), prorated to the payroll period. The maximum number of withholding exemptions permitted shall be calculated in accordance with regulations prescribed by the Secretary under this section, taking into account any reduction in withholding to which an employee is entitled under this section.

US-DIST-CT, [2003-1 USTC ¶50,236], U.S. District Court, Mid. Dist. Fla., United States of America, Plaintiff v. Everte Farnell, Defendant., Injunctions: Tax return preparer: Jurisdiction: Frivolous claims. --, (January 21, 2003)
United States of America, Plaintiff v. Everte Farnell, Defendant.

[EXCERPTS]

U.S. District Court, Mid. Dist. Fla.; 8:02-cv-1742-T-26TBM, January 21, 2003.

PRELIMINARY INJUNCTION

LAZZARA, District Judge: The Court makes the following findings of fact and conclusions of law, and enters this preliminary injunction...

Factual Findings

Both the plaintiff, the United States, and the defendant, Everte Farnell, have had the opportunity to submit evidence and be heard on the United States' preliminary-injunction motion. Based on the evidence, the Court finds as follows:

The US Sources Argument is indistinguishable from the Section 861 scheme, which has been rejected by courts in decisions dating back to 1993.

Everte Farnell promoted and continues to promote the US Sources Argument/Section 861 scheme, a frivolous and unrealistic position which posits that U.S. citizens' domestic income is not subject to the federal income tax. The Section 861 scheme, if employed on a return, requires the taxpayer using the scheme to list fraudulent and false information concerning the amount of income earned, and understates the taxpayer's liability.

Farnell knew or should have known that the Section 861 scheme is frivolous. Specifically: (1) the scheme is unrealistic and baseless on its face, (2) judicial decisions dating back to 1993 have universally rejected the scheme, (3) Farnell knew about several of these decisions, (4) the IRS has published documents describing the invalidity of the scheme, (5) Farnell had received at least one of these IRS publications, (6) IRS agents personally informed Farnell that the Section 861 scheme is frivolous, (7) another return-preparer personally informed Farnell that the Section 861 scheme is frivolous, and (8) Farnell knew that the IRS was investigating him for promoting abusive schemes and knew that the Department of Justice has filed an injunction suit against Thurston Bell, the NITE ringleader and the person with whom Farnell promoted the Section 861 and related schemes, to stop Bell from promoting the scheme.

Farnell is promoting the Section 861 scheme through the mail and in-person. He also promotes a related scheme known as "Third-Party Contracting" over the NITE website at www.nite.org., which purports to allow employees to legally take home all of their pay, tax-free, and which also purports to relieve employers of the requirement of paying federal employment taxes. Farnell further prepares income tax return for paying clients who then falsely claim that their income earned in the United States is non-taxable.

Farnell has repeatedly and willfully failed to list his social security number on federal income tax returns and amended returns he prepares for other taxpayers.

Farnell has repeatedly failed to maintain client lists or the returns of clients for whom Farnell has prepared federal income tax returns. He also failed to provide these records to the IRS when the IRS requested them.

Farnell has repeatedly, willfully and intentionally prepared federal income tax returns for clients stating that the clients' income is zero, and in the process has recklessly and intentionally disregarded IRS rules and regulations.

Farnell has interfered in the IRS's examinations of other taxpayers by attending meetings with the IRS and demanding that the IRS summon witnesses for his clients to cross-examine.

Absent this preliminary injunction, Farnell will continue to promote the Section 861 scheme, "Third-Party Contracting" arrangements, prepare false tax returns, and interfere in the IRS's examinations of other taxpayers using frivolous positions.

If this preliminary injunction is not granted, the United States will suffer irreparable harm. By refusing to list his social security number on returns he prepares for other taxpayers, and by signing in a cursive which is difficult to read, Farnell makes it virtually impossible for the IRS to catch all of the incoming, improper Farnell-prepared returns. Further, the Government will likely need to expend significant resources identifying, reviewing and examining returns and correspondence advocating the frivolous Section 861 scheme. Moreover, there is evidence that some erroneous refunds have already been paid to Farnell's clients. Identifying these persons and prosecuting erroneous refund claims will consume even more resources.

The Section 861 scheme and the related "Third-Party Contracting" arrangement are frivolous. Similarly frivolous are Farnell's claims that the IRS must summon witnesses for his clients to cross-examine in IRS administrative proceedings. The Government, therefore, will likely prevail on the merits.

This preliminary injunction is tailored to prevent Farnell from causing further injury to the United States and the public, and to prevent Farnell from further violating the law. Thus, the threatened injury to the United States outweighs any injury a preliminary injunction might cause.

The public is served by granting this preliminary injunction. If a preliminary injunction is granted, it will help to stem the spread of the frivolous Section 861 scheme and "Third-Party Contracting" arrangements. Farnell's clients will be protected from Farnell's fraudulent scheme and from the tax penalties and other adverse tax consequences resulting from participation in the frivolous schemes.

Conclusions of Law

After considering all evidence and argument submitted, the Court makes the following conclusions of law:

The "US Sources Argument" and the "Section 861 scheme" (which are indistinguishable from each other) are frivolous schemes. Proponents of these schemes, including Farnell, claim that domestically-earned income is exempt from taxation, based on an unrealistic and frivolous interpretation of IRC §§61 and 861- 865 and certain Treasury Regulations, including 26 C.F.R. §§1.861-8(f) and 1.861-8T(d)(2)(ii)(A). These Code sections and regulations do not exempt domestically-earned income from taxation.

The United States has presented the Court with persuasive evidence that Farnell has engaged in conduct subject to penalty under IRC §§6700 and 6701.

Absent this preliminary injunction, Farnell will continue to violate IRC §§6700 and 6701.

Therefore, a preliminary injunction is warranted under IRC §7408.

Farnell has repeatedly violated IRC §§6694(a) and (b), and 6695.

Absent this preliminary injunction, Farnell will continue to violate Sections 6694 and 6695.

Therefore, a preliminary injunction is also warranted under IRC §7407.

Farnell, in addition to the violations noted above, is impeding IRS examinations of other taxpayers by asserting frivolous positions about due process. The evidence therefore shows that a preliminary injunction is appropriate under IRC §7402. Specifically:

(a) The United States and the public will suffer irreparable harm in the absence of this preliminary injunction and that Farnell will suffer little, if any, harm if the preliminary injunction is granted.

(b) The Government has a high likelihood of success on the merits, and Farnell's position is unrealistic and frivolous.

(c) Further, the United States has presented credible evidence that the public interest will be served through granting this preliminary injunction.

ORDER

This Court finds that the United States has presented sufficient evidence to obtain a preliminary injunction, based on the factual findings listed above. Therefore, the Court ORDERS that the defendant, Everte Farnell, and his representatives, employees, agent and all other persons in active concert or participation with Farnell who receive actual notice of this Order are enjoined, until the Court orders otherwise, from:

engaging in activity subject to penalty under IRC §6700, including organizing and/or selling a plan or arrangement (including, without limitation, the U.S. Sources Argument and the Section 861 scheme) and making a statement regarding the excludability of income which constitutes commercial speech that they know or have reason to know is false or fraudulent as to any material matter;

engaging in activity subject to penalty under IRC §6701, including preparing and/or assisting in the preparation of a document related to a matter material to the internal revenue laws that includes a position (including, without limitation, the U.S. Sources Argument and the Section 861 scheme) that they know will result in the understatement of tax liability;

engaging in any other activity subject to penalty under IRC §§6700, or 6701;

engaging in conduct subject to penalty under IRC §§6694 and 6695;

interfering in the IRS's examinations of other taxpayers by taking frivolous positions, including but not limited to making arguments during tax examinations of other taxpayers based on the Section 861 scheme, demanding that the IRS summons witnesses in administrative proceedings, and requesting that clients be allowed to cross-examine witnesses in IRS audits.

engaging in other similar conduct that substantially interferes with the proper administration and enforcement of the internal revenue laws, including engaging in false, deceptive or misleading commercial speech, or engaging in other false speech which is directed to incite the imminent evasion or attempted evasion of federal taxes and is likely to produce such action.

Further, and in addition to the above prohibition against engaging in conduct subject to penalty under IRC §§6700 and 6701, the Court ORDERS that, within 30 days of the date of entry of this order, Farnell must mail (by United States Mail and, if an e-mail address is known, electronic mail) a copy of this order to: (1) every current and/or former for whom Farnell has performed any tax-related service or provided any tax-related advice; and (2) all persons to whom Farnell otherwise sold or distributed any tax-related products, documents, services, or advice.

The Court further ORDERS that Farnell must then, within 31 days of this Order, file with the Court a declaration, executed under penalty of perjury, stating that he has complied with the terms of this order in the immediately preceding paragraph of this Order.

The Court further ORDERS that within 31 days of the date of entry of this Order Farnell shall serve the United States with a list of physical and electronic mail addresses to which he sent a copy of this Order. Farnell shall file a certificate of service with the Court that same day evidencing his compliance with this paragraph of the Order.

The Court further ORDERS that Farnell is ENJOINED from preparing any federal income tax return for any other person (not including himself) until further order of the Court.

The Court further ORDERS that Farnell must, within 10 days of this Order, serve the United States with a list of all persons for whom Farnell has prepared federal income tax returns. Farnell shall file a certificate of service with the Court that same day evidencing his compliance with this paragraph of the Order.

Further, the Court ORDERS that Farnell and his representatives, employees, agents and all other persons in active concert or participation with Farnell who receive actual notice of this Order are enjoined from destroying, dissipating, or altering any documents, including electronic records, that relate in any way to this lawsuit and/or Farnell's clients.

DONE and ORDERED.

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