Tax protester
A tax protester is someone who refuses to pay a tax claiming that the tax laws are unconstitutional or otherwise invalid. Tax protesters are different from tax resisters, who refuse to pay taxes as a protest against a government or its policies, or a moral opposition to taxation in general, not out of a belief that the tax law itself is invalid. The United States has a large and organized culture of people who espouse such theories. Tax protesters also exist in other countries.
Legal commentator Daniel B. Evans has defined tax protesters as people who "refuse to pay taxes or file tax returns out of a mistaken belief that the federal income tax is unconstitutional, invalid, voluntary, or otherwise does not apply to them under one of a number of bizarre arguments". Law Professor Allen D. Madison has described tax protesters as "those who refuse to pay income tax on the basis of some nonsensical legal argument that he or she does not owe tax."
An illegal tax-protest scheme has been defined as "any scheme, without basis in law or fact, designed to express dissatisfaction with the tax laws by interfering with their administration or attempting to illegally avoid or reduce tax liabilities." The United States Tax Court has stated that "tax protester" is a designation "often given to persons who make frivolous antitax arguments".
Tax protesters raise a number of different kinds of arguments. In the United States, these typically include constitutional arguments, such as claims that the Sixteenth Amendment to the Constitution was not properly ratified or that it is unconstitutional generally, or that being forced to file an income tax return violates the Fifth Amendment privilege against self-incrimination. Others are statutory arguments suggesting that the income tax is constitutional but the statutes enacting the income tax are ineffective, or that Federal Reserve Notes or other relevant currencies do not constitute cash or income. Yet another collection of arguments centers on general conspiracies involving numerous government agencies.
Some tax protesters refuse to file a tax return or file returns with no income or tax data supplied.
Origin of term
In the United States, the term "protest" as applied to a tax generally means "a declaration by a payer, esp. of a tax, that he does not concede the legality of a claim he is paying". Similarly, Black's Law Dictionary defines a tax protest as:At common law, and under some earlier tax statutes, the filing of a protest at the time of payment of an erroneous tax was a requirement in order for the payor to recover a refund of the tax at a later time. In the case of U.S. federal taxes, the rule was abolished by Congress in 1924. Under the current Internal Revenue Code of 1986, as amended, the taxpayer's failure to protest does not deprive the taxpayer of the right to file an administrative claim with the Internal Revenue Service for a refund and, if the claim is not allowed by the IRS, to sue for a tax refund in Federal district court.
The term "protest" is also used to describe a taxpayer's formal written request for review, by the Appeals Division of the IRS, after the IRS issues a "Thirty-Day Letter" proposing an increased tax liability following an IRS examination of a tax return.
In 1972, the U.S. District Court for the Eastern District of Pennsylvania used the term tax "protestor" in United States v. Malinowski. This case, however, involved a taxpayer who was a member of the Philadelphia War Tax Resistance League who was protesting the use of tax money in the Vietnam War. The taxpayer was not making arguments that the tax law itself was invalid; he was essentially protesting the war, not the tax. The taxpayer had filed a false Form W-4, and admitted he knew that he was not legally entitled to claim the exemptions he claimed on the W-4. Thus, Malinowski might be termed a tax resister rather than a tax protester. He was convicted, and his motion for a new trial or acquittal was denied.
A person could be both a tax protester and a tax resister if they believe that tax laws do not apply to them and also believes that taxes should not be paid based on the use to which the taxes are put. Some tax resisters have put forth legal arguments for their position—for instance that they cannot pay taxes for nuclear weapons development because this would put them in violation of the Nuremberg Principles—that could be considered varieties of tax-protester theories.
Beginning in the mid-1970s, U.S. Federal courts began using the term "tax protester" in still another, more narrow sense—to describe persons who raised frivolous arguments about the legality of Federal taxes, particularly income taxes. This particular technical sense of the term is the sense described in the remainder of this article.
History
United States
While there have been people throughout history who challenged the assessment of taxes as beyond the power of the government, the modern tax-protester movement began after World War II. One of the first people to fit this description was Vivien Kellems, a Connecticut industrialist and political activist who specifically protested monthly tax withholding. In 1948 she refused to withhold taxes from the wages of her employees, based on the claim that the government had no power to require such withholding. The IRS then seized the money owed from her bank account. She brought suit against them and, in a book she wrote, asserted that she won, although she did not challenge the constitutionality of tax withholding itself. Other notable American tax protesters include Irwin Schiff, who argued that income tax was both illegal and unconstitutional. Schiff died in prison in 2015.The Seventh Circuit Court of Appeals stated that people are attracted to the "tax protestor movement's illusory claim that there is no legal requirement to pay federal income tax." The court called the tax-protester arguments "wholly defective and unsuccessful." Ideas associated with the tax-protester movement have been forwarded under different names over time. These ideas have been put forth, for example, in the broader Posse Comitatus, Christian Patriot and sovereign citizen movements, which generally assert that the Constitution has been usurped by the federal government. One activist linked to the sovereign citizen movement, Roger Elvick, originated the redemption movement and conceived circa 1999–2000 the strawman theory, which asserts that it is possible to dissociate from one's legal person, thus becoming free of all legal obligations, including taxes.
Canada
Similar arguments are raised in the context of other legal systems, notably in Canada. Tax protester theories originating in the United States, such as denying the authority of courts, have spread into Canada, where they have been notably introduced by Eldon Warman, a student of Roger Elvick's theories who adapted them for a Canadian context. Warman originated the so-called "Detaxer" movement, which reused sovereign citizen pseudolegal concepts, including the strawman theory, and argued the illegitimacy of Canadian income tax law. Warman's theories were adapted by other Canadian Detaxer activists, including Russell Porisky and David Kevin Lindsay. As the Detaxer movement went into decline in Canada, its concepts were further adapted by the freeman on the land movement, created by Robert Arthur Menard. Freeman on the land ideas gradually spread to other Commonwealth countries. As with cases in the United States, Canadian courts have uniformly found these arguments to be invalid, and often incoherent.Arguments
In 1986, the Seventh Circuit observed:Arguments made by tax protesters in the United States generally fall into several categories: that the Sixteenth Amendment was never properly ratified; that the Sixteenth Amendment does not permit the taxation of individual income, or particular forms of individual income; that other provisions of the Constitution such as the First, Fifth, or a "Missing Thirteenth Amendment" eliminate an obligation to file a return; that citizens of the states are not also citizens of the United States; that the statutes enacted by the United States Congress pursuant to their constitutional taxing power are defective or invalid; that the tax code does not apply to inhabitants of U.S. territories; and that the government and the courts engage in various conspiracies to conceal the above deficiencies. Outside of the United States, tax protesters raise similar conspiracy arguments, claims that they are not "citizens" under the jurisdiction of the court where the claim is brought, and claims about the validity of statutes imposing taxation.
Such arguments are usually summarily dispensed with when presented in the courts. For example, the Fifth Circuit once noted:
In that case, the court viewed the tax-protester arguments as sufficiently frivolous to merit the imposition of sanctions—in this case twice the costs spent by the government in defending the litigation—for even bringing them up. Similarly, a Canadian Tax Court judge found claims asserted by a "tax denier" in that court to be "an absurd blend of the ridiculous arguments... unintelligible, incomprehensible, meaningless, irrelevant and factually hopeless".
Penalties
In the United States, protesting Federal income taxes is not, in and of itself, a criminal offense. However, a number of offenses arise from failing to pay taxes that are due, and from repeating arguments that have previously been invalidated by the courts.Frivolous tax returns
The United States Congress has, however, enacted Internal Revenue Code section 6702 "in an effort to deter tax protesters from filing frivolous returns." This statute was enacted as part of the Tax Equity and Fiscal Responsibility Act of 1982.The penalty under section 6702 is a civil penalty, and is $500 for positions taken on or before March 15, 2007. For positions taken after that date, the penalty amount has been increased to $5,000. The Internal Revenue Service has issued a list of positions considered to be legally frivolous. Shauna Henline, Senior Technical Coordinator of the Frivolous Return Program at the Internal Revenue Service, has testified that the IRS receives about 20,000 to 30,000 frivolous tax returns per year, and that approximately 100,000 related letters and other documents are received each year.
In some cases, taxpayers have argued that section 6702, the "frivolous argument" penalty statute, is itself unconstitutional. That argument was rejected in Hazewinkel v. United States. See also Pillsbury v. Commissioner, a case in which taxpayer Leecil Pillsbury's argument—that section 6702 violates the Fifth Amendment Due Process Clause of the Constitution—was ruled to be without merit.
In that case, the court also ruled the following taxpayer arguments about section 6702 to be invalid: it is an unconstitutional Bill of Attainder; it unconstitutionally authorizes the imposition of cruel and unusual punishment; it unconstitutionally violates the doctrine of separation of powers; and it unconstitutionally violates the taxpayer's First Amendment rights to petition the government for redress of grievances. See also Duke v. Commissioner, Kane v. United States, and Hudson v. United States.