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Appendix H
Analysis of U.S. vs Hicks
Page H - 1 of 10
The Federal Zone:
Reader's Notes:
Page H - 2 of 10
Appendix H
MEMO
TO: Interested Colleagues
FROM: Mitch Modeleski, Founder
Account for Better Citizenship
DATE: October 25, 1991
SUBJECT: 9th Circuit Wrongly Decides
U.S. vs Hicks and U.S. vs Bentson
The Ninth Circuit Court of Appeals has based its two recent
income tax rulings on blatantly wrong premises. In upholding
convictions for willful failure to file income tax returns, the
Court rejected appeals by both defendants to the clear and
unambiguous provisions of the Paperwork Reduction Act (PRA) and
the Administrative Procedure Act (APA). A simple yet careful
analysis of these rulings is sufficient to expose the faulty
premises upon which both rulings are based. As the Holy Bible
says, "Only the fool builds his house upon sand" (or words to
that effect).
U.S. vs Hicks
The case of U.S. vs Hicks is the more important of the two
because it was decided first, it contains more "analysis", and
sets a precedent to which the second case refers. Beginning with
the PRA, the Court admits that the IRS must comply with the PRA
and "... in particular, must display OMB control numbers on its
tax return forms and on its regulations." Nevertheless, despite
a clear and unambiguous public protection clause, the Court ruled
that the IRS failure to comply with the PRA does not prevent the
defendant from being penalized and that the PRA constitutes no
defense to prosecution under 26 U.S.C. 7203:
"But even assuming without deciding that the IRS failed to
comply with the PRA here, its failure does not prevent Hicks
from being penalized."
The Court's "analysis" justifies its ruling on the basis of
a careful distinction it draws between agency regulations and
Congressional statutes. Specifically, in the absence of an
"express prior mandate" from Congress, a citizen may escape
penalties for failing to comply with an agency information
collection request that is issued via regulation, but without
displaying an OMB control number. It is the existence of an
"explicit statutory requirement" which makes all the difference,
according to the 9th Circuit. The Court refers to its own
precedents as follows:
Page H - 3 of 10
The Federal Zone:
"The legislative history of the PRA and its structure as a
whole lead us to conclude that it was aimed at reining in
agency activity. ... Where an agency fails to follow the PRA
in regard to an information collection request that the
agency promulgates via regulation, at its own discretion,
and without express prior mandate from Congress, a citizen
may indeed escape penalties for failing to comply with the
agency's request. See e.g. United States v. Hatch, 919 F.2d
1394 (9th Cir. 1990); United States v. Smith, 866 F.2d 1092
(9th Cir. 1989). But where Congress sets forth an explicit
statutory requirement that the citizen provide information,
and provides statutory criminal penalties for failure to
comply with the request, that is another matter. This is a
legislative command, not an administrative request. The PRA
was not meant to provide criminals with an all-purpose
escape hatch. [emphasis added]
What exactly is this legislative command, this "explicit
statutory requirement", this "express prior mandate" upon which
the Court places so much emphasis? We search in vain amidst the
Court's analysis of the PRA. Instead, we are told that the tax
code predates the PRA by over 25 years and that Congress never
intended the PRA to create a loophole in that tax code:
Moreover, the provision of the tax code under which Hicks
was convicted predates the PRA by over 25 years. If, in
enacting the PRA, Congress had intended to repeal 26 U.S.C.
7203, it could have done so explicitly. Repeals by
implication are not favored. ... Congress enacted the PRA to
keep agencies, including the IRS, from deluging the public
with needless paperwork. It did not do so to create a
loophole in the tax code.
We hold that the public protection provision of the PRA, 44
U.S.C. 3512, constitutes no defense to prosecution under 26
U.S.C. 7203. To hold otherwise -- to interpret the PRA
without reference to Congress' purpose -- would be to
elevate form over substance. [emphasis added]
Evidently, the Court is ready and willing to elevate
legislative commands over administrative requests, "explicit
statutory requirements" over agency regulations. However, it is
not willing to be explicit itself about the exact statutory
requirement that is so elevated, at least not in its analysis of
the PRA. It is not until the Court analyzes the Administrative
Procedure Act (APA) that we finally discover a pivotal reference
to the exact statutory requirement which the Court considers so
sacred. But this pivotal reference is a foundation of sand.
Page H - 4 of 10
Appendix H
Administrative Procedure Act
Having made such an important distinction between statutes
and regulations, the Court then proceeds to reiterate the same
distinction in rejecting a defense based upon the APA. Even
though the IRS has failed to publish Form 1040 in the Federal
Register, and even though the IRS has failed to promulgate Form
1040 according to the APA notice and comment procedures, the
Court maintains that the defendant still had a legal duty to file
a tax return. According to the Court, it is entirely "meritless"
to argue that the IRS's failure to publish its form eliminated
any legal duty that might have required the defendant to file
income tax returns:
Hicks's argument is meritless. It confuses law with
regulations with respect to such law. It is the tax code
itself, without reference to regulations, that imposes the
duty to file a tax return. ... However, even if we suppose
that the duty to file tax returns can be understood only
with reference to regulations, the IRS has duly promulgated
sufficient regulations, e.g. 26 CFR 1.6011-1, 1.6012-1, to
make that duty clear. The meaning of "willful failure to
make a tax return" is apparent without reference to the
contents of Form 1040 or its instructions. Hicks cannot
complain that he did not know what was expected of him. He
had a duty to make a tax return, and chose to ignore that
duty.
Notice, in particular, that the Court has still not
mentioned the exact statutory requirement which it considers so
decisive. Instead, we are told that the tax code imposes the
duty to file a tax return, that the IRS has promulgated
"sufficient regulations" to make that duty clear, and that Form
1040 and its instructions are not needed to know that duty.
Evidently, the Court judges the statute to be crystal clear and
the regulations to be duly promulgated and "sufficient", even if
we suppose that the statute is not crystal clear. What exactly
is the controlling statutory requirement, and is the "duty to
file" as apparent in that statute as the Court would have us
believe? In answer to the first question, the Court finally
plays its hand:
Hicks's reliance on United States v. Reinis, 794 F.2d 506
(9th Cir. 1986) is misplaced. As the Fourth Circuit noted
in Bowers, Reinis involved unpublished rules (specifically,
instructions for a Currency Transaction Report Form) that
imposed "substantive obligations beyond those created by the
statute itself." ... Only by publication could this
obligation become known. The 1040 form, by contrast, did
not add to Hicks's basic substantive obligation. That
obligation is to comply with the applicable provisions of
the Internal Revenue Code. The code requires that persons
such as Hicks make a return. 26 U.S.C. 6012. [emphasis
added]
Page H - 5 of 10
The Federal Zone:
At long last, we finally discover the exact statutory
requirement which the Court considers so decisive. But is the
"duty to file" as "apparent", as obvious and as crystal clear in
this exact citation as the Court would have us believe? Let us
now quote the operant phrases from a subset of Title 26, Section
6012:
(a) GENERAL RULE: Returns with respect to income taxes
under subtitle A shall be made by the following:
(1)(A) Every individual having for the taxable year
gross income which equals or exceeds the exemption
amount .... except that ... nonresident alien
individuals subject to the tax imposed by section 871
and foreign corporations subject to the tax imposed by
section 881 may be exempted from the requirement of
making returns under this section. [emphasis added]
Admittedly, Section 6012 contains a lot more verbiage which
covers a lot more exceptions to the general rule, e.g. those not
married, heads of households, surviving spouses, joint returns,
estates, trusts, political organizations and homeowners
associations, and so on ad nauseam. Likewise, the meaning of
"nonresident alien individuals" and "foreign corporations" is an
entirely separate and complex subject which will divert us too
far from the path at hand. The important point here is that the
general rule specifies a threshold, namely, the duty to file is
imposed by law on every individual having "gross income which
equals or exceeds the exemption amount". Is this law
sufficiently clear, explicit, and unambiguous? Apparently the
Ninth Circuit thinks so. But is it really? Let's be honest and
objective about this, because the issues here are important and
even crucial to the future of our country.
What is a Widget?
In order to answer these questions, let us first reason by
analogy. Because you are now reading a law which I have enacted
for you, you are hereby informed that you have a duty to send me
a birthday card, and a pair of free tickets to the World Series,
if and when I reach the age of 50 widgets. Your immediate
response is obvious: what's a widget? You would be happy to
comply with the duty if I would only define what a "widget" is,
in terms you understand. Absent such a definition, you cannot
comply because my law is vague, and hence void. Once you know
what a widget is, you are confident you will be able to determine
when my age passes the threshold number of widgets, at which
point you will be happy to satisfy your "known legal duty".
Without a doubt, my definition of "widget" is crucial and
decisive for you to satisfy your duty.
Page H - 6 of 10
Appendix H
This same logic applies directly to the statutory threshold
established for "gross income". At the risk of repeating a
mountain of published analysis on this very same issue, we are
forced once again to quote the statutory definition of "gross
income" as follows:
SEC. 61. GROSS INCOME DEFINED
(a) GENERAL DEFINITION. Except as otherwise provided in
this subtitle, gross income means all income from whatever
source derived, including (but not limited to) the following
items ... [list follows].
Even though the statute has defined "gross income", it still
has not defined "income". What the statute does say is
comparable to saying, "Gross widgets means all widgets from
whatever source derived." (Or, as Godfrey Lehman says, "Gross
gobbledygook is gobbledygook from whatever source derived.") But
we still have not defined "widgets" (or gobbledygook) and the
definition of "gross widgets" is necessarily vague for this
reason and for this reason alone. The statutory definition of
"gross income" is a tautology, because it uses a term it is
defining in the definition of the term defined. From a purely
grammatical point of view, the only thing accomplished by this
statutory definition of "gross income" is to qualify the meaning
of "gross"; it accomplishes nothing else.
Furthermore, close examination of Title 26, the Internal
Revenue Code (IRC), reveals that the meaning of "income" is
simply not defined, period! There is an important reason in law
why this is the case. At a time when the Supreme Court did not
enjoy the benefit of 17,000 State-certified documents which prove
it was never ratified, that Court assumed that the 16th Amendment
was the supreme law of the land. In what is arguably one of the
most important rulings on the definition of "income", the Supreme
Court of the United States has clearly instructed Congress that
it is essential to distinguish between what is and what is not
"income", and to apply that distinction according to truth and
substance, without regard to form. In that instruction, the high
Court has told Congress that it has absolutely no power to define
"income" because that term was considered by the Court to be a
part of the U.S. Constitution:
Congress cannot by any definition it may adopt conclude the
matter, since it cannot by legislation alter the
Constitution, from which alone it derives its power to
legislate, and within whose limitations alone that power can
be lawfully exercised. [Eisner vs Macomber, 252 US 189]
[emphasis added]
Page H - 7 of 10
The Federal Zone:
Clearly, the Internal Revenue Code has not distinguished
between what is and what is not income because to do so would be
an exercise of power which Congress does not have. This is a
Catch-22 from which the Congress cannot escape. It either
defines income by statute and thereby exercises a power which it
does not have, or it fails to define income, thereby rendering
whole chunks of the Internal Revenue Code null and void for
vagueness.
The well documented failure of the 16th Amendment to be
ratified raises a host of other issues too complex to analyze
here. One could argue, for example, that the term "income" is
really not a part of the Constitution after all, because it is
found only in the text of the failed amendment. Suffice it to
say that Congress has never had the power to lien on the private
property of sovereign Citizens of the 50 States, with or without
the 16th Amendment, unless the lien results from a statute
authorizing a direct tax which satisfies the apportionment rule
in the Constitution (1:2:3 and 1:9:4).
Income is private property. Absent a direct tax, or some
commercial agreement to the contrary, the federal government is
not empowered to obtain a controlling interest in, or otherwise
lien on private property so as to compel a private Citizen's
performance to any third-party debt or obligation. Moreover, it
is a well established principle in law that government cannot tax
a sovereign Citizen for freely exercising a right guaranteed by
the U.S. Constitution. The acquisition and exchange of private
property is such a right.
Numerous other rulings of the Supreme Court have all defined
"income" in the same exact terms, namely, income is a "profit" or
a "gain". (See attached formal petition to Rep. Barbara Boxer
for all relevant citations.) Remember, these are not the
writings of some extremist or radical constitutional libertarian.
We are relying here upon the words of the Supreme Court of the
United States, in cases wherein the official definition of
"income" was decisive. Try to find a principle that is better
settled:
Remember that our source is not some "tax protest" group.
Just about everything we are telling you comes from the U.S.
Supreme Court. It would be difficult, and perhaps
impossible, in our system of jurisprudence, to find a
principle better settled than the one we have been citing.
[from Tax Scam by Alan Stang, Mt. Sinai Press, POB 1220,
Alta Loma, CA 91701, 1988]
Page H - 8 of 10
Appendix H
Whatever arguments one may choose to make from this point
forward, those arguments would certainly benefit from a knowledge
of the relevant case law in this area. I mean, if we're talking
gasoline taxes, then we know the subject of the tax is gasoline;
if we're talking tobacco taxes, then we know the subject is
tobacco. Why should a tax on "income" be any different? Just
because the Congressional Research Service chooses to differ with
the Supreme Court? Just because the IRS uses police power to
enforce a different definition? Just because the Federal Reserve
needs a powerful agency to collect interest payments for its
syndicated monopoly on private credit?
Is the Code Sufficient?
The Ninth Circuit tips its hand in another, albeit subtle
way when it discusses so-called makeshift returns. Simply
stated, you don't need a Form 1040 or its instructions to make
and file a return; the statute and the regulations are enough:
While it is true that the regulations state that filing a
Form 1040 is the preferred manner of making a return, it is
by no means the only manner of filing. 26 C.F.R. 1.6012-
1(a)(6). Knowing the code and the regulations, and no more,
is enough to enable Hicks to attempt to comply with the
obligation to file a return. He did not need to consult a
1040 form or its instructions. See also 26 C.F.R. 1.6011-
1(b) (taxpayer is not penalized for filing a makeshift
return pending the filing of a proper return). It follows
that Form 1040 is not a "rule" subject to the complicated
publication, notice, and comment requirements of the APA.
[emphasis added]
Notice, in particular, that the Court has ruled that
"knowing the code and the regulations, and no more, is enough
...." The Court has not ruled that "knowing the code is enough".
This is an important, and telling admission on the part of the
Ninth Circuit. By their own previous precedents in Hatch and
Smith, this Court ruled that OMB control numbers and expiration
dates are required to be displayed in the Code of Federal
Regulations. We already know that the IRC does not define
"income". If the regulations also fail to contain a satisfactory
definition of "income", and if those same regulations fail to
display currently valid OMB control numbers, the conscientious
citizen is faced with a double whammy. The regulations are not
only null and void for vagueness, they can also be ignored as
"bootleg requests" because they do not display OMB approval. If
the Code cannot be understood without those regulations, the Code
is not sufficient. Last but not least, Congress' lack of power
to legislate a statutory definition of "income" is also equally
true of the regulations which promulgate statutes. Were the
Page H - 9 of 10
The Federal Zone:
regulations which implement Section 6012 to contain a definition
of "income", the very existence of that definition in a
regulation (which has the force of law) would evidence the
exercise of a power which Congress has been told, in clear and
certain terms, it simply does not have.
U.S. vs Bentson
Having established its precedents in U.S. vs Hicks, the
Ninth Circuit proceeds to make summary hay of similar issues
raised by defendant Stephen W. Bentson. The Court observed that
Bentson's PRA argument was essentially the same as the argument
it rejected in Hicks, and they found no merit in it:
Bentson points to dicta in United States v. Collins ... that
suggest that persons charged with criminal violations of the
Internal Revenue Code might in some circumstances
legitimately raise a PRA defense. For reasons given in
Hicks, we believe that the PRA was not intended to provide
such a defense, and therefore we disagree with the Collins
court's dicta.
The Court's disposal of the APA argument is even less
enlightening:
The district court denied Bentson's motion for dismissal
based on the APA as untimely. Whether or not it was
untimely, the legal theory on which the motion was based has
no merit. Hicks, supra.
So much for the APA. Since the Bentson case contains no
additional analysis and relies upon the precedent(s) set by the
Hicks case, it would be fair to fault the Bentson ruling for the
same reasons that the Hicks ruling is faulty.
# # #
Page H - 10 of 10
